RERA, is a real estate (Regulation and Development) Act, passed by parliament and the Union Ministry of Housing and Urban Poverty Alleviation, last year. RERA came into force on 1st May and it seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders.
According to RERA, each State and Union territory will have its own regulator and set of rules to govern the functioning of the regulator. The Centre has drafted the rules for Union territories, including the national capital. RERA seeks to address issues like delays, price, quality of construction, title and other changes. RERAs are intended to perform the same role in your property transactions as the SEBI does for security transactions in the capital markets.
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Why RERA is important?
Retail property buyers are the ones who face problems when real estate transactions don’t go well. The developers always make profits by manipulating the buyers and the buyers always have to compromise.
According to RERA Act, the developers have to deposit 70% of the amount received from buyers. In case the builder would like to change the layout or plans after the sale then he will need the approval of two-thirds of the buyers in that project, to make such tweaks.
If there is any missed payment obligation or delayed in the completion of the project, then both the buyer and the promoter have to pay penal interest at similar rates.
The Act ensures that you can secure an interest as penalty from your builder at the prescribed rate.
With the Act in place, it will be mandatory for all existing projects to be registered with the state’s regulatory authority by July 2017, and that no new project can be launched without registration, including clearances, site plans, advertisements and customer brochures, thus helping buyers in making informed decisions before investing.
How RERA will help buyers?
For an individual, It’s not easy to buy a property on his own. So, they choose a home loan for buying a property. Even after that, the builders kept their property on hold for profit and to earn some extra money. But, After the RERA Act builders wouldn’t be able to make extra profit anymore. Here are some points which shows how RERA will help buyers.
Builders can’t delay projects.
Builders can’t charge for the area outside the walls.
Builders will be responsible for any defect in the house.
Builders can’t use your money to make someone else’s house.
Quick redressal of grievances.
The real estate agent will be provided with a registration number by the regulator, which they have to mention in each sale they make. Agents are required to share all the information and documents about the project with the buyers, which they were entitled at the time of booking a property.
The regulator will also maintain a list of the authorized agents on its website, along with details of projects that they can deal with. Agents who are found to be in violation of the rules, will get removed from the list.
Key Provisions of RERA:
The promoter of a real estate development firm has to maintain a separate escrow account for each of their projects. A minimum 70% of the money from investors and buyers will have to be deposited.
RERA requires builders to submit the original approved plans for their ongoing projects and the alterations that they made later.
It will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under RERA. The details of all registered projects will be put up on a website for public access.
Developers can’t invite, advertise, sell, offer, market or book any plot without first registering it with the regulatory authority.
After registering the project, developers will have to furnish details of their financial statements, legal title deed and supporting documents.
RERA mandates that developers can’t ask more than 10% of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.
The regulator will have the power to fine and imprison errant builders based on a case by case basis. The imprisonment can go up to a period of three years for a project.