-
What is RERA?
RERA is the acronym (short-form) for Real Estate(Regulation and Development) Act, 2016. It is also used to refer to the Real Estate Regulatory Authority which, as per the Act, is required to be formed in each state and UT.
-
Why is RERA made? What are the objectives ? Why is it suddenly being talked about so much?
With RERA, the Government has codified the best practices for the first time in this sector. Consumers’ interests are taken care of, covering all commercial and residential real-estate. There was an over-whelming need for regulations and uniform guidelines in a scenario where the consumer discontent was rising by the day, as evidenced by the increase in litigations. Some broad objectives that are covered by the Act are as follows –
a.To bring transparency and efficiency in the process of buying and selling of Real-estate.
b.To provide legal cover and to protect consumers’ interests / rights in the RE sector
c.To ensure that there is a defined process and efficient handling of disputes
d.To define and standardize term and measures, so as to bring all concerned parties to the same level of understanding, thereby also lending certain standardization across builders / projects. This will further help consumers to compare diverse projects and developers with ease.
e.Defining duties, liabilities and penalties for builders / developers and brokers / intermediaries.
f.Setting up timelines for registration processes and dispute resolution.
g.RERA mandates all developers / builders to upload all relevant information regarding a project – viz. Details of land titles, approvals, construction progress, names of brokers etc, on their website. These information shall then be easily available in one place.
-
Since when is RERA applicable ?
Though the Act itself was passed and notified in Gazette in March 2016, the implementation will be done in a phased manner. Each state has to further adopt the Act and form the RERA for implementation. States can also notify any existing agency as the regulatory authority. Specific provisions may take a little longer to implement but certain compliances on the part of Builders / Developers may become mandatory almost immediately.
-
Does it cover purchase and rental both?
RERA does not cover rental arrangements or agreements in any form.
-
Does it cover Commercial projects too?
RERA covers all residential and commercial projects, including shops, offices and buildings.
-
Will RERA be applicable to existing projects also or only to the future ones?
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.
-
Will it be mandatory for all builders / developers to register all their complexes under the Act?
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).
-
Are there any exceptions to Registration of projects under the RERA Act?
There are three exceptions for registration under the Act –
(a) Where area of land proposed to be developed does not exceed 500 sq m or number of apartments proposed to be developed does not exceed eight, inclusive of all phases. While the central government provides for these minimum area requirements the local governments can change the area requirements to conform to the Act, if required such minimum area threshold can be revised even lower.
(b) Where promoter has received completion certificate for Real Estate Project prior to commencement of Act
(c) For purpose of renovation or repair or re-development which does not involve marketing, advertising, selling or new allotment of any apartment, plot or building, under real estate project
-
What is the tenure or validity of registration under RERA?
Registration shall be valid for the period required to complete the project or phase, as declared by the builder / developer.
-
What happens if the builder / developer fails to deliver during the validity period?
The validity of registration is based on builders’ own estimates. Thus, accountability lies with them to adhere to the timelines otherwise they risk suffering losses / penalties.
-
Can registration be extended ?
Registration can be extended only in the case of natural calamities like, floods, drought, fire etc. or in the case of a war. Such extensions, if applied for by the builder / developer, will be for a period of one year.
-
Can the registration be revoked ?
Registration under RERA can be revoked by RERA, if it receives a complaint against the developer and is satisfied that the Developer has not complied with the rules under the Act, or has violated the terms and conditions of approval, or is involved in unfair practices to sell, market or advertise his projects.
-
Revoking of registration will adversely impact the customers. What effect will it have on the builder / developer?How will RERA ensure that customer-interestsare not harmed?
RERA can advise the appropriate Government to employ a competent authority to finish the project. The Association of buyers will have the first right to accept or refuse any further developmental activities in the project.
Revoking of registration will result in the following –
The builder / developer will be listed as a defaulter and will be denied access to site of the project in which he has defaulted
RERA will then inform RERAs of other states and UTs.
It will direct the bank to freeze the bank account of the particular project and consequently unfreeze it for further developmental work, if accepted / required.
RERA may, instead of revoking registration, permit registration to remain in force subject to such further terms and conditions as it thinks fit to impose, in the interest of allottees, and any such terms and conditions so imposed shall be binding upon builder/developer
-
RERA will increase the formalities for the builder / developer+ customer. Will that increase the cost for the buyers?
Though a difficult question to answer at this stage, this might actually become the discerning feature between a customer-oriented, ethical company and others. The Act facilitates an environment whereby real estate sector becomes more institutionalized and practices across builders and states become standardized, and thus, easy to understand for customers. Through the Act the Government is also recommending that Governments and Administration should adopt single window clearance system for real estate projects so as to fast track their development. While one can argue that real estate developers work will increase due to compliances they need to adhere to, the transparency that all of this will bring in, will help the RE sector in the long run and it is hoped that builders and developers will not levy a ‘convenience charge’ on the customers for the increase in formalities. Please note, however, that the Act remains quiet on the costing part of real-estate and leaves it to the builders / developers to take a call.
-
The Act has mandated real estate developers to specify ‘carpet area’ rather than ‘super built up area’. How will that help?
Carpet area is a measure of net usable area of the unit and does not include common areas, balconies, verandahs etc; whereas, the super built up area could be an addition of both. Therefore, to ensure that the consumer knows what he is paying for, it has been made mandatory for the real estate developer to specify carpet area. Essentially Carpet Area is the area within the external walls of a unit where a consumer can reside or have his office. Even when the balconies, verandahs or terraces are exclusively available within a unit these cannot be added to the Carpet Area prescribed in the Act. As per the Act –
"carpet area" means the net usable 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.
Mandating carpet area to be revealed will bring in the standardization across builders that was lacking hitherto. It will become easier for the customers to compare projects and rates.
-
Are there any restrictions on advertisements or promotions?
The Act mandates that anything shown in the marketing material needs to be in line with the final product or else real estate developer will be liable to penalties under the Act.
All marketing collaterals are also to be uploaded on the RERA site by the builder / developer, post registration. The advertisement or prospectus issued or published by the developer shall mention prominently the website address of the Authority, wherein all details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto. In case of any future dispute, the same can be easily referred to or produced as evidence.
-
Can a real estate developer change plans once the project is launched or is under construction?
The Act takes into account 2 scenarios -
1. Minor changes - Minor changes can be made to a unit plan (which includes plans, fixtures, fittings etc) after proper declaration and intimation to the customer and certification by an architect or an engineer that such changes are required for architectural and structural reasons. Such minor changes are also allowed which are requested by a consumer. But these do not include changes in area or height, or removal of part of a building or any such change which the authority feels materially deviates from the product offering.
2. Any other change i.e. change to sanctioned plans, layout plans, and specifications of buildings or common areas can not be brought about without consent of at least 2/3rd of consumers of the project. The consenting consumers do not include real estate developer who might still own units in the project. In fact for the purposes of this clause the Act counts all such consumers who might own several units in a project through direct and indirect ownership (company, HUF and family) as one irrespective of the number of units held.
-
Can a real estate developer exit the project mid-way by selling to another developer or party?
While a developer is allowed to sell the project to another investor he can do so only by taking written approval of 2/3rd of project’s consumers and also the prior approval of the RERA. Again, if a consumer or his family or by other means holds more than one unit in a project he is considered as one consumer only. Also, the RERA needs to be informed of such sale and the developer who is buying then assumes all the rights and liabilities as the previous promoter of the project (including project delivery timelines and other such matters).
-
What are the novel measures taken to secure consumer interest and empower him?
a.The consumer is entitled to receive information about the sanctioned plan, layout plan as approved by the competent authority, stage wise time schedule of the project completion and the services promised by the real estate developer like drinking water facility, electricity, sanitation etc. After receiving the physical possession of the unit, the consumer has a right to obtain the necessary documents and plans including that of the common areas.
b.The consumers can claim possession of the unit and the association of consumers can collectively claim possession of the common areas as declared by the real estate developer.This has to be as per the Apartment Ownership act of the State.
c.If the real estate developer fails to meet the timeline or does not deliver what was promised, the consumer has a right to claim refund of amount paid along with prescribed interest and compensation for the same
Also consumers will have to be updated about project progress, sales and construction status by the real estate developer. Also consumers will have to be updated about project progress, sales and construction status by the real estate developer.
-
What are the responsibilities of a consumer?
It is mandatory for a consumer to make timely payments to the real estate developer as per the agreement for sale. He will also have to pay his share of registration charges, municipal taxes, maintenance charges, ground rent, electricity charges, water supply charges and any other services.
Once the occupancy certificate is issued by the real estate developer, the consumer is required to take possession within two months’ time.
If the consumer is not able to make timely payments for his purchase, he is required to pay interest at a prescribed rate.
It is compulsory for a consumer to exhibit active participation in the formation of an association, a cooperative society or any federation of consumers.
A consumer shall participate towards registration of the conveyance deed of the unit.
-
What is an escrow account and why is RERA mandating 70% funds collected be deposited in an escrow account by a real estate developer?
An escrow account is under the purview of a third party essentially a bank or a recognised lender. This provision thereby results in further oversight of the bank account and signing authority is with the escrow account manager say a trustee or a bank or a lender.
One of the biggest pain points for consumers has been project delays. Amongst other reasons for delay, the use of collections from one project into business expansion or construction of other project or siphoning of funds by real estate developers have also been primary causes. Thereby to protect consumer of a project the Act mandates that of all collections 70% funds be deposited in an escrow account maintained with a scheduled commercial bank. These funds can be accessed by a real estate developer solely for purpose incurring expenditures towards the said project. The real estate developer can withdraw funds from this account in proportion to stage of work. The request for withdrawal of funds is to be certified by an engineer, architect and a chartered accountant in practice that real estate developer’s claims are justified. These costs include the costs of land, construction, finance, and other project costs.
-
What is the provision for an aggrieved person to lodge a complaint? Does he have to go through the existing judicial system?
The Act mandates setting up of an Appellate tribunal by the appropriate government within one year of the Act coming into force. So, RERA is the first body to approach in case of disputes and as per set of rules this body can establish the nature of violation and prescribe the penalty/ punishment. Any person aggrieved by the decisions of the RERA or an adjudicating officer can appeal to the Appellate Tribunal. This set up will fast track the process of dispute settlement since it minimises the involvement of the existing judicial system.
A person can appeal in High Court if he is aggrieved by decision of the Appellate Tribunal however this isn’t allowed in cases where the decision was reached after consent of the disputing parties. The person has to approach High Court within 60 days of receiving the decision.
-
What happens if an Appellate Tribunal is not established for a particular jurisdiction during the time of appeal?
In this case, the appropriate Government shall appoint any other body as Appellate Tribunal that currently exists to hear the appeals in the interim.
-
In the above case, what will happen if the Appellate Tribunal is established during the course of hearing?
The particular appeal will be transferred to the established Appellate Tribunal under the Act and will no longer be with the one which is temporarily appointed.
