Find out what RERA is, its benefits, exceptions, etc.
Investing in real estate is everyone’s dream. However, not everyone can afford it since real estate prices remain very high compared to income levels.
To make matters worse, each developer/builder previously had its own set of standards, and there were no industry-wide standards. Every builder followed a different set of procedures and structured the builder-buyer agreement to favour the builder.
The average person who used his life savings to buy real estate had very few rights. To protect and safeguard home buyers’ interests and ensure that they are not exploited by developers/builders, the government enacted the RERA Act, 2016.
Each state will establish regulatory agencies and appellate tribunals under RERA to resolve builder-buyer conflicts. Any anyone who feels wronged by a direction might anticipate a response from the appellate within 120 days.
RERA
RERA (Real Estate Regulations Act) was enacted in 2016 to protect home buyers’ interests. The primary goal of RERA is to protect buyers from unfair builders’ practices. RERA specifies certain standards for the construction and development of the real estate, which will improve transparency in real estate transactions.
It has awarded home buyers several rights and has also specified certain rules and regulations that all builders/developers must comply with. Furthermore, the RERA Act requires each state to establish a Real Estate Authority and an Appellate Tribunal.
If the builder/developer commits any fraudulent activity, the home buyer may also file a complaint to the Appellate Tribunal. If a buyer’s rights are violated or any requirements of the Act are disregarded, any home buyer may submit an RERA complaint against the builder, developer, or agent.
RERA’s Benefits to Buyers
The RERA Act aims to protect buyers’ interests in the real estate sector by establishing an arbitrating mechanism for quick dispute resolution. It is an act to establish a mechanism that efficiently and transparently regulates and addresses issues such as project delivery delays, property pricing, construction quality, title, and other changes.
The RERA Act will most likely benefit buyers in the following ways:
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Standard carpet area
Originally, builders would charge for built-up and super built-up areas. This means that if the buyer paid for 1,300 square feet, they would only be able to use 900 to 1,000 square feet of carpet. This is an apartment’s net usable floor area when only the internal walls are considered. The rest of the area was surrounded by external walls, including the lobby, service shafts, balconies, open terraces, balconies, common spaces, etc.
The term “carpet area” has been specifically defined in RERA. Property cannot be sold based on a super built-up area and must be sold based on carpet area. Furthermore, developers will need the approval of two-thirds of the buyers in a project before changing the design or any other structure.
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Rate of interest on default
In the event of a buyer default in payment or a builder default on project completion, the amount shall be charged equally to both parties. Previously, if the builder delayed possession of the property, the interest paid by the builder to the home buyer was lower, whereas if the buyer defaulted, the interest to be paid by the buyer to the builder was comparatively higher. The interest to be charged by both parties wasn’t equal. The RERA Act now clearly mentioned that the interest rate for both parties shall be the same.
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Reduces the risk of builder insolvency bankruptcy
Earlier Builders were free to divert funds raised from Project A to Project B’s construction. However, this is no longer possible following the implementation of RERA. The builder must now deposit 70% of the amount realised for the project in a separate bank account.
He may withdraw funds from such an account only upon completion of the project, as certified by a civil engineer, architect, and a chartered accountant in practice. Because the funds can no longer be diverted to other projects or used for other purposes, they will be used only for the purpose they were raised.
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Advanced payment
Before entering into a sale agreement, the builder may take no more than 10% of the cost of the apartment, villa, etc., as an advance or application fee.
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Builders will be held liable for any construction failure
Many buyers have expressed concern about the construction’s quality. Any structural defect that occurs to the property for up to five years from the date of handing over possession must be repaired by the developer under RERA. The Promoter’s responsibility is to correct such defects without additional charge within 30 days.
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RTI
The buyer has the right to all project-related information, including the plan layout, execution plan, stage-by-stage completion status, and so on, under the Right to Information.
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Grievances will be addressed and resolved
RERA establishes regulatory bodies and appellate tribunals in each state to resolve builder-buyer disputes. Any person dissatisfied with a direction can expect a resolution from the appellate within 120 days.
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Pricing and refund policies
The legislation mandates developers to charge only based on carpet area. This will ensure that buyers only pay for what they buy, minimising the overall financial burden. Furthermore, RERA states that if a buyer wants to cancel the booking, the developer must refund the amount, plus interest, within 45 days. This provision protects buyers from excessive delays in the refunding process.
RERA Applicability
RERA applies to all Builders and Developers except the following:
- Where the area of land proposed to be developed does not exceed 500 square metres or the number of apartments proposed to be developed does not exceed 8
- Where the Promoter received a completion certificate before the implementation of RERA
- Renovation, repair, or redevelopment that does not include marketing, advertising, selling, or new allotment of any apartment, plot, or building.
All builders and agents must register with the RA (Regulatory Authority) mentioned in the RERA Act, 2016. They will also be required to register their projects and all relevant information such as financial statements, a copy of the legal title deed, and other documents. Following that, they will be assigned a project-specific registration number. As a result, make certain that you purchase a project that has been registered with the regulatory authority.
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