An Epitome of the Real Estate Regulation and Development(RERA) act.

Written by: Apoorva Bhosale & Shantanu Dhande

BACKGROUND

The Real Estate Regulation and Development Act (hereinafter referred to as RERA Act 2016) was enacted in the year 2016. Prior to this act, there was no single authority for the regulation of the real estate sector. The real estate sector was unorganized and underdeveloped and the interests of the developers and buyers were protected under the Consumer Protection Act and the Indian Contract Act in the Consumer courts and Civil Courts respectively. All this led to tensions and confusion in the real estate sector and to ensure that the rights and obligations of every individual involved to be fulfilled the government implemented RERA, single legislation to overcome insufficiency

OVERVIEW OF PROVISIONS OF RERA

The RERA Act aims to regulate and maintain transparency & accountability in the country’s real estate sector. This act applies to both residential as well as Commercial Real Estate. The whole real estate sector is brought under a single regulator, which provides for a proper grievance settlement mechanism.

The Real Estate Regulatory Authorities are set up in the centre, state, and union territories under RERA which oversees the particular transaction of real estate in the state or union territory. The authority will act as a nodal agency and this will coordinate the efforts of the government as well as various stakeholders in the real estate sector.

The purpose of the regulatory authority is to develop a real estate sector in the economy and also to provide the government with necessary advice regarding the development of the real estate sector. The act defines various terms in Section 2. Under Section 2 (k) it defines carpet area. Since the definition of the carpet area is given the developers can sell only the carpet area which means the net usable space of the particular apartments and consumers can understand the utility area easily.

Chapter 2 and Chapter 3 of RERA deals with the registration of real estate projects & agents and the duties and function of promoters respectively. Registration is mandatory for all projects which exceed 500 meters or a proposed more than 8 apartments. It is the duty of promoters to mandatory disclose information about the project, adheres to the project plan and proposal, rectifies the structural defects, refunds the money if there is any default, and deposit 70% of total funds data into an escrow account.

The Act also provides certain rights and duties of the allottees. The allottees have the right to ask for a time schedule, to claim the possession of the property and they also have the right to ask for a refund with the interest on default from the promoter.

Earlier before the implementation of this act, the consumers had to approach the consumer’s court in case of any grievance. Now the provision of the RERA FastTrack’s the dispute mechanism. The consumers can approach Real Estate Regulatory Authority, in case of any grievance for consumer and if the consumers are not satisfied with the verdict of the Authority the consumer can appeal, within 60 days it has to approach the real estate appellate tribunal to settle the case within the 60 days so there is no time delay for the consumers and therefore is called a fast-track mechanism dispute settlement.

The Punitive provisions in this act include penalties in case of any default or in case of any contraventions to the provision of the act or the orders of the authority of the tribunal.

IMPACT

RERA has been a boon to the unorganized real estate sector ever since and created the
transparency passage between homebuyers and builders. It aims to organize and create a more transparent environment for property buyers. Down below are the significant impacts of RERA on the real estate sector.

Precise Sale Agreement
Prior to this, the promoter conceives the basic information from the homebuyer resulting in various frauds. Now as per the set RERA norms a precise format of sale agreement has been given containing detailed information regarding the possession, payment, construction details, pending litigation, etc.

Defect Liability Period
As per the norms stated by RERA the promoter has to deal with all the defects arising out of the construction due to the usage of sub-quality material for five years. If the builder refuses to comply with the complaint then the homebuyer can seek compensation to the RERA portal.

RERA Clearance
All real estate projects including residential and commercial shall register with the Real Estate Regulating Authority. The promoter must deposit 70% of the project money in a separate bank account which leads to the reduction in cases of money laundering and fraud. The promoter has to provide all the details of the project such as layout area, waste management system, land demarcation, etc. Once the promoter gets the clearance from the RERA, the flats can be put forth for sale by way of advertisements. Beyond all this RERA also provides the project work progress by asking builders to update the project progress on the website and in case of litigation pending on the land they have to share the documents of it too.

Redressal Mechanism
Completion of projects, conveyance of land, transparency in the project details are a few of the main issues on which legal assistance can be sought. Strict regulations have been imposed by RERA for the issues and compensation. There is an Appellate tribunal set up to solve the dispute within four months.

Rights and Responsibilities of Home Buyers under RERA

CONCERNS.

After the implementation of RERA, the developers face problems due to cash flow hindrance. There is no money in the market as the regulation demands 70% investment to be deposited in the scheduled bank account which leads to delay in the project and affects the supply-demand and prices of the property in the market.

The strict regulation of RERA requires approvals and permissions which reduces the profits, which leads to developers losing their interest in Real Estate projects. The developer losing interest affects the number of projects, the chain of RERA impacting negatively further affects the employment opportunities, and other related industries which are involved in the construction material. Therefore RERA affects both Employment as well as the Economy.

The regulations also cause clearance issues and delay in the start and finish of the project due to the procedure for controlling and maintaining the operation of the project at every stage. The delay is also because of the lack of administrative efficiency and political willingness.

Functions and Duties of Promoter under RERA Act

RERA IN TIMES COVID-19

Since March 14, 2020, the world has been hit by a global pandemic. Nirmala Sitharaman, the minister of Finance advised to treat covid-19 as a force majeure and thus the clause has been invoked. The ministry of housing & urban affairs also advised the union authorities to do the same. Force majeure is an unforeseeable circumstance that prevents something from happening. Just like every field, the real estate sector has also been impacted. Projects suffered due to a lack of supply of raw materials and labour.

Maha RERA has extended the deadlines of the validity for registrations of projects by six months. This is the second time the authorities have granted the extension since the pandemic. They have also asked to issue fresh “project Registration Certificates” automatically with revised timelines. The time of covid-19 has also sought relief for homebuyers since they were facing hardships due to job losses, pay cuts, EMIs, and rents. RERA has requested UP RERA to provide a 12 months extension and Karnataka RERA to 3 months extension for the completion and compliance of the projects respectively

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