Introduction
Many Indian real estate home-buyers who were speculating on buying homes in 2016 found a sigh of relief when The Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as ‘RERA’) was introduced. There is no room for real estate developers to make any mistake or deceive the customers now that this Act is in place. The primary goal of RERA is to protect homebuyers’ interests and bring about standardization in the real estate industry.
Obstacles antecedent to the enactment of RERA
There was a time when property brokers, builders, developers, and real estate promoters controlled the real estate market. A real estate project would typically be planned by these promoters, who would then market it to clients using a variety of techniques, such as glitzy advertisements and unbeatable deals and offers.
Once hooked, customers were required to pay the deposit and oblige to the terms dictated by the builder until the ownership of the property was conveyed to them. Many times, the builders would cause the project to be delayed by citing absurd justifications. Not just that, some of the dishonest promoters would engage in unfair business practices, which included-
- charging in a super built-up area (which included common areas)
- deviation from the approved plans.
- Despite having received the booking fee, the promoters canceled the initial allocation in order to take advantage of the rise in property prices.
- obtaining questionable charges.
- Diversion of funds.
With the coming into effect of RERA requiring mandatory registration of real estate projects, the occurrence of the aforesaid challenges has reduced.
Registered Builders
One of RERA’s most important features is that the Promoters are required to register the project with the particular state’s real estate regulatory authority before advertising, marketing, selling, booking or offering the real estate project for sale. Some other major objectives of RERA include reformation of the real estate sector, implementing transparency, and maintaining discipline in terms of the promises made to the Allottees at the time of advertising the project
- The registered builders have the following advantages-
- Financial institutions like banks and NBFCs are more inclined to lending money to RERA-approved projects for housing.
- RERA projects get greater buyer preference than the non RERA-registered projects.
- Occupancy Certificate is granted to registered projects only.
- RERA approved projects can be sold at competitive prices. This is because RERA mandates standardized procedures which have to followed in order to obtain RERA registration.
- Buyers have the right to information about their allotted property and hence, feel more comfortable to buy into a RERA registered project.
- Builders will not be able to delay the projects, in case the projects are delayed the buyers have a legal remedy under RERA.
- Builders will be held accountable for any construction flaw or defect.
Non-Registered Builders
The market for unregistered builders, on the other hand, will be shrinking as more and more builders choose to register. Not registering with RERA has a number of drawbacks, some of which may include-
- The market for unregistered projects is shrinking, and unregistered projects can only be constructed on land that is less than 500 square meters in size and has fewer than 8 apartments.
- Lack of funding options for buyers due to financial institutions’ probable reluctance to financing unregistered projects.
- Ineligibility to participate in government programs like PMAY, which give subsidies to specific categories of buyers.
- To market projects, builders who choose to abstain from registering their projects will only have their reputation to rely on.
- Unlike in case of registered project where all disputes relating to the project will be adjudicated by The Real Estate Regulatory Authority, disputes regarding unregistered projects will invite interference from local courts within whose jurisdiction the project is situated
Conclusion
The introduction of the statutory mandate of registration of new real estate projects and the ones that were ongoing as on the date of enforcement of the Act i.e., 01.05.2017 has been received by potential buyers. The chances of Buyers being duped now stands mitigated since the industry has become more transparent. Between the buyers and the promoters, the agents now act as intermediaries. Both the real estate projects marketed by Promoters and the Agents in business advertising them must be mandatorily registered with RERA. The said mandate is now cemented as a practice within Promoter organizations in tier 1 cities. However, even to this date, many Promoters in tier 2 and tier 3 cities failed to do so owing to lack of awareness. Nevertheless, the Promoters and are growing towards awareness and more and more of them are making efforts to become fully compliant to the provisions of RERA in their ongoing and newly launched projects.
This blog is written by Vinuthan J, an intern of Smriti Legal LLP.
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