RERA Act: Here are 10 key benefits for home buyers
1. The Government of India implemented the real estate bill RERA Act nationwide on May 1 this year
2. The RERA Act will improve the governance, bring more transparency and accountability into the realty sector, say experts
3. It mandates developers to disclose project related details such as project plan, layout, and government approva like sanctioned floor space index (FSI), number of buildings, etc.,
With an objective to protect consumer interest and to bring efficiency and transparency into the country's real estate sector, the Government of India implemented the RERA Act nationwide on May 1 this year.
The RERA Act is aimed at addressing the grievances of property buyers who at times are cheated by developers on delay in delivery of under-construction properties, execution of said project plans, legitimacy of properties, etc., and is being touted as pro-consumer law.
"#RERA promotes accountability, transparency & efficiency in the sector. Buyer set to be King. Promoter benefits from king’s confidence," Union Minister for Urban Development, Housing and Urban Poverty Alleviation, Information & Broadcasting M Venkaiah Naidu said on Twitter on April 30.
#RERA promotes accountability, transparency & efficiency in the sector. Buyer set to be King. Promoter benefits from king’s confidence. 2/n
— M Venkaiah Naidu (@MVenkaiahNaidu) April 30, 2017
Build Up toThe Real Estate Act
The real estate bill was passed by the Rajya Sabha (Upper House of Indian Parliament) on March 10 last year which was later passed by the Lok Sabha (Lower House of Indian Parliament) on March 15 last year.
The country's president Pranab Mukherjee approved the RERA Act on March 25, 2016.
The government introduced the 69 sections of 92 of the notified Real Estate Act on May 1, 2016.
The rules of RERA Act were formed on October 31, 2016
The government established the Real Estate Regulatory Authority (RERA) and Real Estate Appellate Tribunal on April 2017.
Image Source: Deloitte
Transparency, Accountability & Liability
According to the real estate industry players, the RERA Act will improve the governance, bring more transparency and accountability into the realty sector.
"This regulator will govern all real estate transactions, thus improving the governance on the real estate sector by reducing disputes and making the system more transparent and robust," affordable housing property builder VBHC's head of sales-marketing and customer service Narasimha Swamy N said in a statement.
" The setting up of a Real Estate Regulatory Authority in each state will bring in increased accountability in markets, thereby improving the sector’s credibility score and re-instating a sense of security amongst all stakeholders," cited Mahindra Lifespaces VP-CRM and Marketing Sunil Sharma in a statement issued last week.
"Furthermore, mandatory disclosure of project details, including those of the promoter, land status and clearances, is geared towards protecting consumer rights," Sharma added.
Echoing similar views, real estate consultancy firm Colliers International India senior associate director Surabhi Arora said in a statement, "It is a positive move towards giving structure to one of the biggest revenue contributor and employment generating sector."
"This will not only provide clarity on the roles and responsibility of various stakeholders, but also give a level playing field to differentiate between performers and non-performers. This act will be beneficial to both developers and buyers," Arora said.
The real estate act makes the promoters more accountable and liable for their real estate projects.
According to Crisil Research and Deloitte, here are 10 key benefits of RERA Act for home buyers:
1. All real estate developers/promoters have to compulsorily register ongoing and upcoming real estate projects with RERA
2. Home buyers will have to pay only for carpet area
3. Developers/promoters will have to disclose project related details, including: project plan, layout, and government approvals related information to the customers such as sanctioned floor space index (FSI), number of buildings and wings, number of floors in each building, etc.,
4. Developers/promoters will have to transfer 70% of the money received from buyers for particular project to an escrow account. These funds should be used only to cover the cost of construction and land cost
5. The real estate act includes projects that are ongoing on the date of commencement of the Act that is May 1, 2017 and for which the completion certificate (CC) has not been issued
6. Developers/promoters have to register their projects with RERA before advertising or marketing
7. RERA 2016 recommends imprisonment for a term which may extend up to three years, or fine which may extend up to 10% of the estimated cost of the real estate project, or both, in case of non-compliance with the Act
8. If any developer/promoter provides false information or contravenes the provisions of registration of real estate projects - has to pay penalty upto 5% of the estimated cost of the project
9. Developers/promoters have to update project details quarterly on the RERA website
10. Any structural defect, or any other obligations of the developer/promoter as per the agreement for sale, brought to notice of developer/promoter within five years from possession to be rectified free of cost