What is RERA (Real Estate Regulatory Authority) Act?
Real Estate Regulatory Authority Act, commonly known as RERA Act was introduced in the year 2013 by the UPA government with the intention to regulate and promote the real estate sector and also to provide a transparent and efficient method to protect the consumers’ interest. However, RERA Act had undergone 20 major amendments from its inception and it was on 1st May 2016 when this Act came into effect with 59 of 92 sections notified. Real estate plays an important and vital role in the development of an economy and like in any other country, it has quite an important role in the fulfilling the need and demand for housing and infrastructure development. Having said that, where real estate in one of the fastest growing industry, it is also one of the most unregulated sector and lacks professionalism, transparency and standardization. To put it in other words, real estate sector is the backbone of the Indian economy and if statistics have to be believed then its contribution towards Gross Added Value (GVA) was Rs 73.79 lakh crore in the year 2016-17. However the non-appealing part of the real estate sector is that because it lacks a transparent and uniform regulatory body, it is the consumer who is most affected and gets exploited by unscrupulous builders and thus RERA Act was introduced which apart from protecting the consumer’s interests, it also establish the Appellate Tribunal in order to hear appeals.
Benefits of RERA Act
In other words, RERA Act establishes regulatory authorities at the state level and regulates contracts between buyers and sellers in the real estate sector to facilitate sale and purchase of plot, apartment or building in an efficient and transparent manner. Main beauty of RERA Act is that it not only lays responsibility on the promoters but also involves the purchases and thus balances the interest of both. Apart from placing a transparent mechanism in place, RERA Act also facilitates ease of information between the promoter and purchaser and sets minimum accountability standards.
Also Read: Property Purchase Agreement
The main benefits of RERA Act are as below:
- Accountability: At the time of promotion, builders have this tendency to promote their buildings with every possible amenities and features, however when it comes to delivery, half of the promised and assured amenities and features are missing. RERA Act ensures that the consumers get exactly what they have been promised to and in case a builder is found guilty, then he/she will be penalized 10% of the projects costs or might end up in jail up to 3 years.
- Increased confidence: One of the main aims of RERA Act is to build up confidence of the consumers as well as of those who want to invest in the real estate by including relevant regulations and policies.
- Increase professionalism: Real estate has been one of the most unprofessional sectors in India and with the implementation of RERA Act and its policies; it aims at increasing professionalism in the sector.
- All clearances: Enticing consumers with endless offers, discounts and pre-launch offers and then leaving them high and dry to get the clearances done is quite a common scene in the real estate. However, RERA Act ensures that builders get all the clearances done before selling of the flat.
- Boost investments: Real estate is the backbone of Indian economy and also one of the main sources of revenue and thus Indian Government is working round the clock to give it a standard outlook and professionalism so that investors feel secure in investing their money in the real estate and this is one of the main objectives of RERA Act.
- Consumer forums: RERA Act has put a designated and dedicated consumer forum in place where consumers can approach in case of any grievances.
- No advertisement without RERA registration: RERA Act has made it mandatory for the builders and promoters to register their projects with RERA before they start advertising about their project and also to include their RERA registration number in any or all of their advertisements. Also, under RERA Act, it is important and mandatory to register yourself as a real estate agent.
- Transparency: One of the main emphasis areas of RERA Act is to ensure transparency between the builders and consumers so that the consumers know what exactly is happening with their hard earned money.
- Timely delivery of projects: It is not uncommon to see that developers make false promises regarding the delivery date of the project and then do not deliver it on time. RERA Act has imposed strict resolutions on the builders to make sure that the construction work runs as per the promised timeline.
- Booking amount: RERA Act has reduced the booking amount to 10% from 20% which need to be paid only after registering the agreement for sale with the builder and the agreement can be terminated only if the buyer defaults on payment thrice. A 15 day notice is given to the buyer.
Although RERA Act is a central legislation, power to frame laws on the land falls under the state government and thus RERA Act is adopted by each state government and thus every state has its own set of rules and regulations to implement and execute RERA in their respective state and if justice Rajesh Ketkar and Naresh Patil from Bombay High Court have to be quoted then as per them, RERA Act is constitutional and it is a law not only related to the regulatory concerns but has its objective to develop realty sector projects, particularly undeveloped and incomplete projects.
One of the key and salient features of RERA Act is that it is mandatory to register the real estate projects with the Real Estate Regulatory Authority before the promoter or the builder starts advertising, marketing, booking, selling or inviting people to purchase the project. RERA Act defines a real estate project as the development of a new building from scratch or converting a part or the complete building into apartments, building apartments or plots on the land for selling purpose.
However, you need not register the following with the Real Estate Regulatory Authority:
RERA Act has a wide range of applicability and is applicable to promoters, builders, developers, development authority, and society and to the holder of power of attorney from the owner of the land on which the building/apartment is constructed or plot is developed for sale.
However the applicability of RERA Act is subject to the following conditions:
As a promoter of a project, you are required to submit three copies each of below mentioned documents for RERA registration:
However, if you are a real estate agent, then you would need to submit only 3 documents for RERA registration, such as: