Understanding RERA: Benefits, Rules & How it Protects Homebuyers in India

What is RERA Act?

The Real Estate Regulatory Authority is a law enacted in 2016. The law aims to safeguard the interest of homebuyers and boost investment from the real estate sector. As a form of regulation, this Act has been implemented in each state in India; thus, settlement is faster. For years, homebuyers have been suffering due to the unfair practices and inequality that balance sheets showed in most real estate deals. Developers would be at an upper hand in most real estate dealings while homebuyers would be suffering. RERA as an act seeks to balance out the profits of a deal for both buyers and sellers in the Indian real estate market. It aims to make the home buying process hassle-free, including the acquisition of a home loan, by making the entire process responsible and transparent. RERA is the first regulating authority for Indian real estate that has gone to this extent.

 

RERA Act and Rules

Under Section 84 of the Real Estate (Regulation and Development) Act, 2016, State Governments shall establish regulations within six months of the commencement date of the Act for the implementation of the provisions of the Act.

General Directions for the Real Estate (Regulation and Development) Act, 2016
These directions were received by the central government through the Housing & Urban Poverty Alleviation Ministry (HUPA), dated October 31, 2016, which also address issues related to financing, such as home loans, for potential buyers. 

Union Territories such as Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli, Andaman & Nicobar Islands are also included under this regulatory framework.

 

Some Points Under Real Estate Regulation and Development (RERA)

• Security

At least 70% of what is gathered from the buyers and investors must be kept in a reserve account. The remainder is repatriated to the developers for expenses on construction and the utilization of land. Developers and construction firms cannot solicit more than 10% of the selling value of the property as a down payment before the sale agreement takes place.

• Transparency

 The developers are to present the original copies of all the plans drawn on each project that they undertake. It is not lawful for them to change any of those designs without the buyers' consent .

• Fairness

RERA have termed it that properties must be sold on total floor area, not on high-density. In case of delays in a project, buyers will be allowed to take back the entire investment or receive monthly payments as an option.

• Quality

Builders are entitled to solve any complaints arising from customers within a time frame of five years upon acquiring the product. These complaints must be addressed within a 30 day period after raising the complaint

• Permission

Authorities are not permitted to advertise, sell, develop, invest in, or offer plots of land without RERA registration. All marketing material of investments registered with RERA has to carry a unique Project specific registration number.

 

Benefits of RERA Act

• Standard Carpet Area Measurement

Before RERA, builders made use of any tool at their disposal in regards to carpet area, which resulted in overcharging. Through RERA, a standardized method of calculation of carpet area was established that put an end to the inflated size by builders so that the size increased and, therefore, the price as well.

• Builders' Insolvency Risk is Relatively Low

Previously, developers were allowed to divert funds from one project to the other, which was dangerous for the buyers. In RERA, at least 70% of the money collected needs to be deposited in one single account, and then only it can be withdrawn after getting the approval of engineers, chartered accountants, and architects.

• Restriction on Advance Payments

Builders are limited to taking less than 10% of the cost of the project in advance payments or application fees. This will, in turn, prevent the pressure on a buyer to come up with funds quickly or be required to pay a significant amount up front for the land.

• Buyer's Rights Regarding Defects

Within five years from the date of taking possession, in case some structural defects or quality defects arise, the builder is liable to rectify such defects within 30 days at no extra cost to the buyer .

• Same Interest in Case of Delay

The buyer was usually paid at lesser interests if the promoter was also delayed to hand over the property, which in case has been settled under RERA that both parties will pay at the same interest.

• Full Refund in Case of False Promises

Title defect If the promises made by the builder are not delivered, the buyer can easily get back the whole advance payment. The builder is also liable to pay the interest on the same amount in some cases.

• Compensation for Title Defects

If the buyer discovers a title defect after moving into the property, the promoter can be compensated. Compensation paid has no limit.

• Right to Project Information

Buyers should be entitled to all information regarding the project, from plans to lay down, execute and complete.

• Complaint Resolution

However, if any adversity befalls because of this project such as a complaint filed against the developer by a buyer, promoter, or even agent, all it needs to do is file its complaint with RERA. The disappointed party can again move the appeal before the Appellate Tribunal if it does not like the decision of RERA.

 

Carpet Area Under the RERA Act

Under the Real Estate (Regulation and Development) Act, 2016, the provision of pricing of their apartments by the developers has been made under the total floor space available in an apartment for use.

As per the Act, carpet area means the total floor area covered by any wall of the apartment and does not include open terraces, shafts, balconies and so on. Such standardization of definition of carpet area helps prevent a buyer from being scammed by fraudulent developers.

 

How to Ensure that the Property is RERA Compliant?

The above-mentioned construction company has been held liable to register itself properly under RERA Act if the area of the property exceeds 500 square meters about the size of a basketball court before beginning or selling any development upon that said property.

Construction companies will be able to prove that at least 70 percent of the full payment has been placed in a different account known as an escrow account and not allocated for other investment purposes.

Construction companies would be expected to obtain all the necessary clearances before an offer is made for promotion of a new project. No early reservations offers and pre-launch deals shall be permissible.

 

States with RERA Applicability

As of March 26, 2022, it was formed that there are 32 states and UTs into the Real Estate Regulatory Authority or RERA, of which 26 are permanent and 6 interim. Rules have been officially introduced by the states of Ladakh, Meghalaya, Sikkim, and West Bengal. However, they have not established the authority yet. According to the RERA, every state and UT is supposed to have a regulatory body of their own. Till now, no developer has been allowed to advertise his existing or future projects unless he gets himself enrolled with the permanent or the interim regulatory bodies present in that state. Except for Nagaland, all the states and UTs have made the declaration of RERA rules.

 28 states have nominated interim Real Estate Appellate Tribunals, that is to say, 24 permanent, and four interim. The Real Estate Act provides for this. 29 states and UTs have their websites under the regulatory bodies as per the RERA guidelines.

 

Conclusion

RERA has brought in much-needed transparency and better governance in the sector of real estate. It protects the rights of homebuyers and investors by bringing much-needed organization and transparency into the real estate market, otherwise operating without any proper authority. RERA's jurisdiction will now cover almost 70 percent of all real estate projects in the country.