RERA: Most Talked About Topic Of The Year & It’s Influence On Home Buyers
Buying a home is every person’s dream. However, everyone is in dilemma these days to buy one. While 2017 was a year of legal amendments in the property sector, 2018 will be the year of reaping the benefits of the amendments. The implementation of GST, RERA and the demonetization drive makes real estate friendly and transparent for buyers. The confusion and lack of clarity were palpable until the end of 2017; but the beginning of 2018 promises clarity and a hope for genuine buyers. Increasing transparency and lower home loan interest rates. All this makes 2018 the ideal year to invest in real estate. As a result, consumer confidence is getting back on track.
But before going ahead, let’s shed some lights on topic of the year. Yes, the RERA. Don’t you fear, we’ve got your back on this. Let’s dig deep and find out more about the demon.
What is RERA?
RERA stands for Real Estate Regulations Act, 2016 states to protect the interests of the home buyers. The aim behind RERA is to provide relief to the buyers from the malpractices of unfair builders.
RERA specifies certain norms for building and development of real estate . They will enhance the transparency in transactions in the real estate sector.
The common man who invests his lifelong saving in buying real estate has very limited rights. To protect and safeguard the interests of the home buyers and to ensure that they are not under any exploitation by the developers, Govt. introduces the RERA Act to protect the interests of the property buyers.
RERA provides several rights to the home buyers and also specifies certain rules and regulations for all developers to follow. Additionally, the RERA Act also specifies the creation of a Real Estate Authority and Appellate Tribunal for each state. In case of any wrong doing by the developer-the home buyer can also file a complaint with this authority.
Which projects come under RERA?
- Commercial and residential projects including plot-development.
- Projects with more than 500 sq mts or 8 units.
- Projects without Completion Certificate, before the commencement of the Act.
- Each phase is to be treated as a standalone real estate project requiring fresh registration.
All real estate developers have to compulsorily register real estate projects with RERA. Projects, that do not have a completion certificate or occupancy certificate also comply with the registration procedure. While applying for registration, builders have to provide in detail information on the project.
- Pay for what you get:
Home buyers will have to pay only for carpet area. The developer can’t charge for the super built-up area, as is the practice at present, where you get 800-900 sq. ft. carpet area if you book a 1,200 sq. ft. house (the rest is balconies and common spaces). The new law expects you to stop this practice.
- In-depth project details:
Developers will have to disclose all project details like the project plan, layout, and government approvals related information to the customers. Some of them include floor space index, number of buildings and wings, number of floors in each building, etc.,
- Escrow account:
Developers will have to transfer 70% of the money from buyers for the particular project to an escrow account. These funds cover the cost of construction and land cost.
- Clearances before selling:
Developers have to register their projects with RERA and clear all the formalities before advertising or marketing. Developers will have to register themselves with the regulator and get all projects with more than eight apartments registered before launch.
- Penalty for wrong details:
If any builder provides false information or disobeys the provisions of registration of real estate projects – has to pay penalty up to 5% of the estimated cost of the project.
- Quarterly update:
Developers have to update project details quarterly on the RERA website.
- Five-year warranty:
Any structural defect, or any other obligations of the developer as per the agreement for sale, brought to notice of builder within five years from possession to be rectified free of cost.
- Interest on delays:
If there exists any kind of delay in the project, which has become the sector norm today; developers have to pay 10% interest to the buyers on the amount.
- Rate of interest on default:
In case of default in payment by the buyer or default in the completion of the project by the builder, the rate of interest shall be the same for both parties. Earlier, in case the builder delays the possession of property-the interest paid by a builder to the home buyer was less whereas in case the buyer defaulted-the interest to be paid by the buyer to the builder was higher. There was no parity in the interest to be paid by both the parties. The RERA Act specifies that the rate shall be the same for both the parties.
Thus, although the RERA Act is expected to change the way the real estate industry operates and there will be a definite improvement in terms of accountability, disclosure norms, investor protection, and e-governance, however, there are some issues which need to be resolved. Also, it will take some time for the real estate players to implement and follow the new norms set up the state government. Experts say that while it is important that developers should abide by all the rules and regulation of RERA, it is the also buyers’ responsibility to opt for RERA-compliant projects and agents.
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