The advent of Real Estate Regulatory Act (RERA) has launched an era in which real estate development will transform from being an unorganized sector to a professionalized industry. The people who are aspiring to fulfill the basic necessity of housing will be sufficiently protected. In overall, the Act will bring about the much-needed change in terms of regulatory oversight and consumer protection.
Let’s discuss what are the various provisions that assure homebuyers of a better tomorrow.
Registration of projects
- RERA mandates all the real estate projects, whether commercial or residential, larger than 500 sq mtr to register under the Act governed by their respective states.
- The real estate developers who do not register their projects under the Act are liable to pay penalty of 10 percent of the total project cost. The Act also provisions for an imprisonment of up to three years in case a developer fails to register his projects.
- All the registered projects have to submit certain information which is further made available on the RERA website.
- This goes without saying that the registration under RERA will need all the necessary documentation, clearances and approvals. No project, therefore, will come in the market, unless it is in compliance with all the legalities.
- In order to resolve the long-standing issue of fund diversion, the RERA has mandated real estate developers to maintain separate escrow accounts for each of their projects.
- A developer has to deposit at least 70 percent of the total amount collected from the property buyers of the project in that escrow account and that amount has to be used only for the purpose of payment of land cost and construction.
- Thus, a property buyer in India does not have to worry about diversion of his funds into projects other than what he buys.
Super area and carpet area
- Clearing all the dilemma on super area and carpet area, the Act has instructed real estate developers to charge buyers only on the basis of carpet area. That means, there will not be any ambiguity with respect to the size of the end product a buyer gets in hand.
- As a general practice, super area consists 20-35 percent of the total size of a property.
- The Act also prohibits developers to take payment of more than 10 percent without entering into Agreement of Sale.
Alterations in project / property layouts
- RERA has set clear rules instructing developers to not change any sanctioned plans of the project, building, common areas or the property, without obtaining the written consent of at least 75 percent of the total allotees of the project.
- Apparently, this will result in higher per square feet rates, however, that that should not be the point of concern for property buyers as the overall prices will not be affected by this provision.
- RERA mandates developers to clearly mention the date of project delivery in the Agreement of Sale.
- The Agreement also needs to have clear cut provisions of compensation and penal interest in case the project crosses the delivery date.
Resolution of issues
- In view of providing quick resolution of issues, the Act has facilitated set-up of Appellate Tribunals in every State in the country.
- While there have been consumer and civil courts that also look into disputes related to real estate, presence of a specialized and exclusive corridor of justice will result in speedy resolution of matters.
The provision of exclusive Appellate Tribunals at a time when Courts are flooded with property related cases will certainly help in delivery of justice in time.