Real Estate Regulations & Development Act (RERA) | Key points & Review

Real Estate (Regulation and Development) Act 2016, which was enacted on 1st May 2016, will come into existence on 1st May, 2017.

We are all aware of the fact that the real estate sector in India is highly unorganized and largely unregulated. The implementation of a good Real estate bill has been long impending. The need for regulations and uniform guidelines was also being felt by the industry which continued to be perceived negatively by consumers because of unscrupulous activities of a few.

The Real Estate Regulation and Development Bill 2013, was initially drafted and approved by the then UPA (The United Progressive Alliance) cabinet in 2013.  On 7th April 2015, the new Union Cabinet (NDA) gave its approval to the amendments to the Real Estate Regulation & Development Bill.

The Bill has been passed in Rajya Sabha on 10th March, 2016. It became an Act after the President of India gave his assent to it on 25th March, 2016.

The main objective of the Real Estate Regulations Act is to protect the interest of consumers (property buyers), to promote fair play in real estate transactions and to ensure timely execution of projects.

Key features of Central Real Estate Regulations Act (RERA) 

Below are the main features of Real Estate Act – 2016 ;

  • Scope of RERA :
    • The Act covers both residential as well as commercial real estate projects.
    • It is mandatory for the real estate developer to register the project with the concerned RERA (State specific) and obtain a valid registration number before going ahead with the project. If the project which meets RERA criteria does not get registered then the authority can levy a penalty of up to 10% of the project cost.
    • The registration is valid for a specified period as mentioned by the builder in application form. The real estate developer is accountable to adhere to timelines, otherwise he/she risks suffering losses/ penalties.
    • The on-going (under-construction) projects are also included under this Act. Any buildings which are not having OC are covered as ongoing projects. (Read : ‘What is Occupancy Certificate (OC) & its importance?)
    • The Act now mandates projects on 500 sq meters of area or with eight flats to be registered with the regulatory authority.
  • Establishment of Real Estate Regulatory AuthorityReal Estate Regulatory Authority bodies will be set up in each State / Union Territory. Adjudicating officers will also be appointed to settle disputes (if any) and impose penalties / compensation.
  • Registration & Public Disclosure of Real Estate ProjectsThe bill makes it mandatory to register all the real estate projects with the respective State Regulatory Authorities. The builders or real estate companies will have to mandatorily disclose the details of all the registered projects such as; details of promoters, project, layout plan, plan of development works, land status, status of statutory approvals and disclosure of agreements, names and addresses of real estate agents, contractors, architect, structural engineer etc., For wrong disclosure of information or for not complying with the disclosures and requirements, the authority can levy a penalty. The Regulatory authority can even cancel the project approval.
  • Builder’s Liability : The builder has to provide five-year warranty for any structural defects in the building. They are liable to pay equal rate of interest in case of default or delays as home buyers.
  • Home buyers & Exit clause : Home buyers can now exit the real estate project at any stage of construction. The builder is also bound by law to return the money collected from buyers within 45 days, after deducting the booking amount. If builder fails to give possession of the apartment or complete the project as per the stipulated time, the home buyer can now terminate the agreement and is entitled to refund of the amount paid with interest in 45 days of such termination.
  • Definition of Carpet Area :
    • The RERA Act clearly defines what is ‘carpet area‘. Usable spaces like kitchen & toilets have been included in the definition of ‘carpet area’.
    • Carpet area is a measure of net usable area of the unit and does not include common areas, balconies, verandahs etc; whereas, the super built up area could be an addition of both.
    • Therefore, to ensure that the consumer knows what he is paying for, it has been made mandatory for the real estate developer to specify carpet area. Essentially Carpet Area is the area within the walls of a unit where a consumer can reside or have his office. Even when the balconies, verandahs or terraces are exclusively available within a unit these cannot be added to the Carpet Area as prescribed in the Act.
  • Escrow Account :
    • One of the biggest pain points for Flat buyers  has been ‘project delays‘. Most of the builders use the collections of one project to buy another piece of land or for business expansion, instead of using the funds to complete the on-going project.
    • Thereby to protect consumer of a project the Act mandates that of all collections 70% funds be deposited in an escrow account maintained with a scheduled commercial bank.
    • These funds can be accessed by a real estate developer solely for purpose of construction of the project to which it belongs. The real estate developer can withdraw funds from this account in proportion to stage of work.
    • The request for withdrawal of funds is to be certified by an engineer, architect and a chartered accountant in practice that real estate developer’s claims are justified.
  • Adherence to Project Plans (layout / design)To alter a project plan, structural design & specifications of the plot, apartment or a building, the Promoter has to get the consent of minimum two-third allottees (buyers) after the necessary disclosures.
  • Phase wise Projects : Where the real estate project is to be developed in phases, every such phase shall be considered a standalone real estate project, and the promoter / builder shall obtain registration under this Act for each phase separately.
  • Residents Welfare Association : If majority of the flats in the apartment have been allotted / sold,  ‘welfare association’ has to be formed within 3 months.
  • Real estate Agents : The real estate agents who intend to sell any plot or flat of a registered project have to register with the respective State Real Estate Regulatory Authority. It is now mandatory for the real estate developer to provide details about the real estate agents that are dealing with the project, the details have to be made available online. (Details about other professionals like Architects, Engineers etc., should be kept online.)
  • Advertisement & Marketing of Projects :
    • In most of the cases, we observe that there is no co-relation between the details given in marketing materials / project brochures and the actual / end product.
    • Henceforth, the Act doesn’t permit such activities as anything shown in the marketing material needs to be in line with the final product or else real estate developer will be liable to penalties under the Act.
    • The advertisement or prospectus issued or published by the developer shall mention prominently the website address of the Authority, wherein all details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto.
  • Guidelines for Home buyers :
    • It is mandatory for a consumer to make timely payments to the real estate developer.
    • Once the occupancy certificate is issued by the real estate developer, the consumer is required to take possession within two months’ time.
    • It is compulsory for a consumer to exhibit active participation in the formation of an association, a cooperative society or any federation of consumers.

Real Estate Regulations Act : My Opinion

Real estate sector is a very un-organized sector. So, enactment of Real estate Act is definitely a welcome move, not only for the home buyers but also for the industry.

But, is this Act really beneficial? Will the consumers really gain from it?

It all boils down to whether State governments are going to implement the RERA as it is or not. Although RERA is a central law (applicable to all States & Union Territories except J&K), its implementation will depend on State Governments, as real estate is a state subject. The respective State Governments can modify the RERA and approve it. So, any dilution of the original Act can be a cause for concern.

For example – As per Central Real estate Regulations Act, all on-going projects (where OC is not issued) are also included under the scope of the Act w.e.f 1st May, 2017.RERA Real estate Regulations Development Act 2017 Latest rules guidelines pic

But, state government of Uttar Pradesh has modified this rule and added few exclusions in their respective State RERA (U.P. govt approved State RERA on 27th Oct, 2016). Same is the case with Gujarat state, on-going projects have been excluded.

RERA Real estate Regulations Development Act 2017 State goverment Uttar pradesh pic

So, we can see two different versions of the applicability of the same rule. If you are planning to buy a Flat, you are advised to go through that State specific RERA rules and guidelines.

So far, some of the states like UP, Gujarat, Andhra Pradesh, Madhhya Pradesh, Odisha etc., have finalized and notified their rules. Some of the remaining states have framed their draft rules and are yet to notify them.

The central RERA is applicable as it is in all the Union Territories. Let’s hope all the States frame their rules in accordance with the Act in letter and spirit and not try to keep the buyers at a disadvantage. The whole purpose of enacting the RERA will go in vain if it is not followed in its entirety by all the stakeholders.

While searching for State specific RERA notifications, I have come across a useful portal ‘ApnaRERA.com’ where almost all State specific RERA notifications, guidelines, drafts etc., are available online.

Sample Forms :

I hope you find this post useful. Do you believe that Real estate Regulations Act is beneficial to a home buyer? Will this Act keep a check on unscrupulous activities that happen in Real estate sector? Kindly share your views. Cheers!

(Post first published on : 29-April-2017) (Reference : Apnarera.com, Economic Times & Godrej Properties) (Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net)

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  • Anthony Sequeira says:

    The developer – Sahakar developers has registered the property on Maha RERA but he has indicated / maybe modified the completion date which now reads as 31st May 2018. However the agreement I have signed while purchasing the said apartment 401 in the said property in Oct 2017 – indicated the completion date as December 2017. The property is still awaiting Fire Dept permission clearances and post that will be sent for OC application. I am doubtful that I will see the completion of this property and its possession even by March 2018. This causes another problem for me – I cannot avail of the tax benefit on the loan taken from HDFC Ltd in Oct 2017 and I have paid Sahakar 95% of property value via the loan and my own contribution and have been servicing EMIs since October 2017.
    Can I raise a complaint against the developer for delayed possession ?

  • Shanmugapriya V says:

    I am planning to buy an apartment in bangalore. I have 2 quetions to be clarified.

    1. The builder told they have registered in RERA but it is not approved yet. What should I do now. Wait for them to get it or go for it. Because the posession is by September of this year.
    2. They said they got the Completion certificate So RERA registration doesn’t matter. Is that so?

    Please guide me on these.

    • Dear Shanmugapriya,
      1 – You may wait for the approval to come.
      2 – No registration of the real estate project shall be required where the promoter has received completion certificate for a real estate project prior to commencement of this Act (May 2017).

  • Naganna says:

    VMC developers Shahpur is the biggest cheater developer in Thane who still selling NA plot and still havnt refund to those who already cancelled the payment for last 5+ years.
    https://goo.gl/H7nsG7
    Hopefully the new RERA act help us.Thanks for the article.

  • James Gomez says:

    Very nice post! Thanks for sharing this information.

  • Yadav says:

    SOCIETY PROVIDE CC/OC OR NOT

    POSSESSION CERTIFICATE CERTIFICATE IS SUFFICIENT
    IF SOCIETY IS NOT PROVIDING OCCUPATION CERTIFICATE.

  • sumathy says:

    Hi Shrikanth,
    u article on rera was very informative for people like me working in real estate developers as legal manager. My concern is the transparency clause which a developer must take to update his project progresses then and their in their official website for public view seems to be a disadvantage as far as developer’s part is concerned, do u have ur own view on this ….

  • Saket chaudhary says:

    Hi,

    I have booked my flat in on-going project on 29th Apr’17 in Gaur City (Noida Ext.) and My flat is under subvention scheme so builder will pay EMI till possession so can anyone explain that the same project will be under the RERA Act or not if builder failed to pay EMI or timely possession.

    Thanks
    Saket

  • Rosh says:

    Hi Sri

    Thanks for the article .It’s very informative and very crisp.

  • Crimsonwave says:

    This is a good Act if our bureaucracy was as good as in Singapore.
    Now good,ethical Real Estate developer will have more corruption
    Worries

  • D C AHUJA says:

    Suppose there is Arbitration agreement and as far as I know here nobody can intervene.Kindly suggest how to handle such situartion specially in FERA.

  • Shyamala Rao says:

    My name is Shyamala Rao. I am working in the National Heart Institute under Dr.S.Padmavati as her P.A. in Delhi. Thank you for providing valuable information. Good people are still there but very rare.

  • AMAR says:

    Again A good kick off document to start with Sree, Do u have any idea w.r.t what is the penalty to builder in case he is not able to deliver home in time.. What percentage he has to go. is it the same what he commands when consumer delays the payment ie. 18% most of the cases.

    • Dear AMAR ..I have noticed that penalty % have been diluted by some state govts. So, the actual penalty amount can be based on the respective State RERA act.
      The central RERA states that ‘Builders are also liable to pay equal rate of interest in case of default or delays as home buyers’.
      So, if as per the sale agreement is 18% as the penalty charges to be paid by buyer in case of late payment to builder then I believe that same % is applicable to builder as well if there is any delay from their side..

  • Krishan Mitroo says:

    RERA can be effective only if enacted by State Govt., in letter & spirit. As is understood that previous UP Govt has diluted the UP State RER Act & twisted in favour of Builders. If true, this will be highly irregular & detrimental to Buyers of real estate in UP.

  • Yunus Ali says:

    Sir meta old UAN no. Change hogya new me transfer k liye kya Karna padega

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