13/06/2017
RERA
Points to be kept in mind by the Promoter
1) As per the law, State Real Estate Regulatory Authority of that specific state has been made as the ruling body to be contacted in case of help against any developer. But this will happen only once every state individually gives a go ahead to this law and sets up a state authority on the lines as mentioned in the act.
2) The regulations apply to both residential and commercial properties.
3) Real estate developers will have to deposit 70% of the collections from the buyers in an escrow account specifically meant for the project. Please note cost of the land is included in the 70%. It is beneficial move for the buyers. It is a common practice by the builders to divert collections from one project to another project or even to purchase new tracts of land. With this rule, such practice will be restricted to some extent, especially in smaller cities where the land is not prohibitively expensive.
4) A real estate project needs to be mandatorily registered with state real estate authority before it is offered for sale. There is relaxation for projects which are less than 500 sq. meters or 8 apartments. Such projects need not be registered. Please note the respective state governments can do away with the relaxation. At the time of registration of project, the builder will have to submit promoter details, project layout, implementation schedule, requisite approvals, number, type and carpet area of apartments etc. Even proforma of the allotment letter, sale deed and conveyance deed needs to part of the registration application.
5) Even the real estate agents dealing in registered projects need to be registered with RERA.
6) Developers cannot sell the project unless the project is registered with RERA and the commencement certificate is in place. With this, pre-launch sale of projects is now history.
7) Any change in plan (submitted to RERA at the time of registration) by the builder will require approval from 2/3rd of the allottees or buyers in the project.
8) Currently, the sale agreements are heavily skewed in favor of the builders. For instance, in case of any late payments, the buyer has to pay interest at rates as high as 18% p.a. However, if the builder fails to deliver on time, the buyers get penny change, if any. If you are very fortunate, you will get Rs 3-5 per square feet per month for delay in project delivery. After the passage of this Act, both buyers and the builders will have to pay the same rate of penal interest for delays.
9) Builders will be liable for any structural defects occurring within 5 years of the date of possession. A few developers, not all of them, offer 1-3 years of warranty for any structural defects.
10) Sale of property will be on carpet area As per the Real Estate Act, Carpet Area is the net useable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
11) Any grievance/complaint has to be resolved by the state RERA within 60 days. In case, you are not satisfied with the decision of RERA, you can approach Real Estate Appellate Tribunal.
12) All permissions before project launch: No single project will be allowed to be sold by the developer without getting necessary approvals from the local authorities. Many builders in todayโs date give heavy discounts to the buyers in order to lure them at the pre-launch stage without furnishing any details about all sorts of clearances required. Thus, as per this law, the construction for the apartments will only start once the developers get all sorts of necessary clearances prior to the launch of the project. The transparency and disciplinary provisions will help the consumers to understand the complete facts of the projects before making an investment decision.
13) Part of funds collected to be deposited till project completion: The realty projects often suffer a delay as the builders switch the funds collected from one project to another. And due to this fund diversion, consumers are left in lurch with their projects delayed and money struck. The law ensures that the developers deposit at least 70% of collections made, through cheques, in a bank account, so that the booking amount collected from a specific project is not invested into many projects simultaneously and also the developers donโt run out of cash and stall projects and are able to complete and deliver the committed projects on time. This reserve fund would cover the cost of land and construction and would prohibit too much money being pumped into this sector.
14) Registration of projects with concerned Authority: The Bill makes it compulsory for the builders to get all the real estate projects to be set up registered with State Real Estate Regulatory Authority (RERA). All the necessary information like details of the promoter, land status, project lay-out, project plan, status of various clearances and approvals, all types of agreements, details of all the contractors, structural engineers, architects and real estate agents, schedule for completion need to be disclosed to both the authorities as well as the consumers. Mandatory disclosure of these details besides increasing the credibility of developers would protect consumer rights as well.
15) Carpet area defined: Currently the developers quote and sell on the basis of unclear super built-up area as sellable area which is normally 30-40% more than flatโs actual usable area. The law makes this practice illegal and clearly defines the carpet area as net usable area of an apartment and hence going ahead you will be charged only for your carpet area. The carpet area will include toilets and kitchen and now the customer will know exactly what he is getting as living area and at what price.
16) Delays to attract interest: As of now, if a project is not completed on time, the developer is not affected in any way. But going ahead, with the passing of the law, any delay in project completion will make the builder bear the brunt for the same. The developer will cough up the same amount of penalty as EMI back to the consumer for any delay on his part, which the customer is paying to the bank.
17) On time project completion: the law ensures that the flats are completed and delivered on time as harsh rules are imposed on the builders for any kind of violations of the Appellate Tribunals or monetary fines or even both. Any developer who violates the order of Appellate Tribunal can be sent to jail for a maximum term of three years with or without fine.
18) Developers to provide after sales services: the home buyers need to inform the developer in writing of the problems faced or any kind of structural defect, within one year of taking the possession, requesting after sale service. The developers will be liable for any kind of deficiency noticed in the project within five years. He also has a right to change the plans once sold, but only with a written consent of two thirds of house owners. This will keep a control on the common practice by the notorious builders to increase the costing, altering project plans, structural designs and specifications midway like the layout of the apartment or the including the number of floors in a building.
19) Every commercial or residential project having more than eight apartments or covering an area more than 500 square meters will need to be registered with the Real Estate Regulator. This will also cover majority of the realty projects being constructed in various cities of the country.
20) Quick redressal: Under the fast track dispute redressal mechanism the Appellate Tribunals will have to arbitrate cases in 60 days as against the earlier time span of 90 days.
21) Insurance on land title: The Law makes sure that there is an insurance of the land title
So that the consumer is not at the losing side if in case the land title turns out to be defective.
22) The builders are prohibited from making deceitful claims in advertisement, on project location, appearance or amenities. There will be no gap between what is promoted and what is delivered. It is full responsibility of the builders to adhere to rules and provide correct information. Deceptive claims have been made punishable and the builders can be fined with 10% of the total project cost if found violating any kinds of rules set in the regular act. He can be even sent to the jail for any kind of repeated wrongdoing.
23) Any real estate developer or real estate agent who acts in contravention of the provisions of this Act or refuses to follow orders or directions from RERA faces heavy penalty and even imprisonment for up to 3 year (1 year for real estate agent).
24) As per section 3(1) of the Act, ongoing / existing projects, which have not received occupation or completion certificate, shall be covered under the Act. Builders / Developers must register such projects under RERA, within three months of implementation of the Act. Essentially almost all large projects which have not obtained completion certificate will immediately come under the purview of the Act. Thereby consumers of under construction projects can seek protection under the Act.
25) In simple terms, builders / developers will not be able to sell any new project without first registering their project with the RERA. The Act provides that no developer or builder shall advertise, market, book, sell or offer for sale, or invite persons to purchase any plot, apartment or building, in any real estate project or part of it, in any planning area, without registering their project with the Real Estate Regulatory Authority (RERA).
