One of the most globally recognised sectors, the Indian real estate domain holds a promising future with an estimated investment of US$180 billion by 2020. Considering the huge capital investment that goes into it, discrepancies in the system is inevitable.
Since the past numerous years, there have been frequent reports of malpractices by certain fly-by-night developers who have duped people into purchasing properties; incidents of legal frauds and bookings for projects without the possession or proper sanctioned plans have also surfaced. All this had made the earlier gullible buyer/investor apprehensive in his approaches to the sector.
In the light of this dwindling faith, the Parliament of India had, in 2016, passed the Real Estate (Regulation and Development) Act that became effective from May 1, 2017. Under this, every state and union territory will now have to maintain a separate body for the real-estate sector where the developers have to report.
The RERA is an attempt at establishing a regulatory body for the real estate sector. In a bid to reviving consumer's faith in the system, ensuring maintenance of proper practices on the part of the developers and transparency in the sector, RERA comes as a huge relief. To list a few, here are some of RERA's most striking features -
Registration of projects
Under the RERA, the developers are bound to register their project with the regulatory body before advertising or selling of their projects. The registration involves furnishing of the promoter's background details, brief details of the projects launched, the sanctioned plan, a copy of the legal deed along with other details.
Once the developer obtains the registration number, he/she is given access to create a page on RA's website to upload the project related information. This includes information like a list of number and types of apartments or plots booked, the quarterly status of the project amongst others.
After the RERA has come into the picture, the promoter cannot accept more than 10 percent of the advance money paid by the buyer at the time of the booking inclusive of the application fee or any other fee demanded by the promoter.
2012-13, in particular, was marked by delayed delivery of real estate projects to the buyers owing to the allocation of the funds into new projects. However, after RERA, if the promoter fails to complete or to give possession of the property within the agreed period, he has to return the total amount with interest at such rate as mentioned in the agreement to sale.
RERA also mandates the creation of a separate account by the developers wherein 70% of the money deposited from buyers will be utilised in construction. The developers can no more raise the initial capital during the initial stages of a project. As a result, the developers shall have to rely on either debt financing or equity financing or a mix of debt and equity financing to raise the initial capital for their projects.
Making information regarding the current projects available
The RERA decrees developers to make public the original sanctioned plans, changes, the amount deposited, allocation of money, and the timeline for completion etc. certified by a competent authority.
RERA act provides the buyers with a provision of availing rectification in terms of quality of the project handed over. The developers are bound to rectify any issues within 30 days of the complaint and that too without inducing any further charges. This provision is valid only up to 5 years of purchase of the property.
Thus, the RERA provides a standardised procedure to overcome the consumer disputes in a swift and smooth manner. It is an effective tool in ensuring more accountability and fulfilment on the part of the developers.