The new rules under the Real Estate (Regulation and Development) Act or RERA come into effect from May 1. The Real Estate Act has been introduced with an aim to regulate the real estate sector, protect home buyers and ensure timely execution of projects.
The objective of RERA is to boost the confidence of the investor and stamp out illegal practices. The new rules are applicable to residential and commercial development. The Real Estate Act makes it mandatory for all real estate projects and brokers to get registered with the real estate regulator who will oversee transactions and settle disputes. However, only seven states moved to implement the new rules so far.
Here's how the Real Estate Act or RERA will protect homebuyers:
1. Because land is a state subject, RERA, which is a model law, can be recommended by the Centre but the decision lies with the states to formulate and pass their own laws.
2. Only six states - Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar – till last weekend had notified the rules. Last year, the Housing Ministry had notified the rules for the five Union Territories and for the National Capital Region of Delhi.
3. RERA has been described by the Centre as the beginning of a new era where the consumer will be king. As per Union housing minister Venkaiah Naidu, the Act clearly mentions the rights and obligations of buyers, developers and real estate agents. He said that any aggrieved party can seek redressal for violation of terms of agreement by the other party.
4. On reports that key provisions of Real Estate Act have been diluted by some states, Naidu said these states have assured him that these will be corrected.
5. The real estate developers and agents now have to register with their respective state regulatory authorities by July 30. They are also required to deposit 70 per cent of the funds collected from buyers in a separate bank account that will be used only for the purpose of construction of the project. This has been done to ensure timely development. Also, for new projects, all approvals before launch are must.
6. It is must for the promoters to have the consent of two-third of the buyers in a project before making change in the number of units or any other structural change.
7. Penalties including imprisonment on developers who delay projects or do not deliver on promises have also been prescribed by the RERA.
8. Developers now need to disclose the details of their project on the website of the real estate regulator and are also required to provide updates on the progress of construction.
9. Any structural or workmanship defects informed to a promoter within five years from the date of possession must be rectified by the promoter. If the possession is delayed, developers need to pay an interest rate of 2 percentage points above State Bank of India’s lending rate.
10. Imprisonment of up to three years for errant developers has also been prescribed by RERA. A developer will have to sell only on the basis of carpet area. This will provide a clear picture to the home buyers on what they will be paying for each square foot they will get for use.