What is RERA?
The Real Estate (Regulation and Development) Act, 2016, was formulated to safeguard the interest of homebuyers and to infuse transparency and credibility into the otherwise unregulated real estate sector.
The Rajya Sabha passed the Bill on March 10, 2016, and by Lok Sabha on March 15, 2016, after multiple amendments to the regulations. While 59 of the 92 sections were notified earlier in 2016, the remaining were notified on March 2017, before the Act was finally executed on May 1, 2017. By far, 22 States and six Union Territories have notified the RERA rules and around 19 States have an active online portal.
What are the key provisions pertaining to the registration of real estate projects?
The key provisions included in the Act, notified by the Government of India, are mentioned below.
The Act mandates that all the commercial and residential real estate projects larger than 500 sq m, or eight apartments should be registered with their State’s Real Estate Regulatory Authority (RERA) before being launched.
Ongoing projects without Completion Certificates (CC), as on the date of commencement of the Act, will have to file for registration within three months. The authority will have to either accept or reject the application within 30 days. Post acceptance of the registration request, the promoters will be required to present all the relevant details about the project on RERA’s official website.
The failure to register a project would attract a penalty of 10 percent of the total project cost or imprisonment of up to three years.
Real estate agents, facilitating the sale or purchase of realty projects, too, will have to register themselves with the authority.
How does the Act promote transparency in the realty industry?
RERA mandates all builders to submit original, approved plans of their ongoing projects to the regulatory authority, including the details about the alterations made later. Besides, they will have to furnish details of revenue collected from allottees and utilisation of funds, along with and construction, completion and delivery timelines certified by an authorised engineer, architect or a practising chartered accountant.
Moreover, in order to enable homebuyers to make informed decisions, the real estate regulatory authorities will have to ensure publication of information relating to each builder’s profile, track record, litigation details, advertisements and prospectus of their projects, details of plots and apartments, details of registered agents, consultants and promoters, status of approvals, layout plans etc.
What is an Escrow account under RERA?
The promoter/developer of a real estate development firm will have to maintain a separate escrow account for each project. A minimum of 70 percent of the total funds collected for a specific project will have to be deposited in that account and used only for the construction or land cost pertaining to the same project.
What are the changes proposed with respect to super-built up area under RERA?
Promoters of real estate projects will have to charge buyers only on the basis of carpet area, unlike the earlier practise of charging on the built-up or super built-up area. Also, the Act bars a promoter from taking higher than 10 percent of the total cost of apartment, plot or building, as an advance payment without entering into a written agreement of sale.
Carpet Area, as the name suggests, is the net usable floor area in building/apartment.
Built-up Area is the carpet area plus the area covered by inside and outside walls, balconies and verandahs attached to the unit for exclusive use.
Super built-up area includes the carpet and built-up area along with the common areas such as lobbies, reception staircases, lift shafts etc.
What are the mandates pertaining to modification of sanctioned plans?
The Act restricts the developer or promoter from making any alterations or additions to the sanctioned plan of the apartment, building or common areas without the written consent of at least two-thirds of the allottees of the residential projects.
What is an Appellate Tribunal? What are its critical functions?
The Act enforces the establishment of appellate tribunals under the respective State regulators. The tribunals will be required to settle grievances and complaints within 60 days from the date of filing.
The Act also outlines penalty clauses for developers in case of structural defects or delay in project delivery, and for buyers in case of irregular payments. The states have been mandated to notify their separate RERA regulations inspired by the ones notified by the Central government.