What Is RERA (Real Estate Regulatory Act)
The Real Estate (Regulation and Development) Act is an act passed by the Indian Parliament. The RERA seeks to protect the interests of home buyers and also boost investments in the real estate sector. The Rajya Sabha passes the RERA bill followed by Lok Sabha and then comes into force. Under the ACT, the central and state governments are required to notify their own rules, on the basis of the model rules framed.
For long, home buyers have complained that real estate transactions were lopsided and heavily in favor of the developers. RERA and the government’s model code aim to create a more equitable and fair transaction between the seller and the buyer of properties, especially in the primary market. RERA, it is hoped, will make real estate purchase simpler, by bringing in better accountability and transparency, provided that states do not dilute the provisions and the spirit of the central Act. The Real Estate Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules that will govern the functioning of the regulator.
How will RERA impact buyers?
Some of the important compliances are:
- Informing allottees about any minor addition or alteration.
- Consent of 2/3rd allottees about any other addition or alteration and for transferring majority rights to 3rd
- No launch or advertisement before registration with RERA.
- Sharing information project plan, layout, government approvals, land title status, sub-contractors.
- Increased assertion on the timely completion of projects and delivery to the consumer.
- An increase in the construction due to a defect liability period of five years.
- Formations of RWA within specified time or 3 months after majority of units have been sold.
The most positive aspect of this Act is that it provides a unified legal regimen for the purchase of flats, apartments, etc., and seeks to standardize the practice across the country.
Key highlights of the Act:
- Establishment of the regulatory Authority
- Compulsory registration
- Should have reserve account
- Continual disclosures by promoters
- Title representation
- Standardization of sale agreement
Impact of RERA on real estate industry:
- Initial backlog
- Increased project cost
- Tight liquidity
- Rise in cost of capital
- Increase in project launch time
Initially, a lot work is to be done to get the existing and new project registered. Details such as status of each project executed in last 5years, promoted details, detailed execution plans, etc., needs to be prepared.
With the advent of RERA, specialized forums such as the State Real Estate Regulatory Authority and the Real Estate Appellate Tribunal are established for the resolution of disputes pertaining to home buying. The aggrieved party will have more options than other consumer forums and civil courts on such matters. While the RERA sets the ground work for fast-tracking dispute resolution, the litmus test for its success will depend on the timely setting up of these new dispute resolution bodies.
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