What is the Real Estate Act (RERA) in India and what are its key features? How has it impacted the real estate sector in India and what are the challenges in implementing RERA?

April 10, 2023

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Introduction:

Real estate is a significant sector that contributes significantly to the economy of many countries worldwide. In India, the real estate sector has witnessed a boom in the past few decades, with the construction of numerous housing projects and commercial properties. However, this growth has also brought with it some challenges, such as lack of transparency, delayed delivery of projects, and fraudulent practices by developers. To address these issues, the Indian Parliament passed the Real Estate (Regulation and Development) Act, or RERA, in 2016. In this blog, we will explore the key features of RERA, its impact on the real estate sector, and the challenges that still need to be addressed.

What Is RERA

The Real Estate (Regulation and Development) Act, 2016, is an Indian legislation that seeks to regulate the real estate sector and protect the interests of homebuyers. The act was passed by the Indian Parliament in March 2016 and came into effect on May 1, 2017. RERA aims to promote transparency, accountability, and efficiency in the real estate sector by regulating the activities of developers, agents, and buyers.

The key features of RERA include:

Mandatory registration of projects: All new and ongoing real estate projects with more than eight units must be registered with the RERA before launching or advertising the project. This registration must include details such as project plans, layout, timelines, and approvals.
Disclosure of project details: Developers must disclose project details such as the carpet area, the number of units, the timeline for completion, and the status of approvals on the RERA website. This information should be updated regularly to ensure transparency.
Establishment of state-level RERA: Each state in India has a separate RERA that is responsible for regulating the real estate sector in that state. The RERA has the power to issue guidelines, resolve disputes, and impose penalties for non-compliance.
Establishment of Real Estate Appellate Tribunal: An appellate tribunal has been set up to hear appeals against the decisions of the RERA. This tribunal has the power to impose fines and penalties on developers who violate RERA regulations.
Escrow account: RERA mandates that developers must deposit 70% of the funds collected from buyers into an escrow account. This account can only be used for the construction and development of the project and cannot be used for other purposes.
Penalties for non-compliance: RERA has strict penalties for non-compliance. Developers who violate RERA regulations can face fines, imprisonment, or both.

Impact of RERA on the Real Estate Sector

The introduction of RERA has had a significant impact on the Indian real estate sector. RERA has brought about transparency, accountability, and efficiency in the sector, which has helped boost consumer confidence. The following are some of the ways in which RERA has impacted the real estate sector:

Increased Transparency: RERA has made it mandatory for developers to disclose all project details on the RERA website. This has increased transparency in the sector and has helped homebuyers make informed decisions. Homebuyers can now access information about the developer, the project, and the status of approvals, which has made the sector more transparent.
Timely Delivery of Projects: Developers are now required to complete projects on time as per the timelines provided on the RERA website. Failure to do so can result in penalties and fines. This has led to the timely delivery of projects, which has helped boost consumer confidence.
Increased Accountability: RERA has made developers more accountable to homebuyers. Developers are now required to deposit 70% of the funds collected from buyers into an escrow account. This has ensured that the funds collected from buyers are used only for the construction and development of the project.

Improved Consumer Protection

RERA has provided improved consumer protection to homebuyers by ensuring that their rights are protected. Under RERA, developers are required to provide a written agreement to buyers, which clearly states the specifications of the property, the date of delivery, and the price of the property. This has helped homebuyers understand the terms and conditions of the sale and has ensured that developers do not indulge in fraudulent practices. In case of any disputes between homebuyers and developers, RERA has established a dispute resolution mechanism. Homebuyers can file a complaint with the RERA, and the authority will hear the case and pass an order within 60 days. This mechanism has provided a speedy and efficient way of resolving disputes between homebuyers and developers. RERA has also established an appellate tribunal to hear appeals against the decisions of the RERA. This tribunal has the power to impose fines and penalties on developers who violate RERA regulations. This has provided an effective deterrent against fraudulent practices by developers.

Challenges in Implementing RERA

While RERA has brought about significant improvements in the Indian real estate sector, there are still some challenges in implementing the act. Some of the key challenges are:

Lack of Awareness: Many homebuyers are still not aware of the provisions of RERA, which has resulted in developers taking advantage of them. There is a need for more awareness campaigns to be conducted to educate homebuyers about their rights under RERA.
Lack of Implementation: While RERA has been enacted, there is still a lack of implementation on the ground. Many developers are still violating RERA regulations, and there is a need for strict enforcement of the act.
Dispute Resolution: While RERA has established a dispute resolution mechanism, the process can be lengthy and time-consuming. There is a need for a more streamlined process that can provide speedy resolution of disputes.

Conclusion

The Real Estate (Regulation and Development) Act, 2016, is a significant step towards regulating the Indian real estate sector and protecting the interests of homebuyers. The act has brought about transparency, accountability, and efficiency in the sector, which has boosted consumer confidence. RERA has also provided improved consumer protection by ensuring that the rights of homebuyers are protected. While RERA has brought about significant improvements, there are still some challenges in implementing the act. These challenges need to be addressed to ensure that the act is fully implemented and that homebuyers are protected. Overall, RERA is a positive step towards regulating the Indian real estate sector, and its impact will be felt for years to come.

Watch our YouTube video on Rera parking rules.