Real Estate (Regulation and Development) Act, 2016 (RERA) aims at protecting the home purchasers and also boosts the real estate investments. The Rajya Sabha passed the bill on 10 March 2016. The RERA Act was effective from 1 May 2017 with full provisions.
Impact of RERA Act
- No enforcement or registration of sale deed in the office of sub-registrar without completion certificate or Occupancy certificate.
- Financial discipline in the real estate sector.
- Big boost for honest and sincere real estate developers.
Carpet Area under the Act
According to the Act, the carpet area is the total area of the floor that can be used within the walls of the apartment. This does not include areas like an open terrace, shafts, balconies etc. Mentioning the carpet area helps in the preventing sellers from misleading buyers.
As the loading factor (it is the factor which when added with 1and multiplied by carpet area gives super built-up area) is high, the saleable area can be inflated by the developer. This allows the developer to reduce the rate per square feet in the saleable area that is inflated. This becomes illegal, as the home purchasers get happy assuming that they are getting good rates. However, the flat-size never changes, only the loading factor does. Using the standard for carpet area will ensure that there is a certainty on the usable area. This helps in the analysis of cost per square feet.
RERA Compliant Property
- If the area of the property is more than 500 square meters the builders should register it under RERA Act before launching or advertising a project on that property
- Builders must provide proof that 70 percent of the total payment has been deposited separately in a separate account.
- No discounts for early bird booking and pre-launch offer.
Registering Projects under RERA
- Authenticated copies of:-
- Commencement certificate,
- Layout plan,
- At the time of registration, the plan must be sanctioned under the RERA Act.
- Every project (new and existing) be registered under RERA before launch.
- Brokers and agents must register under RERA.
- Dispute resolution must take place within six months at RERA appellate tribunals and RERA.
- Different phases of a single project must be registered differently.
- Details of all the projects built by a realtor in the last five years should be registered with RERA. Reasons for delayed registration to RERA must be stated.
- Updates regularly on the RERA website
- A maximum of 1-year extension can be offered to the realtor if he has no fault.
- A certified CA must carry out the annual audits for the project.
- The property must be insured under Construction and land title insurance.
- The project must be completed on time.
Key Points of RERA Act
- No changes can be made to the plan by the developer without the buyerâ€™s consent. This provision will not allow the developer to increase the cost of their projects.
- the timely completion of the realtor project is ensured and administered by the law. And, in case of delay in the project, the developer will have to pay interest on the amount paid by the buyer.
- Registration is mandatory for all residential and commercial real estate projects in cases where the land is over 500 square meters or includes eight apartments and which are under construction.
- Every phase of the apartment will be considered a standalone real estate project, and separate registration needs to be obtained for each project.
- It is compulsory for a state to establish a State Real Estate Regulatory Authority as per the new act. Buyers can approach this body for redressal of their grievances.
- The property must be sold to buyers based on carpet area and not on the super built-up area, which would be illegal.
- Failing to register a property will attract a penalty up to 10% of the project cost and a repeated violation could send the developer in jail.
- The developer has to deposit 70% of the money collected from a buyer in a separate account to meet the construction cost of the project. This helps to keep a check on developers who divert the buyer’s money to start new projects, instead of completing the one for which payment was made & also ensure that the respective project is completed in time.
- If any shortcomings are found by the buyer in the project, then the buyer can contact the developer in writingÂ within one yearÂ of taking possession.
- The law has a provision of a maximum jail term of 3 years with or without a fine, for a developer who violates the order of the appellate tribunal of the RERA.
Penalties Under RERA:
- Contravention of Section 3 (Registration)
- All projects must be registered with RERA.
- If projects are not registered a penalty of 10% of the estimated project cost will be levied.
- Default continuing after the penalty will result in imprisonment of up to 3 years or a fine of 10% of the estimated project cost.
- Determination of amount of penalty is to be done by RERA.
- Contravention of Section 4 (Furnish Information)
- Promoter to make application within the stipulated time.
- If submitted information is fake or not acted as per provision, a PENALTY of 5% of the estimated project cost will be levied.
- Contravention of other Provisions of the RERA Act
- A penalty of 5% of the estimated project cost will be levied.
- The penalty amount will be determined by RERA.
- Failure to Comply with RERA Orders
- The penalty of 5% of the estimated project cost will be levied.
- Failure to Comply with the Orders of Real Estate Appellate Tribunal
- The penalty of 10% of the estimated project cost will be levied
- Defaults committed by allottees
Penal consequences for agent defaults
- Failure to facilitate purchase or sale without registration
- The Act does not allow real estate agents from initiating the purchase or sale of a building.
- A violation can levy a penalty of Rs.10,000 per day
- A total penalty of 5% of the estimated project cost will be levied.
- Failure to perform functions under the RERA Act
- A violation can levy a penalty of Rs.10,000 per day total penalty of 5% of the estimated project cost will be levied.
- Failure to comply with RERA order
- A penalty of 5% of the estimated project cost will be levied.
- Failure to comply with the regulations set by the Real Estate Appellate Tribunal a penalty of 10% of the estimated project cost will be levied
(This article was submitted by Ashmeet Singh of Panjan University as a part of B&B Associates’ internship program.)