Benefits of RERA to Homebuyers, Government, and Builders

Introduction:

RERA or Real Estate Regulatory Authority Act was passed in 2017 with a motive of providing the homebuyers, government, and builders a transparent selling and buying of real estate properties. Before RERA came into existence, there was an excessive commitment of frauds by the developers in the real estate projects, along with delays, miss-selling, and the losses were suffered by the homebuyers. The consumer protection act was the only remedy providing statute before the year 2016 when RERA was brought into attention in the parliament and the union ministry of housing and urban poverty alleviation. It is mandatory for the builders and developers to adhere to RERA regulations before they start the project, starting with registering the project under the RERA act.

The main aim of bringing RERA into the picture was to establish a regulatory body, who can ensure the sale of any real estate in a very efficient and transparent manner along with protecting the interest of the consumers by adjudicating a speedy dispute redressal under the directions and orders of the real-estate regulatory authority. RERA has the responsibility to deal with delays, quality of construction, and price of the properties. Builders used to sell the property to investors without taking approvals of plans. RERA makes the builders and sellers accountable and responsible. RERA adheres to provisions that provide clarity to buyers and builders as well. The properties registered under RERA should be above 500 square meters.

All the real estate projects and agents are to be registered by the state regulator under RERA, and details about all the real estate projects are to be put up on a website, open for public use. After they are registered, a page is created for each builder or developer on the authority website who is regulating the matter, they will be provided with login credentials through which the developers can upload the relevant information regarding the projects.

The builders cannot buy, sell, advertise, or book any real estate property, without registering it with the authority in charge. After registration, the advertisement of properties is provided with a RERA registration number, project-wise. The developers are subject to fines and imprisonment on case to case basis if they go beyond the RERA guidelines.

Benefits to Homebuyers

There are maximum benefits provided to the homebuyers under the RERA act, few of which are as follows:

1. Leisure and access to details of the seller and his credibility: One of the benefits of RERA is that before investing in a real estate property. The buyer will have access to the work profile of the builder, which will contain all the details regarding him and his projects. Section 3 ¹ of the act asks the builders to register the properties before putting them out for advertisement. Section 4 ² mentions the required details for the registrations, such as details of the promotor’s enterprise, plans related projects launched by him in the past 5 years, sanctioned and layout plan of the proposed project, the carpet area of the apartments, etc. Buyers have now access to these details by logging in to the RERA website of the respective state and can gain more transparency.
2. Fewer chances of fraud: Under section 7 ³ of the acts, if the builder is found to be committing any unfair and fraudulent practices, the competent authority has the power to revoke the registration of such a person. Which provides safety to the homebuyers from falling into the trap of bogus builders.
3. Mention of carpet area: The definition of carpet area ⁴ is also mentioned in the act, which is calculated with the help of standard formula brought in practice post-RERA. Otherwise, the carpet area used to be manipulated by the builders, because it increases the cost of the property.
4. No advance before sale agreement and cap on advance: Section 13 ⁵ of the Act lays down that the promoters cannot take advance from the homebuyers before entering into a sale agreement, after entering into a sale agreement the homebuyers cannot be asked to pay more than 10% of the advance (10% of Cost of property).Previously the homebuyers had to pay according to the demand of the builders.
5. No Manipulation of money of homebuyers: Section 4 (2)(i)(d) ⁶ of the act, makes sure that they are no manipulation of money of the consumer, by making it compulsory for the builders to open an escrow account and deposit 70% of the amount received from the buyers for that project in that project-specific account. Which can be used specifically for projects thereto.
6. Right to compensation: Section 18 ⁷ talks about such a benefit provided to the buyers, if the promoter by any means fails to complete the project within the given time or due to his discontinuance from the business, the buyer can claim for compensation.
7. Claim for a defect after possession: Under section 14 (3) ⁸ of the act, if any structural or general defect appears to the buyer in the property within 5 years from the date of possession, such defects are to be repaired by the builder within 30 days of the defects detected, free of cost.
8. Delay in completion of the project: Under section 18(1) of the act, if the builders are not able to complete the project on time, and the buyers want to withdraw the project then the builders are subject to compensation along with the interest as prescribed by the act. But if the buyers do not want to withdraw from the project, the promoter is liable to pay interest for every month of delay, till the possession is transferred to buyers.
9. Defect of title: Under section 18(2), If there is a defect in the title of the property, the buyer can claim compensation from the builders, which will not be barred by the limitation provided by any law prevalent at that time.
10. Grievance Redressal: Chapter 5, 6, 7 of the acts lays down, all the bodies comprised to take care of the grievances of the buyers. Now the aggrieved can approach the state authority set up under the RERA act. If the aggrieved is not satisfied with the decision of the state authority, they can file an appeal to the appellate tribunals. It has given rest to the time-consuming legal framework.

Benefits to Builders

1. Confidence of buyers: Now the builders are more likely to win the confidence of the buyers Because they can refer to their profile on the RERA website and confirm the credibility under section 5 of the act.
2. No question on certification of authenticity: Now only the builders who are registered under the RERA act can be in the field, and the certificate is only granted to the genuine builders. If any builder is found at fault of malpractices, his certificate is subject to revocation under section 7 of the act.
3. Timely payments by the buyer:  The buyers are responsible for making payments to the builders according to the agreement, if they don’t, they will be liable to pay interest as prescribed by the Act under section 19(6) of the act.
4. Timely possession of the property by the buyer: The buyers should take possession of the property within 2 months of receiving an occupancy certificate, they cannot hold builders liable for any delays on their part.
5. Active grievance redressal system: After the RERA act the builders do not have to deal with the government directly. Their disputes are settled by the regulatory authorities under the act.

Benefits to Government

1. The government does not have to directly deal with the real estate sector, RERA can do it on its behalf, by organizing the sector by laying down rules and regulations. This provides the government with a genuine database of the real estate sector economy.
2. With the help of RERA, the government has records of revenue generation from the real estate industry. Which is very informative for the government to make future budgetary policies.
3. The real estate sector is a great contributor in the GDP, the regulation of this sector will reduce the corrupt practices leading to less revenue loss to the country.
4. The Government is highly benefitted by this act because the real estate sector acquires a lot of labor, which leads to employment opportunities.
5. The real-estate regulation is a boost to the housing revolution, which is a prevalent need of our country.

Landmark Judgements

Lavasa Corporation Ltd. Hicon vs Manju Narendra Joshi Of Mumbai ⁹

Facts: The respondents invested in a property, the agreement of lease came to be executed by them in the year 2014, 2013, 2010. As per the agreement, the respondents booked the apartments based on lease under the township scheme of the appellant. They paid 80% of the sale price. The project was supposed to complete in 24 months but there was no response for 6-7 years. Later the Appellant got registered with RERA, which lead the Respondents to approach “adjudicating authority” under section 18 of the RERA Act, for compensation.

Issue: appellant challenged the applicability of RERA to the “agreements of lease”, contending that these agreements are excluded from the ambit of RERA?

Judgment: The court held that it does fall under the jurisdiction of RERA.

Bindu R Jaisingh v.Ekta Parksville Homes Pvt. Ltd. ¹⁰

Facts: In this case, the complainant was a buyer who was promised to receive possession of the flat by a stipulated time. But the buyer faced a delay, which made him file a complaint. The respondents pleaded for time saying that the delay was beyond their control.

Issue: Delay in possession of the property.

Judgment: The authority ordered the parties to register the sale agreement after 45 days of an order under section 13 of the RERA act. And the respondent was asked to give complete possession of the property before June 2019, failing to do so, he will have to pay interest from July 1, 2019, under the MahaRERA act.

Conclusion

RERA has considerably benefitted the homebuyers, builders, and government. It is an act that has acted in favor of all. It is a very significant step towards eliminating bogus builders and avoiding corrupt practices that hinder the trust of the investors. Many states have their regulatory practices in compliance with the act. Gujarat and Maharashtra are the most RERA favoring states. According to a survey in December 2018, several projects registered under RERA were around 35,000.

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References:

1. Prior registration of real estate project with Real Estate Regulatory Authority.
2. Application for registration of real estate projects
3. Revocation of Registration
4. “Carpet area” means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area, and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
5. No deposit or advance to be taken by the promoter without first entering into agreement for sale
6. That seventy percent. of the amounts realized for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose
7. Return of amount and compensation.
8. In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter’s failure to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under this Act.
9. August 7, 2018, available at https://indiankanoon.org/doc/74678429/
10. 2018/MH/Centrik/44/MAHARERA