RERA HOW IT IMPACTS THE BUYER?
Contents
What is the importance of RERA? ..................................................................................................................1 How Will Buyers Be Benefitted .....................................................................................................................2 Whom to approach in case of a problem? .................................................................................................3 Does RERA Cover All Projects? ....................................................................................................................4 What can attract penalties? ...........................................................................................................................6 Why Was There A Delay In Implementing RERA? ....................................................................................7 Will real estate prices come down or go up post RERA? .......................................................................8 Commonly Asked Questions .......................................................................................................................9
WHAT IS THE IMPORTANCE OF RERA? The Real Estate (Regulation and Development) Act (RERA), 2016 came into existence after almost eight years of deliberations, largely fuelled by concerns over unscrupulous practices of developers, such as delaying of projects, demanding unscheduled or unaccounted payments without actually delivering the product, misrepresentations, etc. The Real Estate Act is intended to achieve the following objectives: Ensure accountability towards allottees and protect their interest Infuse transparency, ensure fair-play and reduce frauds & delays; Introduce professionalism and pan India standardization Establish symmetry of information between the promoter and allottee Imposing certain responsibilities on both promoter and allottees Establish regulatory oversight mechanism to enforce contracts Fast-track dispute resolution Promote good governance in the sector
HOW WILL BUYERS BE BENEFITTED? 1
Clarity: It is mandatory for promoters to register all projects with the State Real Estate Regulatory Authority, along with extensive information about them-- project implementation schedule, layout plan, land status, government approvals, sub-contractors, etc.
2
Accountability: 70 per cent of funds collected from buyers have to be maintained in an escrow account and have to be used only for the construction. This will restrict the entry of fly-by-night developers.
3
Conformity: Developers must list all projects and their details on the RERA website. Details about layout and schedule have to be mentioned clearly. It ensures a standard code of conduct for all builders alike. Violations will be penalised.
4
Answerable: Overall issues related to property matters will b e dealt by the authority in the quickest way possible. This makes erring developers answerable to consumers. Details regarding developers’ projects would be easily accessible by homebuyers.
5
All-encompassing: Not just developers and their projects, all practising brokers need to be listed too. This will mean that homebuyers can approach registered and professional brokers.
WHOM TO APPROACH IN CASE OF A PROBLEM? Previously, all disputes between homebuyers and developers ended up in a consumer court but now the regulator appointed through the Act would deal with the disputes. The regulator is also entrusted with the responsibility of making sure that the stakeholders honour provisions of the Act. This is binding on all. There could even be two regulators for a state or one regulator for two states.
The regulators caters to rationalize the sector at different levels. Players on the supply side would need to adhere to the guidelines. This to a degree will ensure transparency. If homebuyers are not happy with the decision of the regulator, they can approach the Apellate Tribunal for justice. RERA and the Appellate Tribunal will be established through the Act. To ensure that stakeholders on the supply side can conform to guidelines as per RERA, respective states will need to have proper laws in place.
DOES RERA COVER ALL PROJECTS? Projects within 500 sq mt not under the radar
Where area of land proposed to be developed does not exceed 500 sq mt or number of apartments proposed to be developed does not exceed eight, inclusive of all phases, the project needn’t be registered at all. If the authority considers it necessary, it can also reduce the threshold below 500 sq mt or eight apartments. If you thought that 500 sq mt is the minimum permissible area on which a construction can be done, you are wrong. Hence, a lot of plots would be in the exemption range thereby rendering small buyers unarmed. In this case, buyers need to watch out for the projects they are settling for.
As a buyer, you must arm yourself with this knowledge. W hile there are always checks and balances, if you are settling for a private builder’s project that is constructed within 500 sq mt plot, ensure the track record of the builder. Ask for approved building layouts. Insist on completion and occupancy certificates too. Don’t let this RERA provision make you vulnerable.
Completion Certificate Received? Due Dilligence Is Yours
Renovated, Repaired, And Redeveloped? Out Of RERA
RERA provisions clearly point out that where promoter
For purpose of renovation or repair or re-development
has received completion certificate for the real estate
which does not involve marketing, advertising, selling or
project prior to commencement of the Act, such a
new allotment of any apartment, plot or building, the
project needn’t be registered with the authority.
project needn’t be registered under RERA.
Therefore, if prospective home buyers are settling for a property completed before March, 2016, the onus of
Make sure that the clause is followed to the T. In case of
proper research and due diligence falls on you.
a redevelopment where usually a large house or a duplex can give way to the rise of a multi-storeyed
Like any other buyer who didn’t probably feel as secure
apartment, a buyer must be sure about the construction
as prior to the Act materialised, you too are in the same
quality and all other documentation and procedures
plight. Ensure that the property has a clear title, the
which are necessary. Similarly, in the case of a
developer has a clean name and the layout has been
renovated house, has your house owner renovated and
approved as per local building norms. You may want to
rebuilt to an extent that it can house many other
refer this.
families? Perhaps he needn’t have to advertise to sell the other newly built floors and could clearly flout the rules. Watch out if you were planning to buy a unit from such a seller.
WHAT CAN ATTRACT PENALTIES? Developers For developers who violate norms through either of the following ways, the developer may be liable to pay up to 5% of the entire cost of any/all of these defaults. RERA will take into view the nature of this default. False Declaration
Incorrect or No information on website
Publicity without registration
To pay outgoings till transfer of possession
To execute conveyance deed
No mention of website in advertisement for sale
Failure to get notified insurances
Not rectifying defects brought to notice within 5 years
Formation of Association of Buyers
Failure to prepare and maintain details specific to RERA
Failure to Maintain Essential Services
Failure to Obtain Lease Certificate If On Leasehold Land
Failure to provide buyers with CC/OC
Failure to give possession as agreed in the sale agreement
Transferring rights without obtaining prior consent of 2/3 allottees
Failure to make prescribed information unavailable at the time of booking
Mortgaging or creating change on property after sale or agreement of sale
Accepting more than 10% of cost without executing and registering agreement of sale
Allottees Failure to comply by RERA (Up to 5% of the total cost of the apartment,plot)
Failure to comply by Real Estate Apellate Tribunal (Imprisonment or/and penalty up to 10%) of the cost of the apartment/building/plot
WHY WAS THERE A DELAY IN IMPLEMENTING RERA? Too many laws?
A key issue is the reconciliation of land laws and apartment ownership acts pre-existing within the state with the new law and extension of its applicability. As for the latter, the law is applicable in what it defines as ‘urban areas’ – a term that encompasses all municipal areas and areas within the control of an analogous local authority, or part of a planning area.
However, several states do not have planning areas defined and several census towns (areas which are urban as per the census but not under the municipal law of the state) are still governed by panchayats. Although building and/or development control rules may exist for such areas as laid down by the town and country planning law or municipal law, these would not ordinarily fall within the description of ‘urban areas’ as defined under the Act.
Dilution of the RERA
A number of concerns had risen, with respect to states having effectively ‘diluted’ the provisions of the main law, particularly with respect to the applicability of the law to ongoing projects, statutory protection to home buyers and disclosure of information by developers.
WILL REAL ESTATE PRICES COME DOWN OR GO UP POST RERA?
The argument in favour of higher property prices Prior to demonetisation, deals between developers and land owners often used to be entirely cash-based.
If cash transfers are made illegal for land-based transactions, there is a real possibility that land owners will load the tax costs on the price to the developer and in turn, the developer will load this cost back to the purchaser. This will increase the prices of the real estate product, but with no substantial gain in margins for the developer. Similarly, there are chances that with compliance costs going up after RERA, developers would need to bill this on to the consumers.
The argument in favour of lower property prices The focus is now to provide value-for-money homes that can attract more buyers with a lesser budget. However, such stock is often produced in areas that have limited connectivity to places of work and lack basic economic and social i nfrastructure. Consequently, there is little value, i n terms of usability of such an asset.
However, the asset is still worth investing into for speculative long term capital gains. There are no real recurring costs involved in holding the asset without using it. Moreover, post RERA there are chances that with transparency building in, pricing could be buyer-friendly or even when prices remain stable, buyers would find it encouraging to invest. With unstructured sellers out of the market, homebuyers can b e confident that they will get value for money.
COMMONLY ASKED QUESTIONS How to file a complaint? Section 31 of the Act provides for filing of complaint by an aggrieved with the Regulatory Authority. The form and manner and the fees payable for filing the complaint are to be specified by Rules to be made by the appropriate Government.
How soon will the Authority look into the matter? Authority should endeavour to dispose of the questions / complaints as expeditiously as possible but not later than sixty days from the date of filing the same. However, where it could not be disposed of during the said period the Authority is required to record its reasons for the same.
Can you oppose the decision of the Appellate? Any person aggrieved by the decision or order of the Appellate Tribunal can file and appeal with the High Court.
What happens in case the developer defaults? As per section 61 if the promoter defaults any other provision of the Act or the Rules and Regulations made thereunder, he shall be liable to a penalty upto five percent of the estimated cost of the real estate project or ten percent of the estimated cost of the real estate project or with imprisonment for a term which may extend upto three years or with both.
What if the project is not registered? As per section 59, where under the Act, it is obligatory for the promoter to register a project with the Authority, and the promoter fails to do the same, he shall be liable to a penalty upto ten percent of the estimated cost of the real estate project. However, in case the promoter consistently defaults or does not comply with the directions / orders of the Authority as regards registration of the project with the Authority, he shall be liable to additional fine of ten percent of the estimated cost of the real estate project or imprisonment upto 3 years or both. As per section 60 if the promoter defaults as regards matters covered under section 4, he shall be liable to a penalty upto five percent of the estimated cost of the real estate project.
What is the punishment prescribed for non-registration of by a real estate agent? As per section 62, where under the Act, it is obligatory for the real estate agent to register himself with the Authority, and the real estate agent fails to do the same, he shall be liable to a penalty up to of rupees ten thousand per day of default, which may cumulative extend upto five percent of the cost of the plot / apartment, for which the sale has been facilitated by him.
Does the term ‘allottee’ include secondary sales? As per section 2(d) an allottee includes a person who acquires the said ‘apartment / plot’ through transfer or sale, but does not include a person to whom such plot, apartment is given on rent.
What is the punishment prescribed for non-compliance of the orders of the Authority by the allottee? As per section 67 if the allottee fails to comply with the orders of the Authority, he shall be liable to a penalty for every day of default, which may cumulative extend upto five percent of the cost of the plot / apartment.
What is the punishment prescribed for non-compliance of the orders of the Authority by the real estate agent? As per section 65 if the real estate agent fails to comply with the orders of the Authority, he shall be liable to a penalty for every day of default, which may cumulative extend upto five percent of the cost of the plot / apartment, for which the sale has been facilitated by him.
What is the punishment prescribed for non-compliance of the orders of the Appellate Tribunal by the allottee? As per section 68 if the allottee fails to comply with the orders of the Appellate Tribunal, he shall be liable to a penalty for every day of default, which may cumulative extend upto ten percent of the cost of the plot / apartment or with imprisonment for a term which may extend upto one year or with both.
Can an offence which provides for imprisonment be compounded? As per section 70 if any person is punishable with imprisonment under the Act, the same may be compounded on such terms and conditions which may be prescribed by Rules made by the appropriate Government. In addition, the fine payable in lieu of imprisonment needs to be specified by the said Rules, which cannot be more than the maximum fine payable for that offence.
Can the penalties imposed under the Act be deposited in the Real Estate Regulatory Fund? As per section 76 penalties recovered under the Act are to be deposited in the Consolidated Fund of India (in case of Authority established by the Central Government) and in the State Account (in case of Authority established by the State Government). However, as per section 75, grants received by the Authority, fees received under the Act / Rules and the interest accrued thereon shall be credited to the Real Estate Regulatory Fnd.
Does the definition of ‘promoter’ include public bodies such as Development, Authorities and Housing Boards? The Act covers all bodies (private and public) which develop real estate projects for sale to the general public. Section 2(zk) defines the term ‘promoter’ which includes both private and public real estate promoters. Thus, both Development Authorities and the Housing Boards, when involved in sale are covered under the Act.
What is the rate of interest payable in case of default by the ‘promoter’ or the‘allottee’? Is the rate of interest payable by either party (promoter or allottee) the same? As per the Explanation to section 2(za) the rate of interest payable by either the promoter or the allottee shall be the same. The rate of interest is required to be specified by the appropriate Government in the Rules.
Is ‘open parking areas’ a part of ‘common areas’? Section 2(n) defines ‘common areas’ to include ‘open parking areas’, thus open parking areas cannot be sold to the allottees.
At what stage can a promoter start to advertise his project for sale? The promoter can advertise his project for sale after the project has been registered with the Regulatory Authority as provided in section 3(1).
What happens in case of jurisdictions (States/UTs) which do not provide for both the ‘occupancy certificate’ and the ‘completion certificate’? Section 2(zf) and section 2(q) respectively, define ‘occupancy certificate’ and ‘completion certificate’. The two definition are very broad and uses the term ‘by whatever name called’. Thus, if in a State/UT only one certificate is issued which provides for both the aspects covered under the two definitions, it would suffice the requirements under the Act.
Are real estate agents covered under the Act? Does the term ‘real estate agents’ include web-portals engaged in selling of apartments or plots? Section 2(zm) defines the term ‘real estate agents’, which is a very broad and inclusive definition and covers all from of agencies involved in sale and purchase of projects, registered under the Act. Consequently, web-portals etc. engaged in selling plots o r apartments are also covered under the Act and are required to comply with the duties and responsibilities as provided therein including under the Rules and regulations made thereunder.
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