RERA - Provisions, Benefits & Penalties

With the implementation of RERA (Real Estate Regulation Act) the Govt has tried to address the loop holes and bringing Real Estate Sector under a regulatory frame work.

Real Estate is the largest contributor to the Economy of our country. Last few years have been very difficult for the Real Estate Sector specially for Innocent Home Buyers. The Real Estate market had been a speculative & an unregulated market so far. The Lack of regulations and regulatory and contractual non compliances and beaches by Developers have caused tremendous hardship, losses and damages to home buyers. Lack of proper regulatiry frame work and appropriate redressal mechanism lead to exploitation of home buyers by the builders and real estate agents.

The trust deficit between property buyers builders & Real Estate Agents coupled with largescale non compliance of contractual, regulatory and legal Provisions by builders leading to non-completion of projects and or handing over of possession with poor quality of built has caused much hardship to the home buyers and as such the real estate industry.

Lack of transparency in dealing by Builders and real Estate Agents was causing lopsided transaction mostly in favour of the builders resulting into immense hardship for the buyers.

With the implementation of RERA the Govt has tried to address the loop holes and bringing Real Estate Sector under a regulatory frame work.

The Government introduced the Real Estate Regulation Act 2016 vide the RERA Bill in March 2016 as an effort to regulate equitable and fair dealings and transactions between the buyers and the developers and also the Real Estate Agents.

OBJECTIVES OF RERA

RERA was enacted to safeguard the interests of homebuyers and bring back the confidence in the sector thereby increasing flow investments in the Real Estate Industry.

The main objective of RERA was to put forth laws that compel builders to complete projects according to the time schedules promised and handover possession, it was also introduced so as to create a system of complete transparency to rebuild the trust between buyers and builders.

RERA also serves the purpose of establishing the rules of fair play by enforcing rights & obligations on both sides i.e., Buyers & Builders ( Real Estate Agents Included) on the principles of Equity & Fairness.

RERA now brings in a legal frame Work of strict adherence and compliance equally by both the Buyers & builders and developers but more particularly the Builders & Real Estate Agents who usually had the advantage of the one sided agreement with restrictive trade practices and no accountability.

RERA now provides various provisions such as timely completion and delivery of projects to the buyers and making the information of the project plan, layout, government approvals, land title status, and sub-contractors available, consent of two-thirds of the allottees on any alteration or addition in the project, and other such provisions. These provisions were made applicable through the drafting of various rules and regulations under the act making it compulsory for every builder and developer to register their projects with RERA. Most of the states have established their own RERA offices where they work under the established rules and regulations.

RERA also has provisions that enable builders to enforce their rights more specifcally with relation to timely payments while ensuring timely completion of projects along with all facilities and amenities promised at the point of sale.

IMPORTANCE OF RERA

Prior to the introduction and enactment of RERA there were no strict rules and regulations binding builders and real estate developers to handover timely possession of units to the homebuyers. This ultimately used to cause unnecessary monetary over burdening of homebuyers by putting them in a situation where they were under the compulsion to make various payments such as rental of residence, loan premiums and in addition adhere to the builder’s payment plans. Earlier the builders used to divert the funds from one project so as to commence the construction of another project which was one of the native causes of delayed completion of projects. With RERA the developers are required to keep 70% of the funds collected from potential homebuyers in a separate to ensure the availability of funds for timely construction. RERA has enabled a large number of buyers to initiate litigation proceedings and dispute redressal under the State RERA’s instead of going to other authorities and Civil courts inclidng Consumer Forums for resolutions, because of the success rate of cases and the concrete judgements being passed by the RERA authorities.

RERA provides for much faster resolution of disputes it is also helping by reducing the burden on the other Judicial bodies like the Consumer Forum’s and other civil courts.

BENEFITS OF RERA

Relevant documents: Section 11 of RERA compels the builders to make all relevant documents relating to construction, government approvals and land ownership to be made available to the public. These documents were earlier not provided by the developers to the buyers and were most often not available with them and these facts were hidden by the developers.

Procurement of Documents & Permissions : The builder has the onus of obtaining the completion certificate/occupation certificate from the competent authority and to make available to the allottees. If the land is on a leasehold, the builder shall be responsible to obtain a lease certificate. The builder also has the responsibility of providing and maintaining essential services till the taking over of the project by the allottees.

Adherence to Sanction Plans: RERA made it mandator for the developers to adhere to the plans that were sanctioned and approved by the appropriate authorities and the projects were to be completed on that basis. Any alteration or changes in the plans need approval prior to their implementation.

Information in Ads and Prospectus: A buyer usually purchases a property after doing his due diligence but most often buyers come across the projects in advertisements and prospectus’. RERA has makes it compulsory that if any information provided in such ad or prospectus is false and the buyers incurs any loss due to it, the builder is bound to compensate for the same.

Advance Payments: As per RERA no promoter or builder can not accept more than 10% of the cost of the unit so potentially going to be purchased as an advance deposit from the buyer until there is a formal written agreement signed between both the parties.

Booking & Launch: The Builders are obliged to seek all necessray approvals along with RERA registration for both bUilder & project before inviting application for booking or even launching the project. Any violation can attract severe action under the Provisions of RERA.

PENALTIES UNDER RERA

RERA gives explicit and specific penalties for offences by promoters, real estate agents, builders and other parties who are involved under the ambit of this act:

• For non-registration of the project with the RERA Authority: 10% of the total estimated cost of the project.

• Where a project has not been registered and any order or direction for the same has been issued by the authorities: Up to 3 years of imprisonment with or without fine of 10% of the estimated cost of the project

• Where information or advertisement regarding the project is found to be false: 5% of the estimated cost of the project

• Where an order of the RERA has been contravened or has not been executed: Daily penalty for every day after passing of the order which has been contravened up to 5% of the estimated cost of the project

• Where an order of the Appellate Tribunal has been contravened: Up to 3 years imprisonment with or without fine of upto 5% of the estimated cost of the project

Some Areas of improvement Required: ( Rakshit We need to Also Include this)

CONCLUSION

While there are some grey areas such as the enforcement of the Judgements by RERA along with other concerns which will get addressed over the period with more cases being adjudicated by RERA.

The introduction of RERA has proved to be a boon for homebuyers. RERA has provided homebuyers with a scope of healthy and safe investment with providing them a platform to approach with any dispute between them and the builders. It has provided the buyers with the necessary transparency and also given a greater importance to the safety of their investment.

Prepared by

Rakshit Patni

Student BBA LLB 4th Year

Amity Law School Noida.

Under Guidance

Manish Kumar Patni

BSC

LLB

Legal Consultant & Strategist