Home » Uncategorized » RERA 2016 : Glimpses

RERA 2016The Real Estate (Regulation and Development) Act, 2016 (RERA 2016) becomes effective from May 1, 2017. Each state and UT will have its own Regulatory Authority (RA) which will frame regulations and rules according to the Act
RERA has been established for regulation and promotion of the real estate sector and to ensure sale of real estate properties, in an efficient and transparent manner. The objective is to protect the interest of consumers in the real estate sector and to establish a mechanism for speedy dispute redressal.

Let’s see what some important ground rules are as set by the government in the RERA.

i. Informing the buyer at the time of booking :

The promoter at the time of the booking and issue of allotment letter shall be responsible to make available to the allottee, the following information:

(a) Sanctioned plans, layout plans, along with specifications, approved by the competent authority.
(b) The stage wise time schedule of completion of the project, including the provisions for civic infrastructure like water, sanitation and electricity ..And, booking process itself is tweaked a bit.

ii. Booking amount:

Currently, most builders ask for 10 percent of the total cost of the property as a booking amount. The ‘agreement of sale’ is prepared at a later date. 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.
But, even before reaching out to the buyers through advertisement or otherwise, the promoter has to register the project with the state regulatory authority. To keep the builder under wrap, each tower/phase within a project has to be independently registered.

iii. Getting the project registered :

Before a project gets advertised, a registration number has to be obtained against it. Few important documents that the promoter has to furnish to RA will include:

(a) Promoter’s background details.
(b) A brief detail of the projects launched by the promoter, in the past five years including ones which are already completed or being developed. The current status of the said projects, any delay in its completion, details of cases pending, details of type of land and payments pending, will also need to be shared.
(c) An authenticated copy of the approvals and commencement certificate from the competent authority. And, where the project is proposed to be developed in phases, a copy of the approvals and commencement certificate from the competent authority for each of such phases, is also to be furnished.
(d) The sanctioned plan, layout plan and specifications of the proposed project or the phase and the whole project as sanctioned by the competent authority.
(e) Proforma of the allotment letter, agreement for sale, and the conveyance deed proposed to be signed with the allottees.
(f) The number, type and the carpet area of apartments for sale in the project along with the area of the exclusive balcony or verandah areas and the exclusive open terrace areas with the apartment, if any.
(g) The number and areas of garage for sale in the project.
(h) The names and addresses of the contractors, architect, structural engineer, if any and other persons concerned with the development of the proposed project.
(i) A declaration, supported by an affidavit, which shall be signed by the promoter or any person authorized by the promoter, stating:

(A) That the promoter has the legal title to the land.
(B) That the land is free from all encumbrances.
(C) The time period within which he undertakes to complete the project or the phase.
(D)That 70 per cent of the amount realized for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.

iv. Ongoing projects :

RERA will not only cover the new launches but also the on-going the projects. Promoters have been given three months to get their ongoing projects registered with RERA i.e. till 31st July, 2017.
For this now that they 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.

v. Registration of projects:

Make sure a property that you buy any time after May 1, 2017, is in 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.

vi. Online information:

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.

vii. Home buying advertisement:

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.

viii. Interest on default:

The state RA has to specify the rate of interest on a default by either the developer or the buyer. Such a rate could be the interest rate of SBI’s highest Marginal Cost of Lending Rate plus 2%. Odisha state RA has already mentioned about this in its rules. Such payment has to be made within 45 days of it becoming due.

ix. 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 promot promoter to rectify such defects without further charge, within 30 days.

x. Delayed delivery – compensation:

Delayed possession has been the norm all these years. If the promoter fails to complete or is unable to give possession of the property within the agreed timed-period, he has to return the total amount with interest at such rate as mentioned in the agreement to sale. And, in case the buyer does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession.

Recommended : Pradhan Mantri Awas Yojana

Conclusion:

Delayed delivery of projects, bad construction quality, not sticking to sanctioned plans, were some of the common problem marring the industry. Till now, there wasn’t any regulator and neither were the rules of the game in place. In the absence of a regulator, the home buyer was literally at the mercy of the builder.

RERA is a huge step forward and lot of expectation will be there for the state RA to frame the rules according to the Act and not dilute them in builder’s favour. How far RERA is able to bring back buyer’s confidence, however, remains to be seen?

To start with buyers will look forward to at least three things from RERA – One, promoters falling in line and sharing all information as required by authority, secondly, transparency by making the information available online and finally, a robust feedback mechanism between the authority, promoter and the buyer. Let not the buyer suffer from delays, of any nature, from now on.

(Sources: Various Public News Papers)

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