The ‘REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016’, also called as RERA came into force after receiving the assent from the President, on 25th March 2016. It is made applicable to the whole of India except for the State of Jammu and Kashmir. Although the Centre had enacted this act by virtue of entries 6 and 7 of the concurrent list of the VII schedule, (both Central and State Governments can formulate laws on matters falling under concurrent list) it left its implementation on the State Government because as per Entry 18 of List II of the Seventh Schedule of the Constitution, the State Governments are vested with the authority to formulate laws pertaining to real estate.
The Act aims to bring transparency and clarity in property matters and also seeks to safeguard the interest of the buyers and it also aims to ensure that the property projects are completed within the allotted time without missing their deadlines. It also provides provisions for penalties for the guilty builders. RERA being a Central Act, empowers the Central Government to make rules and regulations with respect to the Union Territories including the Capital of the Country. While the rest of the States are at a liberty to formulate and regulate their own sets of rules in their respective territories.
The biggest hurdle faced by prospective buyers was delays in projects, especially in the previous decade, there have been several projects which were delayed for more than seven years. With an aim to curb and control such issues which dealt with cost, postponement, quality of construction, shelving of projects which left the innocent buyers stranded, RERA was brought into force. The reasons behind these obstacles were many, for instance, amendments in law, reformation or variation of regulatory authorities, changes in the infrastructure policies etc.
The Major Highlights of the Act:
- A separate escrow account for each of the projects shall be maintained by the promoter of a real estate development firm. From the amount received by the investors at least 70 per cent should be deposited in the said escrow account. This amount can be utilised only for the construction of the respective projects and towards bearing the cost of the land.
- The developers will be under an obligation to update their prospective buyers about their other under way projects, this aims to bring transparency to the buyers.
- The developers are required to present their original approved plans before the regulatory authority along with all the modifications and variations that were made subsequently in the original plan. It is mandatory for the developer to provide details of all the particulars pertaining to the revenue collected from the investors, the manner in which those funds and revenues were deployed, the duration in which the project will be completed and the documents that are required to be certified by professionals such as Practising Chartered Accountants, Architects or Engineers.
- The State authorities are under an obligation to register all the real estate projects along with all the functioning real estate agents under the Act. These details shall be made available on a website for the public.
- As per RERA if within five years of possession there are any issues including poor quality of construction then the State regulators shall order the concerned developer to resolve it in 30 days. This was done to protect the buyers from bad quality construction because RERA also deals with quality of construction.
- If the developer wishes to advertise, offer, invite, invest in projects etc. he cannot do so without obtaining permission from the concerned authority. In order to do any of the previously mentioned act, the developer is required to first get the same registered with the authorities, the authorities shall provide the developer with a unique RERA registration number which shall be put up along with the advertisements. The registration number is granted project wise. Once the registration is done, the developers are required to submit all the details of their financial statements, title deeds and all other supporting documents.
- In case of default in matters of delivery, or in cases wherein the deadline of the projects has been missed, the developers will have to pay back the entire money of the investors at the pre-agreed interest rate as stated in the contract, the said contract between the developer and the investors will be based on the model contract which provided by the act.
- If the buyers refrain from taking back the money, the builder will be liable to pay interest on monthly basis till the time of delivery of possession.
- The Act also empowers the State authorities to levy fine, penalties and also to imprison the guilty builders. The maximum term of imprisonment shall be three years.
- The Act also states that if a developer wishes to take any advance booking amount before signing any registered sale agreement he cannot exceed 10 per cent of the total cost of the property.
- The state authorities are required to construct a page on its official website which will contain the details of all the developers. Login credentials granted to each developer will enable them to upload their project details on that site. The details of the project shall be updated on a quarterly basis based on the modifications or variations if any, made in the project.
- It will also be beneficial to the developers, because the Act imposes penalties and fines on the allottees as well in case of non-payment of dues. The developers can also seek help from the State authorities in cases where the investors or buyers create any obstacle.
As per the Act, any document which has been uploaded by the builder on the official website, cannot be deleted later on. Hence, the developers will have to be extra cautious before uploading any documents. All the states were under an obligation to get their set of rules notified, to establish their regulatory authorities, to create an official website in this respect and to also constitute an appellate authority for redressal of disputes. But out of the 29 states only 15 states have framed and notified their rules. RERA aims to bring within its purview all the on-going and the new real estate projects. The basic motive behind this act is to bring all the real estate projects under one umbrella, so that it can be regulated and governed more efficiently and effectively