Planning to buy a house, the first thing you need to do before paying the initial booking amount is to verify whether the shortlisted real estate project is RERA approved or not. Aapna ghar is a dream for every Indian household. People shell out all their life savings in purchasing a house but will often make mistakes in checking the authenticity of the builder and fall prey to real estate scams. The Real Estate Regulatory Act (RERA) came into force on the 1st of May 2017 to protect the interest of home buyers. Before RERA act the real estate market in India was manipulated by the Builders/Developers through their false promises, title frauds, delays in project completion and changes in approved plans.
RERA act includes 92 sections and is applicable to residential and commercial projects across India. It is subdivided into various smaller bodies. Each body looks after real estate development in a particular state or union territory in India. For instance RERA Karnataka, RERA Delhi, RERA Goa, RERA Madhya Pradesh etc..This has brought more transparency, accountability and uniformity in the real estate sector. All the builders or real estate developers are mandated to register under RERA before starting the project.
This Act provides the rules and regulations for the real estate sector and levies penalties in case of violation of the act. In case of non-compliance, the builder/developer may be subject to imprisonment for up to three years or a penalty of up to 10% of the projected cost of the real estate project or both.
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Who needs to register under RERA?
As per RERA, all real estate Projects exceeding an area of 500 sqft or more than 8 apartments should be registered under the RERA act. All residential and commercial projects, including shops, offices, and structures, are covered by RERA.
RERA only applies to real estate development, not to the rental of real estate. It excludes the properties which have obtained completion certificates before the RERA act.
How RERA benefits Real estate Investors?
Prior to RERA, there was no uniform set of standards for builders. Each builder followed their own set of standards to manipulate the real estate market & home buyers. The buyer who invests all his hard-earned money in the real estate property had no way out to get his money back if the builder goes bankrupt. There were many cases where builders exploited middle-income households and turned their dream of buying a house into a nightmare.
RERA gave the below rights to home buyers in order to protect their interests.
- Right to Information:
The Developer or Builder should provide updated complete information about the project regularly on their websites. This helps the home buyers to track the progress of the construction. Any changes made to the approved planned project should be submitted to RERA.
- No more delays in project completion:
As per RERA Act 2016, the property developer must provide a due date for the flat’s possession. In case of project delays, the buyer has 2 options;
Withdrawal from the project: The developers/builder should fully refund the amount paid along with an interest rate of 2% over SBI’s Marginal Cost of leading rate to the home buyers.
Continue With the project: In this case, the developers/builder has to compensate along with interest payable from the due date of completion of the project till the project is actually completed to the home buyer.
RERA Act mandates the establishment of a Real Estate Authority and an Appellate Tribunal in each state. If the builder/developer commits any violation, the property buyer can register a complaint with this body.The Tribunal will resolve the case within 60 days from the date of receipt of the Grievance. If the Tribunal is unable to resolve the issues, it must explain the reason for the same.
- Standardization of carpet area :
Prior to the RERA Act Builders/developers had their own way of calculating the carpet area of a flat or property, due to which the properties were highly overpriced or overvalued in many cases.
As per RERA Act now Builders / developers are not allowed to charge on the super built-up area like lifts, staircases etc..The carpet area is the actual useable area for the construction of a flat omitting the thickness of the inner walls.
Builders can determine the Cost Of Property as follows;
Cost Of Property = Carpet Area x Rate Per Square Fit.
- Builders will be held liable for faulty promises or any defects in construction:
If the builder is not aligning with the commitments or the actual project, the buyer has the right to sue him. The buyer has the option to withdraw from the project, in this case, the builder has to refund the payment with interest fully.
If a buyer notices any defect or fault in the construction, quality, or provision of the flat within 5 years of taking possession, the builder is liable to rectify the defect within 30 days at no additional cost. If the builder fails to correct the defect, the buyer is entitled to compensation.
Under RERA Act Builder/ Developer is not allowed to take more than 10% of the cost of the Flat as an advance payment before signing the registered sale contract.
- No mismanagement of funds:
A major issue in the house purchase is a delay in possession or non-completion of construction due to mismanagement of funds by the developers/ builders. RERA mandated all the developers to deposit 70% of the funds received from the buyer into a separate bank account through cheque to avoid these issues. Withdrawals from such accounts are on the basis of the completion of the project, which should be certified by a civil engineer, architect and chartered accountant.
- Clearances before the sale of a project:
Most often builders start selling a project without obtaining all clearances due to which the property buyers may face issues.
To avoid this RERA Act, mandates all developers/builders to register with the regulator, disclosing all the required details of the project. They can sell only after getting all the clearances from real estate authorities.
How to check RERA Registered projects?
To check the registered projects, visit the RERA website and enter the project details.
For example:
KRERA covers the projects in Karnataka.
Maha RERA covers the projects in Maharashtra.
RERA Delhi covers the projects in Delhi.
RERA act enhanced trust, accountability and transparency in the real estate sector through the standardization of rules and regulations in the industry. Due to the hassle-free real estate investment, the demand for real estate has peaked. Since the inception of RERA, the manipulation in the real estate industry has come down to a greater extent which is a big relief for home buyers.
Disclaimer:
This article should not be construed as investment advice, please consult your Investment Adviser before making any investment decision.
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