What is RERA Act?
The Real Estate Regulatory Authority (RERA) Act was launched on 1st May 2017. It is an act passed by the cabinet to create a mechanism that effectively controls and addresses issues like project delivery delays, property pricing, construction quality, title, and the like. other changes in an efficient and transparent manner. It aims to protect the interests of buyers in the real estate sector and to set up an arbitration mechanism for speedy dispute redressal. The Act makes it mandatory for all residential and commercial real estate projects (new or ongoing) that have land coverage of more than 500 sq. mt. or eight apartments, to register with the regulatory authority. All ongoing projects which have not received a completion certificate from the local municipal body on the date of commencement of the Act, have to apply for registration within 3 months.
How Will RERA Protect the Buyers?
Since real estate is a state subject, although RERA is a central law, it is implemented by the state governments. All the States and Union Territories will have their own Regulatory Authorities (RAs). These will frame all the rules and regulations as per the RA Act. That said, below is a list of some of the most important provisions in RERA to protect the rights of buyers.
- Affidavit: Along with all the required documents, the promoter must also give a written declaration supported by a legal affidavit, which will contain all the information including the timeline or specific phase of the project.
- Last Date of Possession: The committed date of delivery is the developer’s choice, and is to be adhered to by both parties. Since the time period for delivery may vary between builders, the ‘Sale Agreement’ will specifically carry the date of possession and the rate of interest that will be charged in case of any default.
- A clear title to the land: The written legal affidavit should also include a title clearance confirmation of the land on which the development is proposed and all relevant documents are available. This is to avoid any land dispute which may lead to delay in construction and delivery.
- Free from constraints: The legal affidavit should also clearly state that the land is free from all encumbrances and is free to transfer. This is to avoid delays in project delivery and transfer of title to the property.
- Maintaining a separate escrow account: Builders will now have to create a separate escrow account in which 70% of the amount received from buyers will have to be deposited by a scheduled bank. Withdrawals from the account would depend on the extent of completion of the work and would be allowed to cover only the cost of construction and the cost of land. In addition, the project will be subject to certification from an engineer, an architect, a chartered accountant, and a six-monthly audit. This is to avoid the diversion of funds received from buyers in other projects.
- Making it a legal offense: If a builder or developer fails to comply with the rules and regulations of the RERA Act – it will be considered an illegal activity and will be dealt with accordingly. Some possible legal actions include:
- Builder stands to lose the registration of the project
- Compensation to the flat buyer in case of delay in delivery
- Going back to the authority and justifying the delay
- Imprisonment for a term which may extend to three years
- A fine that may extend to 10% of the estimated cost of the project
- Both – Imprisonment and fine
- Creation of RERA Appellate Tribunals: State-level courts or expert committees will have to be set up across the country and these tribunals will be required to pass judgments on cases in 60 days. These will help in setting up a state-level RERA to regulate transactions and ensure their timely completion and handover.