How RERA is expected to change your home-buying experience from May 1
Every game has a referee unless it’s being played in one’s backyard. A regulator’s job is similar to referee’s i.e. not only to manage and normalise the situation but also to ensure that all the players play according to the rules.
What the real estate industry witnessed in the past was largely because of the the absence of any regulator but now the real estate panorama is set to change.
The real estate sector gets its own regulator from May 1, 2017, the date when the Real Estate (Regulation and Development) Act, 2016 (RERA) becomes effective in the entire country. Each state and UT will have its own Regulatory Authority (RA) which will frame regulations and rules according to the Act.
Let’s see what’s RERA has in store to address the various concerns impacting buyer’s experience.
On real estate prices
The prices haven’t come down to the extent it was expected. Huge unsold inventory, lack of new demand, demonetisation amongst others has not led the builders bringing the rack rate down albeit few discounts and freebies to the customers. But, will the implementation of RERA help in brining the prices down? Rohit Gera, MD, Gera Developments and VP Credai – Pune Metro, says, “Before the introduction of RERA, the risk on account of delays, quality, title, and changes in the project were all borne by the customer. As a result, most customers had to deal with some sort of the default and were forced to bear the cost of this default. These costs will now be borne by the developer and there will be a consequential premium that the flat purchasers will have to pay for transferring this risk to the developer. In my opinion there is no head room for developers to absorb these increased costs and immediately upon the first opportunity we will see this cost being transferred on to the home purchase by way of an increase in prices. “
Untimely delivery of real estate projects has been the biggest bane for the buyers. Of late, almost all projects especially projects launched 2010-2013 have defaulted in delivery within the stipulated time primarily because funds were diverted to new projects by the builders instead of using them in completing the existing ones.
To put a lid on such diversion, as per the RERA Act, the promoter has to maintain a ‘separate account’ for every project undertaken wherein 70 percent of the money received from the buyers shall be deposited. Such funds can only be used for the purposes of construction and land cost.
Real estate developers will have to furnish additional information regarding the ongoing projects for the benefit of the buyers besides depositing 70% of the unused funds in a separate bank account to ensure their completion.
RERA will not only cover the new launches but also the on-going the projects. In respect of the ongoing projects that have not received completion certificate in specified time, developers will have to make public the original sanctioned plans with specifications and changes made later, total amount collected from allottees, money used, original timeline for completion and the time period within which the developer undertakes to complete the project, duly certified by an Engineer/Architect/practicing Chartered Accountant.
Role of Regulatory Authority
Each Regulatory Authority in the state will have the responsibility to register and regulate real estate projects and real estate agents registered under this Act. It will also be required to maintain a website for public viewing, of all real estate projects for which registration has been given.
Registration of projects
Make sure you buy a project which is registered with the RA. Once the state has its RA established, builders will be required to register their projects with it by furnishing all the information including, financial statements, copy of legal title deed and other documents. The builders will get a registration number project-wise i.e. tower wise.
After registration with RA, the builder will be given a login-id and password to create a page on RA’s website to upload the project related information on authority’s website. It will show quarterly up-to-date the list of number and types of apartments or plots, as the case may be, booked; quarterly up-to-date status of the project; and amongst others.
What you get to see
No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act. Each advertisement has to carry the RERA registration number.
Currently, most builders ask for 10 percent of the total cost of the property as a booking amount. Now as per RERA, a promoter cannot accept more than 10 of the cost of the property, as an advance payment or an application fee, without first entering into a registered agreement for sale.
Quality of construction
The quality of the construction has also been a matter of concern with several builders. The RERA rules provides for protection against this up to 5 years after possession. In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale is brought to the notice of the promoter within a period of five years, it shall be the duty of the promoter, interest for every month of delay, till the handing over of the possession.
In every state a ‘State (name) Real Estate Appellate Tribunal will be formed. Any person aggrieved by any direction or decision or order made by the Authority may prefer an appeal before the Appellate Tribunal.