Real Estate in India has been an unregulated and unorganized for a very long time. This industry was heavily dominated by builders who trick innocent buyers. To put an end to this, the Real Estate (Regulation and Development)Act came into force on May 1, 2016. This act aims to create more equality and regulation in this industry. It aims at accountability and transparency in the house-buying process. This Act set up the Real Estate Regulatory Authority (RERA). It was the first regulator in the real estate market.
Every state and union territory must form its own rules and regulations. This will govern the working of the regulator. These regional governments have made their own rules based on the model under the central Act. RERA is in full swing in states like Haryana, Telangana, Uttar Pradesh, Maharashtra, etc.
Now that we know what RERA is, this article brings you all the knowledge proving how useful it can be.
Features Of RERA
i. RERA is in every State and Union Territory.
ii. It is a fast-track conflict resolution authority. If the complainant is unhappy with the verdict, they can go to an Appellate Tribunal or the High Court.
iii. All real estate projects have to register with RERA. Otherwise, it cannot sell.
iv. It is the responsibility of the developer to upload all details and documents online.
v. The promoter must register with RERA, if not already registered.
vi. The developer must get insurance. This must be on title, land, and construction for every real estate project.
vii. Any default from either side will result in both being liable to pay an equal rate of interest.
viii. When there is an ongoing inquiry, RERA has full control over the project. It has the authority to stop an agent, developer, promoter, or buying from continuing.
ix. If any company disobeys the RERA rules, the person in charge is guilty.
x. No civil court has jurisdiction over any matter related to RERA and the Appellate Tribunal.
Benefits Of RERA
a. Offers transparency and protection to the buyers and holds sellers accountable.
b. Regulates the industry and punishes those responsible for defaults and malpractices. It offers protection and penalties for developers or agents divulging in –
- delays in completion.
- providing false information.
- using funds from one project for another one.
- no consequences for sub-quality construction.
- offering special pew-booking prices.
- not giving a date of possession.
- altering the project without any notice or consent.
c. It makes it mandatory for real estate agents to register. Thus ensuring all real estate agents are credible.
d. There is the Real Estate Appellate Authority (REAT) for appeals.
e. It has standardized the term carpet area when describing the usable area. This way, the developers can’t inflate the usable area to increase prices.
f. The buyer has the right to any and every piece of information related to the project.
g. Dishonest builders and developers have a hard time sustaining themselves amongst these regulations. It has made them either change their ways or leave the real estate industry.
h. This Act has made the Indian real estate sector reliable. This makes it a bankable investment option for financial institutions and foreign investors.
Rules Real-Estate Investors Must Know
1. Register A Project With RERA
All commercial and residential projects which meet the following criteria must register. If the
- area exceeds 500 square meters
- number of apartments exceed 8
The promoter cannot launch, book, sell, or advertise the property before registering.
To register the developers, have to submit all the necessary details. This includes building sanction plan, layout, carpet area, and area of the garage. They also have to submit documents with the clear demarcation of the land. By doing so, the developer has to be transparent, thus ensuring accountability. It also reduces the risk of malpractices, as the developer must register the property. Only after registering are they allowed to advertise their property to attract buyers. Failure to do this will lead to a penalty or even imprisonment.
2. Regular Updates
The developer must upload regular updates every three months. These include project details like government approvals and pending approvals—updates like engineers or architects asking for structural or architectural changes. The developer should upload the findings of the audit of the escrow account. They must upload all documents of any ongoing proceedings in case of legal disputes. By enforcing this, the buyer knows exactly what is going on with the property and isn’t blindsided.
3. Escrow Account
Diverting money is a problem often faced by many in this industry. 70% of the money received from the customer must go to a separate escrow account. This ensures that the builder/developer does not spend this money on any of his other projects. The buyer’s money is then only used for this project. This includes costs related to construction and land.
Certification of any withdrawals from this account is compulsory. An architect, an engineer, and a chartered accountant do this. This account will also be subject to an audit once every six months by an approved accountant.
4. Sale Agreement Standardization
The earlier formatting of this agreement was used to penalize the buyer for any default. The actual offender, the developer, would get away scot-free. But with RERA, and its standard model sale agreement is the same throughout and cannot change. This agreement specifies details on the construction work, internal and external developmental work. It also includes the possession date of the plot, building, or apartment. By this standardization, faulty builders have to pay the penalties, not the buyers.
5. Advance Payments
Earlier, promoters demanded very high advance payments. They demanded these payments before even entering into a written agreement for sale. Now, the promoter or middleman can only accept 10% of the total cost as an advance payment. To accept more money, they will have to enter a contract. The developer must register this written agreement for sale. Discounts offered for early-bird bookings, and pre-launch offers are no longer entertained.
6. Defect Liability Period
Earlier, the builder has never held responsible for any structural or quality issue. They thought their work ended the minute they handed over the possession of the property. Thus, they never took responsibility for rectifying any mistake or defects. The buyer has to spend huge amounts of money correcting this. Now, in case of any structural defect or poor quality, the developer must rectify it in a period of 5 years. The developer is responsible for all sub-quality issues in case of a defect in quality. These include defects due to design or building structure or bad materials used. Faulty workmanship or negligence are also major reasons for defects. The customer has the authority to ask to repair the problems or demand compensation. They are penalized if they do not comply in 5 years.
7. Carpet Area
The categorization of the property; built-up area, super built-up area, and carpet area. Developers can try and trick the buyers with these different words. They often trick buyers with an inflamed area. This allows them to reduce the rate per square area, thus profiting unfairly.
With RERA, developers have to tell the customers the size based on the carpet area. It is the area within the four walls of an apartment. This excludes any area covered by external walls and services shafts. It doesn’t include areas covered by balconies, verandahs, or open terraces. It does include the area covered by any internal partition walls of the apartment.
Having a standard set for the usable area helps buyers be sure of what they are getting. It helps them analyze the cost per square feet with other projects.
8. Clear Title Of Land
This Act makes sure that all middlemen reveal a clear title over the project and property. The promoter must submit a Conveyance Deed with some undivided title in the common areas. The promoter must do this within 3 months of obtaining a completion certificate. He must do this and handover all physical possessions of the plot/apartment. Any discrepancy over the title, and the buyer can ask for compensation. RERA ensures that there is no limit to the amount the buyer can ask. If somebody else owns the land, the promoter should provide a written affidavit. This includes the legal title to the land and valid documents.
9. False Information
If any of the buyer’s information is false when he has paid an advance, he is eligible to ask for a refund. The false information can be in the form of a false prospectus or false advertisements. If the promoter advertises a facility he is unable to provide, it comes under this. Often allottees buy their dream property only to find they won’t get the advertised services. RERA works to end this breach of trust. If the buyer wants to buy the house still, the developer has to pay the penalty. This penalty can be as high as 5% of the cost.
10. Failure To Give Possession By The Date Of Possession
There are many cases where the developer fails to complete in time or give possession on time. During times like this, RERA offers two options to the buyer-
- If the buyer chooses to leave the agreement, the developer returns the entire amount.
- If the buyer chooses to stay in the agreement, the developer must pay interest for every month of the delay. He has to this penalty until the buyer gets possession of the property.
11. Approval For Any Alteration
- The builder cannot make any changes to your flat without your approval.
- The builder cannot make any changes to the project without 2/3rdof the allottee approval.
The changes include any alteration of the sanctioned plan, layout, fixtures, or fittings.
The developer may make minor alterations, important for structural and architectural reasons. For this, an authorized Engineer or Architect must verify the alterations. The allottee must receive a proper declaration detailing the changes, reasons, and verification.
No matter how many apartments the buyer has, his vote is counted as one only. Thus, the builder needs 2/3rdof allottees’ votes, not 2/3rdof the apartment inhabitants’ votes.
12. Transfer Of Rights
The developer cannot, on his own, transfer the rights of the project to a third party. To do this, he needs prior written consent from two-third of allottees. This does not include the promoter. He also required written approval from the RERA authority. He needs to prove that transfer of rights will not affect allotment or sale or the apartments. Here too, no matter how many apartments the buyer has, he only has one vote.
If the vote is to transfer the rights, the new developer must abide by the deadlines set earlier. In the case of default, where he misses any deadlines, he will face the consequences.
13. Agent Registration
Every real estate agent must register under RERA. He must do so before selling or advertising any property. He also must obey all the rules detailed under RERA. These rules are
- Using his registration number, granted at the time of registration, every time. Especially when he is selling a property,
- Renew his registration after the prescribed period
- Maintain books and records of all transactions occurred
- Feed the buyer insurance for things he does not require approval or affiliation for
- Make any false statements or representation
- Not involving himself in unfair practices
- Not advertise a building that is not registered. This includes not advertising for services which they will never provide
- Must hand over all documents and relevant information to the buyer at the time of booking the plot
14. Grievance Redressal
Buyers, mediators, promoters, developers, or agents often have complaints. To address this, they can take the following steps
- File a complaint with RERA. The real estate regulatory department of that state will take 60 days to resolve the dispute.
- If not satisfies, they can file a complaint with the Appellate Tribunal. They should do this within 60 days of receiving the verdict from RERA.
- If they are still not satisfied, they can approach the High Court or Supreme Court.
Penalties Under RERA
1. For Developers/Builders
- Non-registration of a project – payable a penalty up to 10% of the estimated project cost
- Violation of any provisions of the Act – payable a penalty up to 5% of the estimated project cost
- Not complying with orders of the Authority – payable a penalty every day of default. This can add up to 5% of the estimated project cost
- Not complying with orders of the Appellate Tribunal –
payable a penalty every day of default or imprisonment. The penalty can add up to 10% of the estimated project cost. The imprisonment can extend up to three years. In major cases, the defaulter has to pay the penalty and face imprisonment.
2. For Real Estate Agents
- Non-registration of project they are selling – payable Rs. 10,000 every day of default. This can add up to 5% of the project cost.
- Going against the RERA – payable a penalty every day of default. This can add up to 5% of the estimated project cost.
- Going against the Appellate Tribunal –can lead to imprisonment for up to one year. This may or may not be with a penalty up to 10% of the estimated project cost.
3. For Homebuyers
- Going against the RERA – payable a penalty every day of the default. This can add up to 5 % of the building or apartment costs.
- Going against the Appellate Tribunal –can lead to imprisonment for up to one year. This may or may not be with a penalty of up to 5% of building or apartment costs.
Filing A Complaint Under RERA
Section 31 of RERA allows buyers to file complaints. All states make their own rules under the model provided by the Central government.
Thus, every state has different forms and procedures. The procedure listed below is common, followed by most states.
i. The complainant fills the application form found online. Application forms for each state are available online on their particular site.
ii. Submit the following documents are along with the filled application-
- Details of the complainant and respondent
- Registration number and address of the real estate project
- A concise statement containing all facts and grounds for the claim
- Details of relief and interim reliefs (if any)\
iii. Pay the fees. This amount is different in each state.
iv. Suppose you are unhappy with the RERA decision. You can approach the RERA Appellate Tribunal. You must do this within 60 days of receiving the RERA decision.
v. RERA gives you the authority to approach the High Court if you are still unhappy with the decision. You must do this within 60 days of receiving the Tribunal decision.
Registering Projects Under RERA
It is mandatory to register a property under RERA. This includes new and existing projects before launch. The developer must register for each phase of one project. The developer should make sure to update the RERA website in, timely. The documents the developer/buyer must upload are –
1. Authenticated copy of all
- Legal Title Deed
- Commencement certificates
- Building sanctioned plans
- Layout plan
- Plan of development work
- Proposed facilities
- Allotment letter
- Agreement for sale
- Conveyance Deed
- Estimated invoice
- Income tax returns od developer or promoter for the past 3 years
- Seller’s PAN card and copy of Aadhar Card
2. Registration of agents or brokers under RERA.
3. Name and address of engineers, architects, contractors, and chartered accountants.
4. Any dispute resolutions (within 6 months) at RERA or the Appellate Tribunals.
5. Annual audit of all accounts related to the project by an approved CA.
6. Conveyance deed for all common areas in favor of RWA.
7. Insurance for construction and land title.
8. Project completion date.
9. Date of possession
10. Projects launched in the last 5 years with status and reason for delays (if any)
11. Any other document required by your respective state.
Along with the above-mentioned documents are collected, there are a series of forms required to submit.
12. Fill and submit Form A, the application form for registration.
13. Fill and submit Form B, a declaration made by the promoter (if any)
14. Fill and submit Form G, draft agreement of sale of the project.
15. Submit an affidavit which states that details given in Form G follow RERA guidelines
16. Submit an affidavit, which states, the developers took no booking amount.
Frequently Asked Questions
1. I am interested in a property, and the buyer says it is RERA registered. How can I check the registration number?
2. Is RERA the only thing one should look for while buying a property?
3. Can the developer choose to withdraw a sum from a separate account?
4. Can the authority revoke a RERA registration?
5. What can lead to the revocation of RERA registration?
Not complying with the rules and regulations set under the Act.
Violating the conditions of approval
If found that the developer/broker has indulged in any malpractice
6. Does RERA cover rental agreements?
7. Are old and existing projects applicable for a RERA registration?
8. Are there any cases where registration is not possible?
(a) If the land area does not exceed 500 square meters of the total number of apartments does not exceed 8. These are the specifications set by the Central government. The state government may change these dimensions.
(b) If the property receives a completion or an occupancy certificate.
(c) If the property is undergoing a renovation, repair, or re-development.