RERA: Key Features, Objective and Benefits

by Godrej Properties Limited

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The Real Estate Regulatory Authority (RERA) Act of 2016 is a landmark legislation passed by the Indian government to regulate the real estate market and protect homebuyers’ interests. Several reforms have been enacted under the RERA Act to bring transparency and hold developers accountable for delays and discrepancies in real estate projects. Let’s look at some of the highlights of RERA.

Real Estate (Regulation and Development) Act, 2016 (RERA)

Reasons for Enacting RERA, 2016

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced in India to address critical issues in the real estate sector:

  • Enhanced Accountability: RERA aimed to boost accountability among developers and promoters, prioritising consumer protection.
  • Combatting Frauds and Delays: Fraudulent practices and project delays were widespread concerns RERA sought to mitigate, instilling confidence in homebuyers.
  • Reducing Transaction Costs: RERA aimed to streamline high transaction costs associated with property transactions, making them more affordable.
  • Balancing Interests: The Act sought to balance consumer and promoter interests through clear obligations for both parties.
  • Transparency: RERA introduced transparency by ensuring clear and fair contractual conditions, reducing disputes and increasing consumer trust.
  • Setting Standards: Minimum accountability standards were set for developers and promoters, ensuring compliance with norms and timelines.
  • Fast Dispute Resolution: RERA established a speedy dispute resolution mechanism, resolving conflicts on time.
  • Professionalism: The Act promoted professionalism and standardisation, increasing industry credibility.
  • Encouraging Growth: RERA facilitated growth and investment in the real estate sector by instilling confidence.

Benefits of the RERA Act, 2016

The RERA Act brought significant advantages to India's real estate sector:

  • Statutory Regulation

It enforced statutory regulation on real estate projects, ensuring adherence to guidelines and timelines.

  • Completion Assurance

Buyers gained assurance of project completion, reducing the risk of investing in delayed or abandoned projects.

  • Statutory Obligations

Developers and buyers had statutory obligations, emphasising compliance with legal mandates.

  • Access to Funds

RERA approval made projects more appealing to financial institutions, granting developers easier access to funds.

  • Buyer Satisfaction

RERA-approved projects offered transparency, adhered to timelines, and complied with regulations, resulting in higher buyer satisfaction.

  • Beneficial for All

The positive impact of RERA extended to developers, real estate agents, and buyers, benefiting the entire real estate ecosystem.

What are the Objectives of RERA?

  • Agent Registrations: As per RERA, all real estate agents assisting with the purchase or sale of apartments, plots, or any property registered under RERA must be registered with the regulatory authority. This ensures a standard code of conduct amongst agents, thus safeguarding homebuyers’ interests.
  • Regulation of the Real Estate Sector: RERA ensures transparency in project development and execution by mandating that all projects be registered with the regulator. Developers cannot market, advertise or sell units in an unregistered property. Every phase of construction has to be registered as a standalone project.
  • Mandatory Project Disclosures: Developers must update all project details on the RERA website. This includes promoter details, project plans, schedule, and layout, approvals received or pending, and the completion timeline. Homebuyers can thus make informed decisions and the developer is not allowed to deviate from the registered plans without the consent of two-thirds of the homebuyers.
  • Carpet Area Definition: Among the many RERA project details regulated under the Act, carpet area is clearly defined. The RERA-approved meaning of carpet area refers to the usable floor area within the walls of the apartment or unit and excludes corridors, external walls, service elevators, and balconies.
  • Escrow Account: As per RERA, all developers must deposit 70% of the money received from homebuyers into a separate escrow account. This fund is to be utilised only for project development and cannot be diverted for any other purpose.
  • Quality Standards: Under RERA, the developer is liable for any defects in the project and must rectify them within the stipulated timeframe. Thus RERA enforces quality standards in real estate projects.
  • Grievance Redressal: Every Indian state has a RERA authority to address homebuyers’ complaints and grievances. If a homebuyer is dissatisfied with the decision, they can appeal it first with the RERA Appellate Tribunal and then approach the High Court.

RERA benefits homebuyers by protecting their interests while simultaneously providing an efficient regulatory framework for developers that ensures the timely delivery of projects and promotes accountability and transparency.

 

Frequently asked questions

1. What is the RERA Act's full form? Is it applicable to commercial property as well?

Ans. RERA's long form is Real Estate Regulatory Authority (RERA) Act. RERA registration is mandatory for residential and commercial real estate.

2. Do I have to pay for parking in a RERA-Registered Project?

Ans. Covered parking and garages are permitted to be sold under RERA. However, open parking comes under the RERA meaning ‘common areas’, and is hence not permissible.

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