The Real Estate Regulation and Development Act, 2016 (RERA) came into effect on May 1, 2017, setting the stage for easy and secure procurement of homes for buyers in the country.
Focusing on transparency and facilitating buyers at different stage of the buyer funnel, RERA imparts benefits to developers with an increased demand on its projection list.
Adding to the benefits of property buyers, RERA comes into the scene with a huge relief to property investors at all levels, with a solution to problems which previously were ignored or not given its fair share of attention.
Each state and UT will have its own Regulatory Authority to frame rules and regulations for the law. As on May 1, 2017, 13 states and UTs have notified rules under RERA.
Here are basic amendments of RERA:
- A developer cannot collect more than 10% of the amount of the property, as an advance payment, without entering into a registered agreement of sale.
- 70% of the fund collected by the developer should go in a separate bank account for construction purposes of the project. Any withdrawal from that account must trace to the construction of the project
- The developer can no longer delay projects. Penalties will be implied on developers on account of delay in the project. In case of delay, monthly interest taken by buyer for under construction flats will be paid by developer.
- The law prescribes developers to disclose project details on their websites and provide quarterly updates on construction progress.
- Any structural defect noted within a period of five years from handing over the property will be rectified by the promoter/ developer at no additional cost, within a period of 90 days.
- Before beginning promotions and advertisements for the project, a registration number has to be obtained against these activities. The developer/ promoter is expected to submit a few important documents to the RERA.
- In case of completed projects, the developers can obtain completion / occupancy certificates (CC or OC) and continue advertising unsold inventory.
- If the CC is expected in 3 months from the date of commencement of the project, developers should obtain the registration and continue to sell their projects post 1st May, 2017.
- As per the Maharashtra RERA, developers shall stop advertising at the end of 90 days from the date of notification of section 3 of the act, if they do not obtain the registration number within 90 days.
- For all the ongoing projects for which the completion certificate has not been issued as on the date of commencement of the act, the promoter has to apply for registration of such incomplete projects, and provide all the details such as tentative completion date and all the information to be provided under RERA.
- The promoter should make the following information available to the buyer at the time of booking or issuing the allotment letter:
- Sanctioned plans
- Layout plans along with specifications, approved by competent authority
- Stage wise phases of completion of project, including civic infrastructure like sanitation and electricity
- The state RA should specify the rate of interest on a default by either the developer or the buyer.
Conclusion: RERA is a big step to the removal of problems such as delayed completion of projects, bad construction quality and developers not sticking to sanctioned plans. However, it depends on the RA of each state to dilute it in favor of the builders or to draw a line in favor of the buyers. Either way, the act is seen to benefit buyers in the best possible manner. As projected, RERA comes with increase in transparency and dip in supply. Prices will be stable for now but a surge can be expected in the upcoming months. However, there will be an increase in demand by home buyers and investors due to increase in sense of security and confidence. All attributed to RERA.
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