Thursday, May 4, 2017

Real Estate Regulatory Act; Are you ready for RERA?

The Real Estate Regulatory Act 2016, that was passed by parliament last year, has come into effect from 1st May, 2017 and this will be first of its kind of act for the real estate sector.

Actually the center had had given time till 30st April to notify the rules for the functioning of the regulator. The idea of RERA was to ensures the transparency and accountability in the real estate sector and protection of interests of both the buyers and builders.

As the law came into effect the there is expectation that the consumers won't have to suffer late deliveries and the errant builders can also be penalized.

There was a need of such kind of law for the real sector because of the buyers were facing a lot of problem. Although the Real Estate Regulatory Act 2016 has come into effect in the country, even after that there is considerable hope that it will fullfill the much needed transparency in the real estate industry.

The economic downturn deflated the real estate sector and after the demonetisation it has badly affected due to shortage of cash and many of the project had delayed or halted, leaving the many of the homebuhers in the lurch, the law that could address the concerns of the homebuyers had become the need of the day.

After all the law has came into effect, do you know what is RERA? Here is all you should know.

How will the Real Estate Regulatory Act be implemented?
The Ministry of Housing and Urban Poverty Alleviation has already notified the act last week and ensured the act has enforced from 1st May. Both the center and the state have to formulate the rules under the RERA.

As per RERA each state and Union territory will have its own regulator and sets of rules to govern the functioning of the regulator. The HUPA ministry will formulate the rules for the Union Territories but as for as Delhi is concern the Ministry of Urban Development will set the rules as reported in the media.

The Real Estate Regulatory Authority will be established by the central or state government within a year from the 1st May. These authority will decide on the complaints of the buyers and developers within not more than 60 days. The government can designate any officer as the interim Regulatory Authority until the authorities are in place.

How will RERA affect builders, developers and promoters?
The promoters of a real estate firm has to deposit, 70% of the amount realised for the project from investors and buyers, from time to time, in a seperate bank account that will be used to cover the construction cost and the land cost and shall only be used for that purpose.

Further the amounts from the seperate account shall be withdrawn by the promoters only after an engineer, an architect and a chartered accountant will certified that the withdrawal is in the proportion to the percentage of the completion of the project.

The promoters have to get his account audited, within the six months after the end of the every financial year, by a chartered accountant.

The developers have to register the every projects with regulatory authority. In fact it will be the responsibility of the authority to register the real estate projects and the real estate agents that is being operated in their respective state. The registered projects details will be put up on a website for the public access.

The developers can't invite, advertise, sell, offer, market or book any plot, house, apartment, building and investment in projects without registering it. Once it registered, all the advertisement will have to bear the unique RERA registration number. Every project will have its own registration no.

The builders have to submit the original approved plans for their ongoing projects and also the alterations that will be done later. They have to also furnish the details of revenue collected from the allottees, funds utilisation, timeline for construction, completion and delivery of the projects that will need to be certified by an Engineer/Architect/Chartered Accountant.

The developers have to keep buyers informed of their other ongoing projects so that there could be clarity to buyers.

The promoters will also have to provide declaration related to the a legal title of the land and free from all encumbrances on which the development is proposed along with the legally valid documents for the authentication of such title, if the land is owned by the another person.

To register their projects the developer have to log on their regulatory authority's website. After the registration the developer will be given login credentials which will be used to upload all the necessary information regarding the projects on the regulator's website. They have to upadate the project details like number, type of apartments, plots and their completion status at a maximum quarterly basis.

Is there any provisin of project warranty in RERA?
Yes, In this Real Estate Regulatory Act 2016 there is provision of 5-year warranty for the any structural defect in the building. If the buyers highlighted any issue, that includes quality of construction and the provision of services, in front of the regulator the developer will have to rectify such defects without any charge, within 30 days. If the promoter failed to rectify such defects the allottees shall be entitled to receive the appropriate compensation in the manner as it has been provided in this Act.

How will RERA impact the homebuyers?
Over the last few years the buyers have protested for the poor construction quality of the flats. There is a provision in the Real Estate Regulatory Act 2016 for the buyers complaints.

In case of defaults delivery by promoter within the said deadline, the promoter will be required to return the entire invested money of the buyers along with the pre agreed interest rate that had mentioned in the contract based on the model contract given by RERA.

If the buyer wants not to take the money back, the builder will have to pay monthly interest on each delay on the monthly basis to the buyer till they get the delivery.

According the RERA the developers can't ask more than 10 percent of the property's cost as an advanced payment booking amount before actually signing a registered sale agreement, it add the security to buyers.

There is provision in the REARA that provides power to the regulator to fine and imprison the errant builders based on the case by case basis. For a project the imprisonment can go up to the period of three year.

The home buyers will have to pay now only for the carpet area, means the total usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, excluding balcony or verandah area and exclusive open terrace area, but it includes the area covered by the internal partition walls of the apartment, and the builder can't charge for the super built-up area.

But the pricing will be impacted because of both the RERA has come into effect and the GST is also set to roll out by the government.

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