Real estate has always been a lucrative market, and now with the RERA act throngs of people are rushing to make investments in the sector. With a special focus on under-construction properties, let us look at why this is a golden era to buy them.
Home buying is an exciting journey, and a matter of utmost importance for most of us. Buying a place to live in, we harbour high expectations from the place we will call home for a lifetime. Given a spate of project delays, builder defaults, and endless wait for possession, under construction properties were not really a dream for homebuyers.
But with the implementation of the RERA act, it’s an opportunity to rethink!
What is RERA?
The Real Estate (Regulation and Development) Act, 2016 (RERA), an Act passed by the Indian Parliament intends to safeguard the interests of homebuyers and encourage investments in the real estate sector. Enacted by The Government of India on 26th March 2016, the Real Estate (Regulation and Development) Act 2016 and all its provisions came into effect from May 1, 2017. RERA is expected to make real estate purchase more transparent by bringing in more accountability and standardisation and also simplifying the entire process. The RERA Act is India’s first strong enforcement to regulate an industry infamous for its business practices.
Key aspects of the Act
- In accordance with the new law, the developer can’t make any changes to the project plan without the written permission of the buyer.
- The registration is compulsory for all commercial and residential real estate projects, in which the land is above 500 square metres or comprises eight apartments and which are under-construction.
- A failure to register a property will invite a penalty up to 10% of the project cost in addition to a repeated violation, which could put the builder in prison.
- It’s mandatory that when the property will be sold to the buyers, it’s based on carpet area and not on super built-up area which falls illegal under the new law.
- The law includes a provision of a maximum prison term of three years with or without penalty, for a developer who crosses the order of the appellate tribunal of the RERA.
- The law ensures that a state has to institute a State Real Estate Regulatory Authority as per the new act. Buyers could go to this body for redressal of their issues.
How is RERA positively impacting under construction properties?
- Reliability – RERA brings in a lot of accountability into the picture. From timeliness of project delivery to builders being held for defects/problems in the property, there is a backing for the buyer to rely on and be confident about the entire project.
- Communication – All forms of core communication between the buyer and builder has to be in writing, according to RERA. There is a clear track record for all demands from the buyer. Any alterations or changes in the property have to be with a prior permission from buyer for builder to move ahead.
- Quick Redressal: Under RERA, regulatory bodies and appellate tribunals will be put up in each state to resolve builder-buyer concerns. Any person facing a crisis, can anticipate a solution from the appellate within 120 days.
- Trust – The stringent regulations backed by law makes it mandatory for builders to conform their projects with comprehensive information under RERA, filtering out fraud builders from the picture. Standardised processes, regulatory authority, and compliance needs ensuring well thought out launches means buyers can place more trust in the system.
- Reserve account: Usually, the delay of projects happens due to diversion of collected funds for fresh projects rather than the existing one. The roadblock RERA has brought to this practice is that promoters are now required to transfer 70% of the funds into a separate reserve account.
Even though the benefits are manifold, since the implementation of RERA there has been an evident slowdown in the industry. The delivery of projects has been delayed because real estate companies are restructuring their working styles to comply with the strictness of the fresh law. Even though it looks like a setback now, RERA in the long run will play a large role in regulating the real estate industry.