Real Estate Market in India
(posted Dec., 2018) Home buyers who have been duped by real estate developers and agents welcomed the coming into effect of the Real Estate Regulation Act, 2016 (RERA/Act) from 1st May, 2017. The RERA is considered as one of the landmark legislations passed by the Indian Parliament to bring in more transparency and accountability in our country’s most precarious sector. Real estate being our country’s leading revenue generators (9% to gross domestic product), not only needs RERA to boost home buyer’s confidence in the real estate sector but also to enhance our vast and growing economy. However, implementation of RERA demands strong participation from all states to create Real Estate Regulatory Authorities, framing of the necessary rules and procedures for successful application of the Act. Following is a brief overview of the main features of this legislation.
- Funds Collected: The RERA mandates that 70 per cent of the funds collected from the buyer is to be deposited in a separate escrow account in case of a new project. In case of an ongoing project the 70 per cent of the unused amount is also supposed to be deposited in a separate escrow account. More so, these funds can only be used for the construction of the project in order to ensure their timely completion and any deviation would not only attract strict penalty including imprisonment. RERA also instructs developers not to ask for more than 10 per cent of the property’s cost as advance payment before signing the registered sale agreement.
- Registration of the Project: The RERA stipulates that real estate developers shall not sell any new project without first registering their project with the Real Estate Regulatory Authority (“Authority”). The RERA provides that no developer shall advertise, market, book, sell or offer for sale or invite persons to purchase any plot, apartment or building, in any real estate project or part of, in any planning area, without registering their project with the Authority. However, where land proposed to be developed does not exceed 500 sq. mts. or where the number of apartments does not exceed eight, registration of such projects under RERA in not required. This is applicable to all commercial and residential real estate projects.
- Consumer is King:The RERA has emphasised on the protection of consumers/allottees in the following manner:
- Each consumer shall not only have the right to seek information about the real estate project but also receive the documents relating to the project like the sanctioned plan, layout plan as approved by the competent authority, stage wise time schedule of the project completion and the service promised by the real estate developer like sanitation, electricity or drinking water etc. Even after receiving the possession of the unit, the consumer has the right to obtain the necessary documentation and plans of the common areas as well.
- Any structural changes after the start of the project needs to have a consent of 2/3rd of the buyers.
- Any delay in the projects or in case any changes made against what has been promised in the project shall attract a penalty including imprisonment up to 3 years.
- All projects sold by the real estate developer shall only be based on the carpet area and not on super built up area.
- If the real estate developer fails to meet the timeline or does not deliver what was promised, the consumer has a right to claim refund of the amount paid along with prescribed compensation for the same.
- All new real estate projects shall obtain all approvals prior the launch of the project.
- Provisions for an aggrieved person: Any such dispute coming under the purview of RERA will be adjudicated by the Real Estate Regulatory Authority. Further, the RERA mandates setting up of an Appellate Tribunal by the appropriate government within one year of the Act coming into force. Hence, any person aggrieved by the decision of the Real Estate Regulatory Authority can appeal to the Appellate Tribunal. All appeals from the Appellate Tribunal shall lay in the High Court of the State within the period of 60 days of receiving the decision.
- Details to be on RERA official website The buyers can now find complete and updated information on the Act available on the website. All the projects which are registered with the Authority can be browsed for information regarding the completion date, updates on the construction and other ancillary information. The Act further mandates that anything shown in the marketing material needs to be in line with the final product or else the real estate developer will be liable to penalties under the Act. All marketing collaterals are also to be uploaded on the RERA official website by the builder/developer, post registration. The advertisement or prospectus issued or published by the developer shall mention prominently the website address of the Authority, wherein all details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto. In case of any future dispute, the same can be easily referred to or produced as evidence in a court of law.
- Equal Penalty Earlier the developers did not pay any refund in case the project got delayed but with RERA they will have to pay a compensation amount to the customers. This will account to about eleven to twelve per cent rate of interest which includes the lending rate of two per cent as well. Thus, the customers can look forward to a refund if the project is not completed on time thus keeping in mind the interest of the buyers.
- Responsibilities of a Consumer It is mandatory for a consumer to make timely payments to the real estate developer as per the agreement for sale. He will also have to pay his share of registration charges, municipal taxes, maintenance charges, ground rent, electricity charges, water supply charges and any other services. Once the occupancy certificate is issued by the real estate developer, the consumer is required to take possession within two months’ time. If the consumer is not able to make timely payments for his purchase, he is required to pay interest at a prescribed rate.
- Limit on Advance Payment In order to safeguard the amount paid by an allottee towards a project and restrict the use of such amount to the construction and completion of such project alone, the RERA places a limit of ten percent on the advance amount that can be received by the promoter, prior to entering into a registered agreement of sale. RERA further mandates that such advance must be received in an escrow account / separate bank account.
Though RERA came into full effect from 1st May 2017 but the continuing delay in issuing notification may dilute the proper implementation of the Act. Even though all states were supposed to have notified their RERA rules by July 31, 2017, only 15 states out of the existing 29 states and all seven Union Territories have complied by this deadline. With the coming of RERA, home buying may become the pleasant experience it ought to be. However, as a buyer, it seems the things may take a little more time to settle down before one starts his search for the RERA compliant home.
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