How will homebuyers benefit?
The Real Estate (Regulation and Development) Act, 2016 (RERA) seeks to protect home buyers as well as boost investments in the real estate sector. RERA has come into force from May 1, 2017. Let’s look at the benefits that RERA entails to home buyers and how they will benefit from this Act.
Points of concern for homebuyers before RERA:
* Property builders advertised and sold properties based on ambiguous super built up area. A lot of homebuyers ended up spending more but actually deriving lesser benefits and useful space.
* Homebuyers had to pay a booking charge to block their investment in an apartment and later pay the total purchase consideration in one go or in instalments without even knowing that how and where their funds were being utilised.
* Homebuyers did not have a point of contact to check the progress of the project invested in.
* Homebuyers had no mechanism to know the credibility of the project and had to merely rely on the brand of the property developer or promises made by the property developer.
* There was no redressal mechanism for either delay in obtaining occupancy certificates/ possession or for the realisation of sub-standard development in the future.
How RERA has taken care of the above issues:
* A property has to be sold based on carpet area only (selling of property based on super built up area is prohibited under RERA). To avoid confusions and tweaking at the end of property developers, RERA has specifically defined ‘carpet area’ to mean net usable floor area of an apartment which includes area covered by the internal walls and excludes the area covered by the external walls, areas under service shafts, exclusive balconies, verandahs or open terrace areas. This will give an assurance to homebuyers that they will pay for the actual space that they are getting.
* Property developers will have to park 70 per cent of the total consideration received in a separate bank account. The aforementioned amount can be withdrawn only for the purpose of cost of land and cost of construction in the specific project. The amount can only be withdrawn in proportion to the percentage of completion of the project. Further, the withdrawal can be made only after obtaining requisite certificates from an Architect, an Engineer and a Chartered Accountant in practice. This will give an assurance to homebuyers that their money is being invested specifically in the project and not used for any other purpose, thereby, guaranteeing the quality of development.
* It has been made mandatory for the property developers to maintain a website and provide details of the registration granted by RERA, quarterly updates on number and type of apartments or plots booked, approvals granted, the status of the project, etc. This will ensure that the homebuyers are updated on each and every aspect of the development and is no longer duped by the developer.
Further, RERA has protected the interest of homebuyers in the following ways:
# Property developer is liable for compensating the homebuyer for any loss or damage caused due to incorrect/ false statement made in the prospectus or notice of advertisement or in relation to the model apartment;
# Property developer is prohibited from taking more than 10 per cent as advance from the allottees without entering into a written agreement for sale;
# Interest payable by the property developer and the allottees in case of default to be specifically mentioned in the agreement for sale. Also, the interest rate is to be as per rates prescribed which is being benchmarked based on SBI prime lending rate;
#Any structural alteration/ addition to the sanctioned plan to be made only after obtaining a written consent of at least 2/3rd of the allottees (other than the developer);
# Transfer of real estate projects to third parties would now require written consent of 2/3rd of the allottees and RERA;
# Any failure on the part of the property developer to hand over the possession of the property in accordance with the agreement for sale would empower the allottees, at their will, to withdraw from the project and demand refund of the amount paid along with prescribed interest;
# Developer will now be responsible for fixing structural defects in the property for five years after transferring the property to the allottees. Also, such repair work needs to be completed in a prompt manner within 30 days of receipt of written complaint from the allottees;
# Any loss caused due to defective title would have to be compensated by the developer;
# Real estate agents will also be required to be registered under RERA; and
# Non-compliance of provisions of RERA will attract a penalty or/ and imprisonment up to a maximum of three years.
The intent of RERA is loud and clear – satisfaction of homebuyers and providing them value for their money. The only show stopper is that the State Governments have been given the right to frame rules under RERA and notifying the RERA authorities for the respective states. The State Governments have been extremely slow in this aspect.
Nevertheless, it is a good reason for homebuyers to cheer and I will feel more satisfied as a homebuyer going forward.