Finally, after the long wait of almost nine years, regulating the Real Estate sectors became a reality with ‚ÄėThe Real Estate (Regulation and Development) Act, 2016‚Äô came into force on May 1, 2017 in the entire Country. The Real Estate (Regulation and Development) Act, 2016 was passed by Parliament in March last year and all the 92 sections of the Act comes into effect from May 1. The government has described the implementation of the consumer-centric Act as the beginning of an era where the consumer in king. Yes, this is nothing but the beginning of a new era making buyer the king while developers benefit from the confidence of the king in the regulated environment.
However, as on April 30, just 13 of the 32 states and Union territories, including Gujarat, Uttar Pradesh, Madhya Pradesh, Maharashtra, Odisha, Delhi, and Andhra Pradesh have notified the rules.
A Mumbai- based developer and a Thane builder are probably among the first in the country to register under the Real Estate Regulatory Authority (RERA), which came into effect on May 1, 2017.
Let‚Äôs have a quick on some important features¬†of this new Law:
1.¬†¬†It makes it mandatory for all builders – developing a project where the land exceeds 500 square metre – to register with RERA before launching or even advertising their project. Developers have been given time until July 31 to register.
2.¬†Developers will have to submit as well as upload project details, including approved layout plan, timeline, cost, and the sale agreement, that prospective buyers will have to sign to the proposed regulator.
3.¬†Real Estate Appellate Tribunals to be set up in every state.
4.¬†Builders will also benefit as the law has p enal provisions for allottees who do not pay dues on time. The builder can also approach the regulator in case there is any issue with the buyer.
5.¬†It also states that any structural or workmanship defects brought to the notice of a promoter within a period of five years from the date of handing over possession must be rectified by the promoter, without any further charge, within 30 days, he added.
6.¬†The State RERA office has four wings: Finance, Legal, technical and administration and IT.
7.¬†Before applying for registration, the layout of the real estate project has to be approved by the local authority like BMC. However, the developer may include some buildings in his application of registration where apartments are proposed and the building approvals are pending.
All commercial and residential real estate projects will have to be registered¬† except¬†where:
1.¬†Area of land proposed to be developed does not exceed 500 sq metres.
2.¬†No. Of apartments proposed to be developed does not exceed eight, inclusive of all phases.
3.¬†Promoter has received completion certificate for a project prior to the commencement of this Act.
Some of the major provisions¬†of the Act, besides mandatory registration of projects and Real Estate Agents include:
1.¬†Depositing 70% of the funds collected from buyers in a separate bank account in case of new projects and 70% of unused funds in case of ongoing projects;
2.¬†Projects with plot size of minimum 500 sq.mt or 8 apartments shall be registered with Regulatory Authorities;
3.¬†Both developers and buyers to pay the same penal interest of SBI‚Äôs Marginal Cost of Lending Rate plus 2% in case of delays;
4.¬†Liability of developers for structural defects for five years; and
5.¬†Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.
6.¬†As mandated, the developers have to upload details about their experience over the past five years, estimated project cost, money incurred and flats sold so far and Escrow bank account number, among other things. The Law also says a builder has to submit an affidavit that the project information furnished by him while applying for registration is correct and RERA– compliant.
Registration requirement for ongoing projects
(a)¬†The promoter of an ongoing project has to compulsorily register it within 90 days from the date of commencement of the Act in the state, by furnishing following information.
(b)¬†The status of the project (extent of development carried out till date and the extent of development pending) including the original time period disclosed to the allottee for completion of the project at the time of sale including the delay and the time period within which he undertakes to complete the pending project, which shall be commensurate with the extent of development already completed, and this information shall be certified by an engineer, an architect and a chartered accountant.
(c)¬†The promoter shall disclose the size of the apartment based on carpet area even if sold on any other basis such as super area, super built up area, built up area etc. which shall not affect the validity of the agreement entered into between the promoter and the allottee to that extent.
(d)¬†For ongoing projects, the promoter has to deposit in a separate bank account, 70 percent of the amounts already collected from the allottees but not been utilised for construction of the project or the land cost for the project.
Now the question arises, will RERA hit supplies, push up home prices?
‚ÄúNew Project Launches will get postponed as compliances will increase. With demand rising, delay in new project launches would result into temporary short supply‚ÄĚ said Jaxay shah, president, confederation of Real Estate Developers‚Äô Associations of India (CREDDAI).
Author: C S Ekta Maheshwari¬†is the Author of this article and is Company Secretary by profession. The Author can be reached at [email protected]
Disclaimer: The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn‚Äôt constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn‚Äôt accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information‚Äôs provided herein above.