‘Customer is the king’ goes the famous adage. But, the customers of real estate sector face problems regularly. Some of the common problems are a lack of transparency, no after-sales support, project delays, and other scams. This becomes a deterrent while booking a property in under-construction project. Your ordeal is to end soon from 1st May 2017. Now, you may have the power to safeguard yourself with access to information and grievance redressal through RERA.
What is RERA?
The Insurance Regulatory and Development Authority (IRDA) regulates the insurance sector. Securities and Exchange Board of India (SEBI) regulates the securities market. Similarly, Real Estate Regulation and Development Act (RERA) would be the regulator for the real estate sector. Retail property buyers are often deceived into buying a property. RERA aims to protect the buyers from all fraudulent and misleading activities. Home buyers have also suffered because of delayed completion or project termination. Until RERA, there was no convenient way for them to get their grievances resolved. Tribunals would be setup in every state for solving the builder-buyer conflicts.
As per this Real Estate bill passed in Rajya Sabha in 2016, RERA would hold an end-to-end record of all the authentic projects in the sector. Any project plan with 8 flats or occupying more than 500 square meters of the plot along with specific phases would require compulsory registration. Buyers would have online access to all the important documentation to make informed decisions. Penalties for project delays would also be applicable.
Who is Covered Under RERA Bill?
Although the act has come into force for the protection of buyers, the interests of developers would also be considered. The rules of the RERA act would be applicable to buyers, developers, and agents as well. Failure to abide by the rules by any party would result in imprisonment. A monetary punishment would also be applicable. Builders and developers would be liable to pay 10% of the total project cost. Agents and buyers would have to pay a fine of 10% of property cost.
Buyers, as well as developers, can file their grievances to be redressed at RERA consumer courts.
The act covers not just the new properties but also the under-construction properties. Thus, the act also protects those who have already purchased a property but awaiting its completion. In this case, the developer must upload the originally sanctioned plans, changes made in the plan, total money collected from buyers, amount utilized, and estimated project completion time.
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How Will The RERA Act Benefit The Buyers?
1. Access To Information
For completing the registration process, the developer must disclose names of promoters, project layout, land status, the status of statutory approvals, sales agreement draft, construction status, and details of agents, architects, contractors and engineers. These details must also be updated regularly on developer’s website. This can serve as an authentic source of information to buyers.
2. Pay For Carpet Area Only
Currently, buyers are charged for the super built-up area. It includes the area of the lobby, lift, balcony and other common places. But with the implementation of the Real Estate bill 2016, the developers can sell only on the basis of carpet area. They must disclose the carpet area while registration with the regulator. Thus, you would know the exact square feet cost and pay for the usable area.
3. Security of The Money Paid
It is compulsory for the developers to open an escrow account in a bank. They must deposit 70% of the money received for a particular project from buyers to this account. These funds can be withdrawn as per the construction stages only. This step will ensure that the developer does not divert this money for some other project.
4. Buy a Property With Clearances
The registration of builders and developers with the regulator may take care of deliberate and negligent sale of products. Disclosure of all the important information may make sure that all the necessary clearances are in place.
As of now, once you get the possession, the builder is out of the picture. You must provide for yourself, in case some problem arises in the construction. But from May 1st, the builder would have to take care of any structural defect in the building for five years.
6. Have a Say
Earlier, the developers used to change the proposed plans at their will. With the implementation of RERA, for any change in structure or the number of flats, 66% (two-thirds) of the buyers should give their consent. Thus, you know what you would get even if the plans are changed.
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What To Expect From RERA?
The registration process would ensure complete transparency in the system. Buyers can view details of all the listed projects, and track construction status online.
For any delay in construction or termination of the project, the developer would be liable to pay a penalty. It would be payable at an interest rate of 11%-12% including the lending rate of 2%. Because of the penalty, you can expect project delivery on time.
Rights as a Buyer
If a developer leaves a project in between, the nominated association of buyers would have the right to refusal. You also have a right to complete refund with interest in such cases. The buyers can also approach RERA to get the project completed by another developer.
A total of 644 consumer courts at district-level would be setup to resolve buyer-builder conflicts. A time-limit of 120 days has been stipulated to resolve issues.
Organizing the Property Brokers
The real estate agents were an unorganized sector until now. Now, every property broker would have to register with RERA. They will be allowed to deal only with registered properties in specified areas. RERA aims to make them accountable towards their role as a broker.
The purpose of RERA is to make the real estate sector systematic. It involves safeguarding interests of buyers and sellers. This is a massive step towards bringing governance in the real estate sector. Assured safety is likely to attract first-time home buyers to take the biggest decision of their lives.