How will Real Estate Regulatory Bill (RERA) help home buyers in India?

Real Estate Regulatory Bill (RERA) has been passed and is now being implemented at state levels. How will Real Estate Regulatory Bill (RERA) help home buyers in India? Here is quick look:

The Real Impact of the RERA Act

It’s been over four months since the Real Estate Regulation Act (RERA) came into effect in India. While the much-welcome move from the Indian parliament came as a boon for home-buyers in the country, there were (and still are) a lot of teething issues for developers and builders and the real-estate sector as a whole.

As is known, the RERA Act covers all projects that were still being executed and hadn’t received a Completion Certificate as on the date of commencement of RERA Act, that is May 1, 2017. Thus, many under-construction properties have come under the ambit of the RERA Act. All of these projects had to be registered with the housing regulatory authority, and the developers or builders concerned had to provide regular updates on the approvals at various levels. All these registered properties have to follow the rules of RERA.

• The Much-Needed Respite

One of the highlights in the RERA guidelines is that any real-estate property, be it a luxury apartment in OMR Chennai or a simple 2BHK in a suburban location of Mumbai, will be priced on the basis of the carpet area, and not the super built-up area. As per a report in The Economic Times, BMR & Associates LLP’s Manoj N Kumar, who is a Partner in Direct Tax, has clarified that the carpet area is 30–35% lesser than the super built-up area of a project. The sale of projects on a carpet-area basis can lead to a significant increase in the per-square-foot price of the project, he adds.

• The WIP Bane

The newly introduced rules under the RERA Act bring about a major transformation in the way real-estate dealings have been taking place in India. Switching to the new rules was expected to take some time, especially in the case of under-construction properties that have already seen a lot of paperwork. And, as can be seen, the shifting of gears has slowed down the growth of the sector in many states. The properties that were under construction at the cusp of the switch to RERA are bearing the worst brunt as their regularization and documentation had to be changed midway. And, until these properties get completed, their respective builders and developers are not willing to start off with new projects. This means, there is a lot of pressure on them to complete the ongoing projects and sell them, failing which there will be a pile-up of unsold inventory.

• The DeMon-RERA Impact

Experts express unison in the opinion that the demonetization drive by the Indian government in November 2016 was a blow to the real-estate sector because of the unprecedented and heavy cash crunch that made an appearance without any warning. Add to that, the RERA Act has forced builders and developers to mend their ways and set things straight, and bring about transparency at every level.

The back-to-back moves by the Indian government have taken the businessmen in the sector by shock, and it is only natural that they will need time to ensure things are in order. Until then, the sector is expected to continue facing a slowdown. However, given the motive of RERA to ensure thorough regularization and accountability in real estate, it is believed that the sector will start looking up gradually and that the benefits of the Act will be here to stay.


This is a guest post by Dinesh Dhawde

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.