One should have an overview of RERA Act 2016, as everyone wishes to have their own house at some point in their life. A house is like their one time investment, where all savings are invested to build a home out of it. No one wishes to be betrayed in their special moments of making such big transactions. But there have been instances when buyers have been cheated by the developers for their own profits and no proper redressal mechanism was available to the aggrieved parties. Hence, in order to prevent the buyers from being exploited, the Real Estate (Regulation and Development) Act 2016 was enacted.
It has been rightly stated, that RERA is an act for the regulation and promotion of real estate sector and to restore the faith of builders in the real estate market. It ensures the sale of land, property, apartment in an effective and transparent manner. The Act establishes Authorities solely for dealing the matters of real estate and increase the rate of delivering justice. It basically acts as an armor of the homebuyers in India. Speedy justice and uniform system of regulation is the primary goal of the RERA Act. The Act also imposes penalties and imprisonment for the defaulters.
If one is facing issues with regard to property matters or delay in possession of property, or the refund amount is not being initiated by the builder, or the terms of the agreement are one-sided leaning towards builders benefit, then RERA Act can come as handy for those. This Act is completely sector specific and deals with major issues of the real estate market, explaining what all actions can be taken in case the buyers are harassed by developer or promoter in some or the other way.
Applicability of RERA Act
The Real Estate (Regulation and Development) Act 2016, was enacted to regulate the immovable properties of India specifically the residential ones. The Act tries to make the authorities answerable to the judicial bodies and people and safeguards the interests of home buyers and give a boom to the real estate industry. The Act has further mentioned that Real Estate Regulating Authority shall be set up in each state respectively acting as a redressal body for adjudicating the sector specific cases.
The RERA Act was passed in March 2016, and made effective from 1st May 2016, but the entire Act came into force from 1st May 2017. The Act had given a mandate for every State and Union Territory. They are-
- Make the RERA Rules for particular State or Union Territory within 6 months from the date of enactment of the Act. The Rules will mention the procedure and registration fees for registration of properties accordingly as per the rates in their state under the RERA Act. Further, RERA Rules will also comprise of compliances to be followed by the builders and agents along with grievance redressal procedure for the disputes arising in the particular state.
- Notify the RERA Authority for particular state within 1 year of effective date. The RERA Authority shall act as the RERA registration authority. It shall also be the first authority for RERA grievance redressal mechanism.
- The States need to constitute RERA Appellate Tribunal as appellate authority for respective state or UT within 1 year of effective date. This RERA Appellate Tribunal will act as the appellate authority for RERA grievances.
There are certain statistics for measuring the effectiveness of implementation of RERA in every state or union territory.
- There are 30 States and Union Territories in total who have notified the rules under RERA
- 29 states/ UT have set up the Real Estate Regulatory Authority, 20 regular and 9 interim
- 22 states/ UT have set the Real Estate Regulatory Appellate Authority, 13 regular and 9 interim
- The Regulatory Authorities of 24 states have even operationalized their official websites in accordance to the provisions of RERA Act.
Objective of RERA
With the enactment of RERA, it established the standard for stringent compliance of the provisions and rules which need to be adhered to by every builder or developer in their area. Post the enactment of RERA, majority of the states had set up their state RERA rules and offices along with the Regulatory Authorities and Appellate Tribunals. Even though the Act is prospective in nature, the provisions clearly mention that every project whether finished or under construction has to be registered with the respective State RERA by the promoters of the company within span of 3 months from commencement of the Act.
The main objective behind passing the RERA Act was to secure the home buyers from the harassment and fraudulent works of builders and developers. As the real estate market had come to standstill, it was understood that there was an immediate need for a uniform legislation to regulate the real estate matters in uniform manner. Thus, the Act is a wholesome act with respect to the real estate industry as it states the information regarding project plan, layouts, land title status, government approvals, timely completion of project, delivery of project by builders, consent of 2/3rd of allottees in case of any alteration or addition to the project etc. It was aimed that the Act would bring a drastic shift in the functioning of real estate sector with more reliability and transparency.
Chief Characteristics of RERA
Real Estate (Regulation and Development) Act 2016, consists of many provisions and some of the primary ones are as follows-
- Establishment of Real Estate Regulatory Authority in every state or union territory for supervising as well as adjudicating the real estate matters. These authorities have the capacity to go for arbitration for any dispute as per the agreement of the real estate projects in the respective state.
- All the real estate projects irrespective of their completion or not, need to be registered with their State RERA, so that the authority has jurisdiction over them. In case, any ongoing project which begun before the enactment of the Act, and hasn’t registered itself shall not be allowed to advertise their project until the registration is done. Moreover, the Authorities can reject the registration of particular project, if the guidelines are not abided by the developer or promoter.
- Establishment of fast track dispute redressal mechanism by setting up Appellate Tribunal and Adjudicating Officers in state.
- If there is any default found on the part of buyer or promoter, then both will be responsible for paying an equal rate of interest.
- For situations, where the promoter wishes to transfer or assign the majority of buyer’s rights and liabilities in real estate project to third party, then written consent from 2/3rd of the allottees will be required along with the written approval of RERA.
- Complaint mechanism has been introduced in case if a person has problems with regard to violation of provisions of RERA or rules of RERA by the promoter, buyer or agent or developer, they can file a complaint with RERA.
- If the promoter causes any losses to the buyer due in case of defective title of the property which is still under construction or has been constructed, then the promoter shall be liable to compensate the buyer. There is no limitation given within the Act presently for compensation amount.
- When an enquiry is taking place, RERA can stop an agent, promoter or buyer from continuing the activity against which the complaint has been raised. Basically a kind of injunction can be imposed on the activity of the agent as per the complaint.
- If the aggrieved party is not satisfied with the decision of Regulatory Authority, then the aggrieved party can submit an appeal before the Appellate Tribunal.
- If the orders of Appellate Tribunal are not complied by the party, then penalty of up to 10% of the estimated cost of the project or imprisonment up to 3 years or both can be granted to the defaulter.
- Even in case, the promoter fails to abide the orders of RERA, they shall be liable to pay the penalty of up to 5% of the total estimated amount of the project.
- If the company commits an offence under the RERA Act, then the person in charge of the business at the time of commission of offence along with the company will be held guilty for the same and be punished accordingly.
- No civil court shall have the jurisdiction with respect to any matter that comes under the purview of Real Estate Regulatory Authority or the Real Estate Appellate Tribunal. Similarly, no court is permitted to grant an injunction, with regard to any action taken by the Regulatory Authority or the Tribunal.
Benefits of RERA
There are numerous perks of enacting the Real Estate (Regulation and Development) Act 2016, in favour of the agent, promoter and buyer. They are-
- Standardized definition of “carpet area”- before the advent of RERA, the method by which a builder calculated price of the project was not explicitly mentioned. However, with RERA there is now a standard formula prescribed in the Act to calculate the carpet area. This shall bring in transparency in the property market and promoters will not be able to provide inflated carpet areas in increased prices.
- Lowered the risk of insolvency of builder- most of the promoters and developers have numerous projects going on at the same time and not just one. So, prior to the Act the developers could shift their funds raised from one project to the other one. But after RERA, this was not possible since 70% of the funds raised need to be deposited in the separate bank account of that project and the developer can withdraw these funds only after getting a certification from the CA, architect or engineer.
- Rights to buyer in case of defects- after the project is built, within 5 years of possession the buyer encounters any structural defect or issue with the quality of the property or building, then the builder is responsible for rectifying the damage within 30 days and all from his own pocket.
- Advance payment- as per the Rules of RERA, a builder is not permitted to take more than 10% of the cost of the project from the buyer as advance amount or booking fee or application fees. This gives time to the buyer to source his funds faster rather than paying a large sum at one go.
- Interest to be paid in case of default- before the Act was introduced, the interest paid to the buyer for delayed possession was much lower as compared to delayed payments made by the buyer to the promoter. This was amended with RERA and now both the parties are on same footing and have to pay same amount of interest.
- Right to information- with RERA, the buyer has the right to information and knowledge regarding the project and it shall include the layout, execution and completion status of project.
- Title is defective- at the time of possession, the buyer shall discover that there is defect in the title of the property or it comes to the knowledge that someone is claiming title in the property, then the buyer can ask for compensation from the promoter and there is no specific limitation prescribed for the same.
- Buyer’s right in case of false promises- if there is some disparity of terms of what was promised by the builder and what was delivered, then buyer is entitled to full refund of the amount that was paid as advance and sometimes the builder can be asked to pay interest on the amount as well.
- Grievance redressal- if the buyer, promoter or the agent has any complaints with respect to project, they have the right to file complaint with RERA. If the party is not satisfied with the order of Regulatory Authority, then an appeal can also be filed in the Appellate Tribunal.
Conclusion
Therefore, it can be witnessed that Real Estate (Regulation and Development) Act 2016, was required to boost the real estate sector in India; with a standard legislation for the Real estate it will enhance the functioning of the sector and re-establish the faith in the sector. This will not only aid people but also the economy as it contributes around 7% to the GDP of India. The absence of regulatory authority in real estate led to its downfall, and also exploited the home buyers to certain extent. The major problems such as delay in possession, not refunding the advance amount with interest, one-sided terms of agreement are very well addressed in Act. The Act also provides for dispute redressal mechanism and penalties against the offenders. RERA Act has attempted to bring in transparency and stability in the real estate market and it is expected that the Act will facilitate further expansion of the same too.
The article is authored by Rhea Banerjee.
Refer- https://www.myadvo.in/blog/file-a-case-under-rera/
Also Read- https://www.lawgurus.in/how-to-form-a-private-limited-company-in-india/
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