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10 Ways How Rera Will Delight The Home Buyers - A Fresher Life Beckons At The Hemisphere
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Many projects have seen delays of up to 7 years, while some Projects launched have run into obstacles even before a brick was laid. The reasons include diversion of funds to other projects, changes in regulations by authorities, the environment ministry, national green tribunal etc and other bodies like those involved in infrastructure development and governing transport. In many places, land acquisition becomes an issue. Errant builders often sell projects to investors without the approval of plans, unauthorised increase in FAR, bad quality of construction, projects stuck in litigation etc. With the slow legal process, legal recourse is also out of question for most.
The government has now stepped in with a comprehensive legal – financial framework with a statutory authority that will address and provide swift remedial action even while affixing responsibility for the developers as well as the buyers. The Real Estate (Regulation and Development) Act, 2016 (RERA) will finally set up India’s real estate sector’s first regulator as it came into effect from May 1, 2017. So what is RERA? According to RERA, each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator. The Act seeks to address issues like delays, price, quality of construction, title and other changes.
Before we delve into how it will benefit to the buyers, let us first state the Key provisions of RERA.
Some of these are:
The promoter of a real estate development firm has to maintain a separate escrow account for each of their projects. A minimum 70 per cent of the money from investors and buyers will have to be deposited. This money can only be used for the construction of the project and the cost borne towards the land.
To provide clarity to buyers, developers will have to keep them informed of their other ongoing projects. ERA requires builders to submit the original approved plans for their ongoing projects and the alterations that they made later. They also have to furnish details of revenue collected from allottees, how the funds were utilised, and the timeline for construction, completion, and delivery that will need to be certified by an Engineer/Architect/Practicing Chartered Accountant.
It will be the responsibility of each state regulator to register real estate projects and real estate agents operating in their state under RERA. The details of all registered projects will be put up on a website for public access.
RERA talks about the quality of construction in projects. It will ensure protection to buyers in this matter for five years from the date of possession. If any issue is highlighted during this period, including quality of construction and the provision of services, the developer will have to rectify the same in a matter of 30 days.
Developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. Furthermore, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number. The registration no. will be provided project-wise.
After registering the project, developers will have to furnish details of their financial statements, legal title deed and supporting documents.
If the promoter defaults on delivery within the agreed deadline, they will be required to return the entire money invested by the buyers along with the pre agreed interest rate mentioned in the contract based on the model contract given by RERA. If the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery.
After developers register with the regulator, a page will be created for the builder on the regulatory authority’s website. The developer will be given login credentials using which it will upload all the information regarding the registered projects on the regulator’s website. The number, type of apartments, plots and projects and their completion status will be updated at a maximum quarterly basis.
To add further security to buyers, RERA mandates that developers can’t ask more than 10 per cent of the property’s cost as an advance payment booking amount before actually signing a registered sale agreement.
The regulator will have the power to fine and imprison errant builders based on a case by case basis. The imprisonment can go up to a period of three years for a project.
Let’s look at the benefits that RERA for home buyers as a point by point rebuttal of the existing situation:
EXISTING CONCERNS FOR HOME BUYERS BEFORE RERA:
* Property builders advertised and sold properties based on ambiguous Super Built Up Area. A lot of home buyers ended up spending more but actually deriving lesser benefits and useful space.
* Home buyers had to pay a booking charge to block their investment in an apartment and later pay the total purchase consideration in one go or in installments without even knowing that how and where their funds were being utilized.
* Home buyers did not have a point of contact to check the progress of the project invested in.
* Home buyers had no mechanism to know the credibility of the project and had to merely rely on the brand of the property developer or promises made by the property developer.
* There was no redressal mechanism for either delay in obtaining occupancy certificates/possession or for the realization of sub-standard development in the future.
How RERA has taken care of the above issues:
1. A property has to be sold based on carpet area only (selling of property based on super built up area is prohibited under RERA). To avoid confusion and tweaking at the end of property developers, RERA has specifically defined ‘carpet area’ to mean Net Usable Floor Area of an apartment which includes area covered by the internal walls and excludes the area covered by the external walls, areas under service shafts, exclusive balconies, verandas or open terrace areas. This will give an assurance to home buyers that they will pay for the actual space that they are getting.
2. Property developers will have to park 70 per cent of the total consideration received in a separate escrow bank account. The mentioned amount can be withdrawn only for the purpose of cost of land and cost of construction in the specific project. The amount can only be withdrawn in proportion to the percentage of completion of the project. Further, the withdrawal can be made only after obtaining requisite certificates from an Architect, an Engineer and a Chartered Accountant in practice. This will give an assurance to home buyers that their money is being invested specifically in the project and not used for any other purpose, thereby, guaranteeing the quality of development.
3. It has been made mandatory for the property developers to maintain a website and provide details of the registration granted by RERA, quarterly updates on number and type of apartments or plots booked, approvals granted, the status of the project, etc. This will ensure that the home buyers are updated on each and every aspect of the development and are no longer duped by the developers.
Further, RERA has protected the interest of home buyers in the following ways:
4. Property developer is liable for compensating the home buyer for any loss or damage caused due to incorrect/false statement made in the prospectus or notice of advertisement or in relation to the model apartment.
5. Property developer is prohibited from taking more than 10 per cent as advance from the allottees without entering into a written agreement for sale.
6. Interest payable by the property developer and the allottees in case of default to be specifically mentioned in the agreement for sale. Also, the interest rate is to be as per rates prescribed which is being bench marked based on SBI prime lending rate.
7. Any structural alteration/addition to the sanctioned plan to be made only after obtaining a written consent of at least 2/3rd of the allottees (other than the developer). Moreover, the developer will now be responsible for fixing structural defects in the property for five years after transferring the property to the allottees. Also, such repair work needs to be completed in a prompt manner within 30 days of receipt of written complaint from the allottees.
8. Transfer of real estate projects to third parties would now require written consent of 2/3rd of the allottees and RERA.
9. Any failure on the part of the property developer to hand over the possession of the property in accordance with the agreement for sale would empower the allottees, at their will, to withdraw from the project and demand refund of the amount paid along with prescribed interest. Any loss caused due to defective title would have to be compensated by the developer.
10. Last but not least, non-compliance of provisions of RERA will attract a penalty or / and imprisonment up to a maximum of three years.
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