RERA Act: Here Are the Benefits That Will Empower Homebuyers
Will the real estate act ensure transparency in land deals?
“We have been discussing about some regulation in real estate for the last 11 years because all the buyers across the country are not getting adequate redressal system as per the previous arrangement,” said Minister of Urban Development and Housing, Venkaiah Naidu initiating the debate on the Real Estate (Regulation and Development) Bill, 2016 in the Lok Sabha, in May 2016.
One year later, the Act – popularly known as Real Estate (Regulation and Development) RERA – has finally come into effect, and experts say it will help consumers breathe easy and bring back confidence in the sector. It is also expected to ensure timely completion of the project.
No more will unscrupulous smaller builders or even larger organised developers be able to take buyers for a ride.Anuj Puri, Chairman, JLL (Residential)
It will not only help revive end-user sentiment, but help open up the Indian housing sector to foreign investments, he added.
Will RERA Ensure Transparency?
A builder has to set aside 70 percent of the funds received from the sale of a particular project in an escrow account, which can be used only for that construction site, under RERA.
This rule will ensure timely delivery and also help avoid the possibility of the developer defaulting on the project, said Gulam Zia, Executive Director – advisory, retail, and hospitality – at Knight Frank India.
“The biggest concern that a homebuyer always had was delay in getting possession, which will now be taken care of,” he added.
Builders will no longer be able to collect funds for one project and invest in another, a practice said to be followed by many developers. The law mandates the builder to declare details of the project, including cost, or lien on the project, land clearances, status, and so on.
“This will increase the confidence of homebuyers and ensure if there is any wrongdoing by the developer, there will be an addressal mechanism through RERA court or consumer forum,” said Sanjay Dutt, chief executive officer of India operations and private funds, Ascendas Singbridge.
Will a Buyer Also Pay for Super Built-up Area?
The prevalent practice of builders charging on super built-up area, including the terrace and common spaces, will also have to stop, with the law making it clear that prices have to be based only on the carpet area of the apartment (floor space within the walls).
“This translates to actual usable area – and not the far more ambiguous built-up area basis as was the norm before,” said Puri.
Will the Builders Deliver as Promised?
Builders are also barred from changing the development plan mid-way through a project, without the consent of the homebuyers. In other words, amenities promised by the builder at the time of sale have to be ready at the time of possession.
Penalty for Delaying Payments, Projects?
The most important safeguard according to Gulam Zia is the new rule of agreement, which lays down clear guidelines for any change in the delivery timeline. Earlier, in case a buyer defaulted on an instalment, the penalty was at least 24 percent, whereas the developer payed hardly 8-9 percent interest if there was a delay in completing the project, he added.
Those contracts (created by developers) were absolutely one-sided and the buyer had no alternative but to sign on the dotted line without discussing or debating clauses. But now a model code of sale has been put in place.Gulam Zia, Executive Director – Advisory, Retail, and Hospitality, Knight Frank India
The article was originally published on BloombergQuint.
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