The Real Estate Act 2016 came into force from 1 May 2017. It promises of protecting the right of consumers and bringing about transparency in the real estate sector in India.
The government describes the implementation of the consumer-friendly Act as the inception of an era where the consumer is the king.
Real estate sector has also welcomed the implementation of the Act. Real estate sector thinks that it will bring a paradigm change in the way the Indian real estate sector functions.
The legislation made by the government has brought in changes in the laws related to real estate industry which will be helpful to protect home buyers and encourage genuine private players.
Important Provisions in RERA
The Real Estate (Regulation and Development) Bill, 2016, was passed by the parliament in March 2016 and all the 92 sections of the Act came into effect from 1 May. Here are some important provisions which are explained in the bill:
Important Provisions in RERA 2016
1. According to the act the promoter of a real estate development firm is required to maintain a separate escrow account for each of their projects.The investors and buyers are required to deposit a minimum 70 per cent of the money. This money can only be used for the cost borne towards the land and the construction of the project. And, developers are required to keep their buyers informed of their other ongoing projects.
2. RERA makes it mandatory for builders to submit the original approved plans for their ongoing projects and the alterations that they made later.
They are also required to furnish details of revenue collected from allottees, the timeline for construction, how the funds were utilized, and delivery that will need to be certified by an practicing Chartered Accountant /Engineer/Architect.
3. The Act makes it the responsibility of each state regulator to register real estate projects and real estate agents operating in their states. The details of all registered projects will be put up on a website for public access.
4. RERA has provisions which talk about the quality of construction in projects. Over the last few years, buyers have protested about poor of flats. The regulator is responsible to ensure protection to buyers in this matter for five years from the date of possession. If any issue is raised by buyers in front of the regulator in this period including the provision of services and quality of construction, the developer will have to rectify the same in a matter of 30 days.
5. Developers can’t invite, sell, advertise, market or book any plot offer, apartment, investment in projects, house, building, without first registering it with the regulatory authority. And, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number. The registration no. will be provided project-wise.
After registering the project, developers will have to furnish details of their financial statements, legal title deed and supporting documents.
6. In case, when the promoter defaults on delivery within the agreed time, they will be required to return the entire money invested by the buyers along with the pre agreed interest rate mentioned in the contract based on the model contract given by RERA.
If the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery.
7. RERA mandates that when developers register with the regulator, a web page will be created for the builder on the regulatory authority’s website. The developer will be given login credentials using which it will upload all the information regarding the registered projects on the regulator’s website. The number, type of apartments, plots and projects and their completion status will be updated at a maximum quarterly basis.
8. In order to add further security to buyers, RERA mandates that developers can’t ask more than 10 per cent of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.
9. The regulator is given the power to imprison and fine builders based on a case by case basis. The imprisonment can go up to a period of three years for a project.
Real State Data in India
The industry data shows that in India, real estate projects in the range of 2,349 to 4,488 were launched every year between 2011 and 2015, amounting to a total of 17,526 projects with investments of Rs13.70 lakh crore in 27 cities, including 15 state capitals. In real estate industry, abbout ten lakh buyers invest every year with the dream of owning a house.
There are around 76,000 companies in the Indian real estate sector across the county. Besides mandatory registration of projects and real estate agents, RERA includes that the builders will have to deposit 70% of the funds collected from buyers in a separate bank account for construction of the project. This will ensure timely completion of the project as the funds could be withdrawn only for cons.
Impacts of RERA
RERA will have positive impacts on real estate industry. When applied effectively it will help in solving myriads of problems faced by the buyers in India. It will go a long way in assisting upstanding developers. The most important positive thing it will do is that it will ease the burden on innocent home buyers who put their life’s savings into a real estate investment in the hope of having a roof over their head but often face their dreams come tumbling down.
Another impact of RERA would be it will increase transparency in the sector and boost confidence of both domestic and foreign investors.
There will be some “teething problem” initially in implementation of this law. And, initially, supply will dip during this year but demand will improve as buyers will have increased confidence about investing in the property market. The real estate prices will remain stable now but rates could rise by 10% in the next six months.
Finally, it can be said that the new legislation is a welcome enactment. Eventually the benefit of any statute is based on its effective implementation.
Till now, only a few States have notified their rules despite a model set of rules.
The biggest responsibility lies on States to formulate rules and timely establish the regulatory authorities.
If an existing authority is designated to take additional charge as the real estate regulator, it will make the Act ineffective as that would affect the timeliness prescribed under the Act. So the whole process ought to be started in a fresh way.