With the launch of the new regulatory body for real estate and passing of the Real Estate Regulation and Development Act (RERA) on May 1, 2017, the real estate market is likely to be transformed. With the lowering of Home Loan interest rates, we should also see renewed interest from buyers.
What is RERA?
This Act seeks to regulate the real estate sector. It stipulates the formation of a regulating authority in each state and union territory and a set of rules which would govern the regulator. The consumer sentiment will improve as this Act has been passed with the objective to make builder-consumer transactions more transparent, thus putting an end to the malpractices of builders and promoters. There would be mandatory disclosure of project details at the time of buying a property.
Here are five things that RERA brings for the homebuyers:
Timely completion of project
Delay in completion of projects happens frequently. We have seen instances of promoters accepting deposits from buyers at the start of a project and then diverting the fund to other projects thus causing delay in completion of the original project. Under RERA, promoters are mandated to hold at least 70% of the amount collected from investors in an escrow account and use it only for construction of the associated project. This would help reduce delays. Plus, developers will be penalised in case of delayed possession.
Higher compliance levels
Under RERA, builders and developers are required to register themselves with the regulating authority. They need a registration number to be able enter the promoter market, accept bookings, and sell or invite home buyers to invest in a project. Every advertisement put up by the promoter must bear the registration number. Following the registration, the promoters have to put up all project-related information on the regulator’s website. Thus, home-buyers can look up for details online before approaching a promoter.
Assurance against quality of construction
Until now builders could get away with using low-grade building materials. In case of damages, the homeowners would have to bear the cost of repairs. Under the new regulations of RERA, the promoters of a project would be held responsible for any kind of structural, quality or workmanship defect for five years after the completion of the project. The promoter is liable to rectify the defects at his own expense.
Assurance of compensation against delays
In case of delay, the promoters are liable to return the entire booking amount and any other payments received from the home buyer. Moreover, the promoters would also have to pay the appropriate interest along with the amount. The rate of interest would be mentioned in the sale agreement. In case the homebuyer does not want to withdraw his investment from the project, the promoter would have to pay interest for each month of delay till possession is actually granted.
A forum for grievances
RERA would serve as a regulator of the real estate industry. Any grievances or redressals of home buyers would be addressed by the regulatory authority.
As the Housing and Urban Poverty Alleviation Minister M. Venkaiah Naidu puts it, RERA would make ‘buyer the king’ and he seems quite right.
(The writer is CEO, BankBazaar.com)