The Government of India has recently notified the final rules to implement the Real Estate (Regulation and Development) Act, 2016 (RERA) that aims to bring transparency and set accountability in the sector and help in completion of stalled projects. This Act of the Parliament that came into force from 1 May, 2016, touted as a key reform measure in the vast real estate sector, will help regulate the sector and bring in clarity for both buyers and developers. The Act seeks to protect home-buyers as well as help boost investments in the real estate industry.
The Act under S.84 contemplates that within 6 months of its being enforced; State Governments have to establish the State Real Estate Regulatory Authority as the government body to be approached for redressal of grievances against any builder. Uttar Pradesh is the one of the first states to publish rules for its state on 27 October, 2016.
RERA makes it mandatory for all commercial and residential real estate projects where the land is over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority for launching a project, in order to provide greater transparency in project-marketing and execution. The on-going projects which have not received completion certificate on the date of commencement of the Act will have to seek registration within 3 months. For failure to register, a penalty of up to 10 per cent of the project cost or three years’ imprisonment may be imposed.
This Act prohibits unaccounted money from being pumped into the sector and obliges the developer to park 70% of the project funds in a dedicated bank account. This will ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money for one project, thus delaying completion and handover to consumers. A major benefit for consumers included in the Act is that builders will have to quote prices based on carpet area and the current practice of selling on the basis of ambiguous super built-up area for a real estate project will come to a stop as this law makes it illegal. Carpet area has been clearly defined in the law.
This Act also makes it mandatory for developers to post all information on issues such as project plan, layout, and government approvals, land title status, sub contractors to the project, schedule for completion with the State Real Estate Regulatory Authority (RERA) and then in effect pass this information on to the consumers. The developers have also been mandated to upload various information about the project including number and type of apartments or plots, booked status of the project with photographs floor-wise, status of construction of internal infrastructure and common areas with photos, etc.
Currently, if a project is delayed, then the developer does not suffer in any way. Now, the law ensures that any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer.
The developer cannot make any changes to the plan that had been sold without the written consent of the buyer. This puts paid to a common and unpopular practice by developers to increase the cost of projects. The buyer can contact the developer in writing within one year of taking possession to demand after sales service if any deficiency in the project is noticed.
Regulatory Authorities have to dispose of complaints in 60 days and Appellate Tribunals will be required to adjudicate cases in 60 days. The Rules also provide for compounding of punishment with imprisonment for violation of the orders of Real Estate Appellate Tribunal against payment of 10 per cent of project cost in case of developers and 10 per cent of the cost of property purchased in case of allottees and agents. Compliance with reasons for punishment shall be complied within 30 days of compounding. The maximum jail term for a developer who violates the order of the appellate tribunal of the RERA is three years with or without a fine.
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