The most talked about topic of the year & how it is influencing 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 has made 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: increased 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 the most talked about 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 and was introduced in 2016 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 which will enhance the transparency in transactions in the real estate sector.
The common man who invested his lifelong saving in buying real estate had very limited rights. To protect and safeguard the interests of the home buyers and to ensure that they are not exploited by the developers, Govt. introduces the RERA Act to protect the interests of the property buyers.
RERA has provided several rights to the home buyers and has also specified certain rules and regulations to be followed by all developers. Additionally, the RERA Act also specifies the creation of a Real Estate Authority and Appellate Tribunal for each state. In case of any wrongdoing by the developer-the home buyer can also file a complaint with this authority.
Which projects come under RERA?
- Commercial and residential projects including plotted 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.
According to Research, here are 10 key benefits of RERA Act for home buyers:
- Mandatory registration: All real estate developers have to compulsorily register real estate projects with RERA. Projects, where the completion certificate or occupancy certificate has not been issued, are also required to comply with the registration procedure. While applying for registration, builders are required to provide detailed 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 is expected to stop this practice.
- In-depth project details: Developers will have to disclose all project related details like the project plan, layout, and government approvals related information to the customers such as sanctioned 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 received from buyers for the particular project to an escrow account. These funds should be used only to 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 a project is delayed, which has become the sector norm today; developers are required to pay 10% interest to the buyers on the invested 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 to be paid shall be the same for both parties. Earlier what used to happen was that 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 has now clearly specified 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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