What is the Real Estate Regulation Act (RERA)? Here is how it will help buyers

RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders.

By: Express Web Desk | New Delhi | Updated: May 1, 2017 5:05 pm
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The Real Estate (Regulation and Development) Act, 2016 (RERA) will finally give India’s real estate sector its first regulator from Monday, May 1, 2016. The act was passed by parliament last year and the Union Ministry of Housing and Urban Poverty Alleviation had given time till May 1, 2017, to formulate and notify rules for the functioning of the regulator. RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders.

So what is RERA? Here is a look at the real estate regulator and how it will impact the real estate market.

According to RERA, each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator. Centre has drafted the rules for Union territories including the national Capital. While many states are still behind on schedule for notification of RERA rules, many have notified rules and a regulator will start functioning. Some of these states are Haryana, Uttar Pradesh and Maharashtra.

Despite seeing a slump in the past three years, the ticket prices are relatively high and inventories are piling up. Low demand is also contributing to the reduced recovery of investment by developers. These reasons have deterred developers from reducing the ticket prices.

RERA seeks to address issues like delays, price, quality of construction, title and other changes.
Delays in projects are the biggest issue faced by buyers. The reasons are many and the impact is huge. Since the last 10 years, many projects have seen delays of up to 7 years. Projects launched after the turn of this decade have faced delays as well. Some have run into obstacles even before a brick was laid. The reasons include diversion of funds to other projects, changes in regulations by authorities, the environment ministry, national green tribunal etc and other bodies like those involved in infrastructure development and governing transport. In many places, land acquisition becomes an issue. Errant builders often sell projects to investors without the approval of plans, unauthorised increase in FAR, bad quality of construction, projects stuck in litigation etc.

Key provisions of RERA

The promoter of a real estate development firm has to maintain a separate escrow account for each of their projects. A minimum 70 per cent of the money from investors and buyers will have to be deposited. This money can only be used for the construction of the project and the cost borne towards the land.

To provide clarity to buyers, developers will have to keep them informed of their other ongoing projects.

RERA requires builders to submit the original approved plans for their ongoing projects and the alterations that they made later. They also have to furnish details of revenue collected from allottees, how the funds were utilised, the timeline for construction, completion, and delivery that will need to be certified by an Engineer/Architect/practicing Chartered Accountant.

It will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under RERA. The details of all registered projects will be put up on a website for public access.

RERA talks about the quality of construction in projects. Over the last few years, buyers have protested about poor of flats. The regulator will ensure protection to buyers in this matter for five years from the date of possession. If any issue is highlighted by buyers in front of the regulator in this period including in quality of construction and the provision of services, the developer will have to rectify the same in a matter of 30 days.

Developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. Furthermore, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number. The registration no. will be provided project-wise.

After registering the project, developers will have to furnish details of their financial statements, legal title deed and supporting documents.

If the promoter defaults on delivery within the agreed deadline, they will be required to return the entire money invested by the buyers along with the pre agreed interest rate mentioned in the contract based on the model contract given by RERA.

If the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery.

After developers register with the regulator, a page will be created for the builder on the regulatory authority’s website. The developer will be given login credentials using which it will upload all the information regarding the registered projects on the regulator’s website. The number, type of apartments, plots and projects and their completion status will be updated at a maximum quarterly basis.

To add further security to buyers, RERA mandates that developers can’t ask more than 10 per cent of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.

The regulator will have the power to fine and imprison errant builders based on a case by case basis. The imprisonment can go up to a period of three years for a project.

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  1. M
    Mr. N.D. Patil
    May 20, 2017 at 4:46 pm
    Government may arrange seminar on account of RERA Act 2017 inovation in Taluka level of Indian Goverment.
    1. s
      May 19, 2017 at 5:46 pm
      this reules is very good for makeing good stand by customer view.such rules has to be there form all sector including goverment sector to every small sector for cerating customer satisfaction as per qulatiy.
      1. J
        May 14, 2017 at 6:24 am
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        1. P
          PS goswami
          May 14, 2017 at 3:51 am
          I have recently got refund since follwing up for 7 months. Also approached thru lawyear. They took almost 20 percent advance and not even made any agreement. They have returned money with interest. This act should be circulated more for awareness of buyers.
          1. S
            Swati agrawal
            May 12, 2017 at 9:40 pm
            I cancelled the booking of a flat.nd want money back.will help tera.thanks tera.
            1. G
              G P Sharma
              May 12, 2017 at 11:18 am
              i am intrested in work with rera and doing help for sufferer
              1. M
                M.K. Shukla
                May 10, 2017 at 10:04 pm
                MOdi Govt. must be thanked as someone who is really gone serious about the thousands of victimized buyers like me shelter hope I have invested few lakhs one after another in two different state and project-but found neither shelter nor any refund from builder side.As they changed their contacts nos. and add. and are not traceable now. Now I hope & request to Modi Govt. to form a fast track court system in redressal of thousands of such pending cases.I also request Govt to release an Ordinance for all the builders & collonaisers(project stage does't matter) to update and publish their recent phone nos,e-mail and contact address essentially as earliest possible. So taht all the cases may be updated for file or out of court compromise. In buyer's favoured better hope. MK Shukla Faridabad(HR)
                1. T
                  Tusar Pradhan
                  May 8, 2017 at 6:49 pm
                  Hi Friends ... I am also cheated by my Builder . ND Developer , Bangalore . The builder left the project work after 60 completion , saying he has no more money. Because he has invested our project money into some other projects. I am not sure whether the RERA is going to control these type of Builders or not . Because each state is implementing RERA by diluting the original rules. Also Builders are more closure to Political people. As they are the people who are investing the money during Election. It is my kind request to all people not to buy any ongoing property . Always buy ready to move flats . Otherwise go with renowed builders like Prestige , Shobha , Mantri ... Thanks Tusar
                  1. D
                    dinesh kuthe
                    May 8, 2017 at 3:23 pm
                    Rera shall prevent builders monopoly. Rera is protective act for home buyers .Thank you. Modiji .
                    1. S
                      May 7, 2017 at 5:55 pm
                      If builder complete his site by own funds and after completion he sold the flats or tenements of that project please tell us he is also require to registration under rera authority?
                      1. U
                        May 6, 2017 at 11:42 am
                        Will the sleeping partner of the registered firm will penalize if any damages arise to the buyer?, due to poor quality of the construction.
                        1. V
                          May 6, 2017 at 10:19 am
                          1. N
                            May 3, 2017 at 6:35 pm
                            If builder becomes defaulter then in this case how buyers will get their home.
                            1. S
                              May 2, 2017 at 4:58 pm
                              If you come across an error in your article, can you please update the same when you find out? "Over the last few years, buyers have protested about poor of flats. " Thanks!
                              1. S
                                Sharda Pareek
                                May 2, 2017 at 3:51 pm
                                A company Sunstar Club LTD.made us members and took high amount Rs. 1,35000 and ured to provide 5/4 star facility for 20 yrs He made the fraud and cheating on PanIndia basis in multiple cities across the country Now the company and its managing director Raman Kapoor with his wife director Seems Patel Kapoor are absconding and hiding. Even Police FIR not helping to get our money refunded. How RERA can help us in this case
                                1. S
                                  Sharda Pareek
                                  May 2, 2017 at 3:40 pm
                                  Will RERA protect the buyers whoinvested before 01.05.2017 How the defaulters like Cosmic Structural LTD will be punished by RERA as they made bookings and took full payment and now found way to put company in hands of Official liquidator This method will only ease the developer to escape and we investors are not sure to get our refunds Sharda Pareek
                                  1. V
                                    Vikas Das
                                    May 2, 2017 at 11:37 am
                                    Could you please clear on your write-up that states a minimum of 70 has to be deposited from buyers in escrow account.
                                    1. E
                                      May 2, 2017 at 10:02 am
                                      change the date : it says 1st May, 2016 Second line
                                      1. D
                                        Dr Mayur
                                        May 2, 2017 at 7:09 am
                                        Dear. Bharath and. Deepak Too. Many regulation kills any business How about government corruption in getting various approvals by builder. How is government going to ease the builder work???
                                        1. D
                                          Dr Mayur
                                          May 2, 2017 at 7:04 am
                                          RERA appears too good and favouring the interest of BUYERS BUT ALL PENALTIES ARE UNREALISTIC.
                                          1. S
                                            May 2, 2017 at 12:21 am
                                            govt should now take on the states which are busy in diluting the act in favor of corrupt builders. a diluted rera is useless
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