5 question on every home buyer’s mind about RERA
It has been over 3 weeks since the Real Estate (Regulation and Development) Act, 2016 commonly known as RERA has come into force. Though the law directs States and Union Territories to set up respective regulatory authorities, only 13 states and UTs had notified rules for the same. Moreover, there have been widespread allegations/reports that some states have dumbed down or diluted the provisions of the law to favor the powerful builder lobby.
Worried homebuyers have written to the chief ministers of Maharashtra and Uttar Pradesh to revoke the diluted RERA rules like allowing developers to submit proposed project details rather than final details as directed by the law. Homebuyers in Gurgaon organized a Havan recently to seek ‘divine help’ so that the RERA rules drafted by the center are implemented in letter and spirit by the state government.
The passing of the law was hailed as a watershed moment for the industry; it was supposed to safeguard the interest of hapless homebuyers, regulate brokers and punish unscrupulous developers. But the average homebuyer is confused regarding many provisions of the act which have been left to the discretion of the state-appointed authority. Here we list some of the concerns/queries which are causing stress to both existing and prospective home buyers:
Will the stated penalties be levied against all delayed under construction projects?
Though there is clarity on what kind projects are out of purview of the act, there is confusion about the status of projects which have been issued ‘partial completion certificates’ by the state authorities like in Noida. These projects have given possession of few towers/phases in under construction projects, many of which are greatly delayed. There have been reports of builders handing possession in a hurry or applying for Occupation Certificates to avoid penalty under RERA. Experts say that all projects that not have obtained OCs by May 1, the day law came into practice, should be bought under the purview of the act. It remains to be seen whether that will be the case.
What penalty will be paid by developers for delayed projects?
As per the law, maximum punishment is penalty of 10% of the total project cost and imprisonment upto 7 years. But as notified by states like Maharashtra, there is ambiguity regarding the penalty clause (it can be anywhere between 5%-10% as per the discretion of the state authority) and there is a fear that the developer will be able to escape imprisonment by paying as little as 5% penalty. If that turns out to be the case, it will be an easy escape route for defaulting developers which defeats the purpose of the law.
How will 70% of project funds be secured for completion of the project?
One of the most important clauses of the law directs the developers to deposit 70% of funds collected from the sales of a particular project into an escrow account. But what happens in the case of majority of under construction projects where the developers have already siphoned off the funds elsewhere? How will the developer procure required funds for completion of the project and how will the competent authority ensure timely possession? This is a grey area which will only get cleared after the 3 month window for registration of projects is over and the authority starts receiving complaints from aggrieved buyers.
Will flats be advertised and sold under carpet area?
One of the most important demand of the buyers has been incorporated in the law but it remains to be seen whether developers will tow the line. It is likely that they will continue to market their projects on super area but mention the carpet area in the agreement papers. Developers may also start selling their inventory in value terms rather than in Basic Selling Price (BSP) or per sq feet terms.
Will I end up going to jail if I don’t pay my installments on time?
Buyers are wary of this clause of the act and they fear intimidation from developers and brokers regarding the same. What if I am in genuine financial distress? Will my plea be heard/accepted by the authority?
There are of course many other issues which also need clarity; till when can developers advertise under construction projects which are yet to receive OC? How will the developers get necessary approvals from government agencies in stipulated time frame to complete projects? We hope that in due time, the competent authorities are able to address concerns of all the stakeholders and ensure smooth implementation in letter and spirit of the landmark act.