Monday, July 31, 2017

How Will Real-estate Buyers Benefit From the RERA Act?

After over a year since the Real Estate Bill was presented in the Rajya Sabha, the Real Estate Regulatory Authority (RERA) Act is finally here. The much-awaited Act, which was implemented nationwide on May 1st this year, is aimed at bringing about the required accountability and transparency in the real-estate sector, which has so far been unregulated. Buyers across the nation, including those investing in expensive properties such as villas in Electronic City in Bangalore, are expected to be in the know of projects, right from the get-go.

A day before the implementation of the Act, M Venkaiah Naidu, Union Minister for Urban Development, Housing and Urban Poverty Alleviation, Information & Broadcasting, had tweeted, "#RERA promotes accountability, transparency & efficiency in the sector. Buyer set to be King. Promoter benefits from king’s confidence."

Here are a few benefits that buyers of real estate are expected to gain from the newly implemented RERA Act:
  • The Act will regulate the development work of projects that were ongoing as on the date of commencement of the Act, that is May 1, 2017, and for which the Completion Certificate was not issued. Which means, all ongoing and upcoming real-estate projects will have to be compulsorily registered by the developers. And, the registrations will need to be done before the projects can be marketed.

  • The term ‘carpet area’ has been given a clear meaning in the new Act. It states that the term covers usable spaces, including all areas covered by the internal walls—such as the kitchen and toilets—and excludes areas covered by the external walls—such as balconies and open terrace areas. And, buyers will need to pay for only the carpet area.

  • Unlike earlier days when there was not much transparency in the development work undertaken by developers and promoters, under the new RERA Act, all project-related details, including layout, sanctioned FSI, and number of floors/wings/buildings will need to be shared with buyers.

  • Quarterly updates on the development of the projects will need to be posted by the developer or promoter on the RERA site. The updates will concern the government approvals granted, overall status of the project, etc.

  • In case the developer provides false information regarding the project or breaches any of the provisions of registration, he will be liable to pay up to 5% of the estimated cost of the project.

  • Developers cannot take more than 10% of the project cost as advance without entering into a written agreement for sale.

  • To prevent misuse of the money invested by real-estate buyers, developers and promoters will have to transfer 70% of the received money to an escrow account. This money will be withdrawn for covering construction and land costs, and that too after the necessary certificates are issued by the architect, engineer, or CA concerned, stating that the said repairs are imperative. This measure is aimed at curbing developers’ practice of using buyers’ money for a project other than the one for which the money was reserved.

  • In case the developer does not hand over the possession of the property to the rightful allotted person, the latter can withdraw from the project and seek 100% refund of the amount paid, along with interest.

  • Any structural repair costs in the property will be borne by the developer for five years, as against two years earlier.

  • Non-compliance with the RERA Act will lead to up to three years of imprisonment or a fine of up to 10% of the estimated cost of the project, or both.

This is a guest post by Dinesh Dawde.

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