Everything You Need to Know About the Impact of RERA on Indian Real Estate
Real Estate Regulatory Act or RERA was officially enforced on 1st May 2017.
With its introduction, home buyers stand to benefit from the increased transparency in their dealings with builders. Legal safeguards are also available if contractual clauses are violated.
RERA’s advent was momentous real estate news in India after the apparent slump real estate had experienced due to demonetization.
Impact of RERA on Indian Real Estate
You may be wondering how RERA has changed the dynamics of Indian real estate. It has in many ways. Read on to learn how.
Elimination of the Scope of Launching Illegal Projects
Builders who wish to announce a new project containing more than eight apartments or construction space exceeding 500 sqmt have to compulsorily register with RERA authority of respective states.
The state tribunal requires mandatory registration of each construction phase. This does away with the prospect of pre-launching a project for the purpose of mobilizing capital by an unscrupulous builder.
The catch is that builders would now have to borrow initial capital at higher interest rates which eventually have to be borne by buyers.
Project advertisement without prior registration with RERA tribunal has been banned.
A builder cannot demand an initial deposit in excess of 10% of project’s cost from the buyer.
If a builder announces a project without registering the same with RERA tribunal, he would be liable to 3 years of rigorous imprisonment or a fine amounting to 10% of project’s cost.
Stopping Delays in Project Delivery
Both parties i.e. buyer and builder have to enter into an initial agreement wherein there would be a clause to indemnify the buyer if project delivery date extends beyond the committed deadline.
Further, the builder would also have to pay interest on the penalty amount due. Real estate companies in India can no longer dare to inordinately delay projects and give you nightmares.
Further, each builder has to maintain his own website wherein comprehensive information regarding the number of projects, completion timeline, apartment types, legal hassles or any other challenges have to be updated.
You can check the status as per your convenience. Information update has to happen on a quarterly basis. Any deviation can be reported to the tribunal and concrete action would be taken within 4 months.
Each builder has to open an escrow bank account in which 70% of construction fund has to be deposited. The amount would be withdrawn in phases based on the progress of construction. The progress would be certified by engineers and chartered accountants.
A builder would not be able to hike the project price or change plan type without buyer’s explicit written consent.
Freedom from the Devious Methods of Avaricious Brokers
Real estate market in India is dominated by agents who operate independently without any registration. RERA stipulates compulsory registration of each broker with the tribunal in lieu of a fee.
If a broker inflates information about a property to the buyer, he would be penalized if the buyer complains. The broker would also be punished if the builder fails to conform to promises made to buyers.
Each property put up for sale has to be promoted based on actual carpet area available and not super build up area.
Regularization of Ongoing Projects
All ongoing projects have to be compulsorily registered with RERA tribunal before further work can be commenced. Till that time, the builder cannot advertise the project.
The builder would have to shell out ‘Occupation Certificate’ before handing over the project to you. If due to aforesaid, a project gets delayed, the builder needs to seek an extension from tribunal by citing tenable reasons.
This provision may delay ongoing projects a bit but it would be in the favor of buyers only.
If there is a dispute with the builder, the same would be referred to an Appellate tribunal which must resolve the case within 2 months.
Safeguarding Against Poor Construction
As a buyer interested in making real estate investment in India, you would no longer have to run from pillar to post to have your plea heard for poor construction quality by the developer.
RERA binds builders in a defect liability clause with a span of five years. Any flaw in the project can be brought to the attention of developer within a year of delivery in writing for demanding rectification.
RERA’s impact is already being felt on the real estate landscape. Renowned builders have already been doing their bit to prevent gullible buyers from getting fleeced. Now, RERA would take up the role of being a fair arbitrator between real estate buyers and sellers.