Real Estate Industry

RERA

Note4Students

From UPSC perspective, the following things are important :

Prelims level : RERA

Mains level : Real Estate issues

The Supreme Court has asked the Chief Secretaries of the States to respond to queries raised by the Centre on the implementation of rules framed under the Real Estate (Regulation and Development) (RERA) Act, 2016 in their respective jurisdictions.

What is RERA, 2016?

  • The Real Estate (Regulation and Development) Act, 2016 seeks to protect home-buyers as well as help boost investments in the real estate industry.
  • It establishes a Real Estate Regulatory Authority- RERA in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution.
  • It was enacted under Entry 6 and 7 (dealing with contracts and the transfer of property) of the Concurrent List.
  • It is followed by the principle “buyer is the king and builders will have to ensure compliances to avoid punishment”.
  • Its main objective is to reduce delay in the work or timely delivery of the project without compromising the quality.

Objectives of this Act

It has the following objectives:

  • To protect the interest of the allottees and ensure their responsibility
  • To maintain transparency and reduce the chances of fraud
  • To implement Pan-India standardization and bring about professionalism
  • To enhance the flow of correct information between the home buyers and the sellers
  • To impose greater responsibilities on both the builders and the investors
  • To enhance the reliability of the sector and thereby increase confidence amongst the investors

Key Provisions of RERA Act

  • Compulsory registration: According to the central act, every real estate project (where the total area to be developed exceeds 500 sq mtrs or more than 8 apartments is proposed to be developed in any phase), must be registered with its respective state’s RERA.
  • Establishment of state level regulatory authorities: It provides for State governments to establish more than one regulatory authority such as RERA to:
  1. Register and maintain a database of real estate projects; publish it on its website for public viewing
  2. Protection of interest of promoters, buyers and real estate agents
  3. Development of sustainable and affordable housing
  4. Render advice to the government and ensuring compliance with its Regulations and the Act
  • Establishment of Real Estate Appellate Tribunal: Decisions of RERAs can be appealed in these tribunals.
  • Mandatory Registration: All projects with plot size of a minimum 500 sq.mt or eight apartments need to be registered with Regulatory Authorities.
  • Deposits: Developers needs to keep 70% of the money collected from a buyer in a temporary pass through account held by a third party (escrow account) to meet the construction cost of the project.
  • Liability of the developer: A developer’s liability to repair structural defects would be for 5 years.
  • Cap on Advance Payments: A promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale
  • Carpet Area over super built-up: Clearly defines Carpet Area as net usable floor area of flat. Buyers will be charged for the carpet area and not super built-up area.
  • Punishment for non-compliance: Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.

Which projects can get RERA approval?

  • Commercial and residential projects including plotted development.
  • Projects measuring more than 500 sq mts or 8 units.
  • Projects without Completion Certificate, before the commencement of the Act.
  • The project is only for the purpose of renovation/repair / re-development which does not involve re-allotment and marketing, advertising, selling or new allotment of any apartments, plot or building in the real estate project, will not come under RERA.
  • Each phase is to be treated as standalone real estate project requiring fresh registration.

Benefits offered by the RERA Act

Industry

Developer

Buyer

Agents

  • Governance and transparency
  • Project efficiency and robust project delivery
  • Standardization and quality
  • Enhance the confidence of investors
  • Attract higher investments and PE funding
  • Regulated Environment
  • Common and best practices
  • Increase efficiency
  • Consolidation of sector
  • Corporate branding
  • Higher investment
  • Increase in organized funding
  • Significant buyers protection
  • Quality products and timely delivery
  • Balanced agreements and treatment
  • Transparency – sale based on carpet area
  • Safety of money and transparency on utilization
  • Consolidation of the sector (due to mandatory state registration)
  • Increased transparency
  • Increased efficiency
  • Minimum litigation by adopting best practices

 

 

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