Real estate sector is a vital productive drive for economic growth. The Indian real estate market was highly unorganized and fragmented with several cavities during the early 1990’s. There was no such institution which governed and supported the Indian Real Estate Industry. The industry was grappled with lack of consumer demand, absence of world-class developers, lack of transparency in the market and unavailability of easy financing options. This sector has witnessed tremendous improvements in the era of globalization and liberalization. Business opportunities have improved along with economic fundamentals. This in turn has led to increase in demand for real estate in retail, hospitality, entertainment industry, social and economical infrastructure and IT enabled services. After these developments and the ongoing race in the sector some authority needs to govern as well as support it. Don’t you think so? RERA is the authority today which governs and supports the Real Estate Industry in India.
Establishment and Incorporation of RERA:
The Real Estate (Regulation and Development) Act, 2016 is an Act which seeks to protect home-buyers as well as help boost investments in the real estate industry. The Act establishes theReal Estate Regulating Authority (RERA).Every State Government was to establish within a period of one year from the date of enactment of the Act an Authority to Regulate Real Estate (RERA) to exercise the powers conferred and to perform the functions assigned by the Act. They State/UT Government may establish one or more Real Estate Regulating Authority/Authorities in their respective territory.
Until the establishment of RERA, the State/UT Governments were to designate Regulatory Authority (DDA/GDA/GNDA) or any officer, preferably the Secretary of the Department dealing with Housing, as the Regulating Authority under the Act. The Authority shall have the powers subjected to the provisions of the Act; to acquire, hold and dispose of property both movable or immovable. Contract and shall by the aforesaid name sue or be sued.
RERA seeks to address issues like those of delays, price, quality of construction, title and other changes. Delay is possession is the biggest issue faced by buyers. The reasons for it are many and the impact is huge. The reasons include diversion of funds to other projects, changes in rules and regulations by the authorities involved in infrastructural development and governing transport. Land acquisition is a major issue a lot of times. Errant builders often sell projects to the investors without approving the plans, the unauthorized increase in FAR, bad quality of construction, projects stuck in litigation and many more.
Functions of RERA:
1. To regulate and register the real estate projects and the agents;
2. To maintain a website of records of all registered real estate projects including the information provided in the application;
3. To maintain a database of including the names and photographs of the default promoters and the details of the projects whose registrations have been revoked or are penalized under the Act on the website;
4. Also to maintain a database of name and photographs of registered real estate agents under the Act and those whose registrations are revoked as well.
5. To fix regulations for each region under its jurisdiction, the fees to be levied on the allottee, promoters and the real estate agents.
6. The ensure the compliance of obligations and regulations cast upon allottees, promoters and real estate agents by the Act.
7. To ensure the compliance of regulations/orders/directions made in exercise of the power invested under the Act.
8. To perform all such other functions which are entrusted to the Authority by State/UT Government for carrying out the provisions of the Act.
Powers of RERA:
1. To call for information and conduct investigations into the affairs of any Promoter/ real estate Agent/Allottee and examination of their books of accounts, recors and documents.
2. To have all the powers which are vested in the civil courts under CPC, 1908 during examination of any suit;
3. To issue interim orders during an enquiry to restrain Promoter/real estate Agent/Allottee from doing anything in contravention to the provisions of this Act;
4. Issuing necessary direction time and again to any Promoter/real estate Agent/Allottee for discharging their functions as prescribed by the provisions of this Act;
5. Imposing penalty or interest on any Promoter/real estate Agent/Allottee for the acts done in contravention of this Act.
6. To rectify/amend any of its order within 2 years for any mistake apparent from the record
7. To recover the amount of interest/penalty/compensation from any Promoter/real estate Agent/Allottee as land revenue, who fails to pay them.
Key Provisions under RERA:
1. A minimum 70 percent of the money from investors and buyers will have to be deposited in a separate Escrow account. This money can only be used for the construction of the same project and cost borne towards the land.
2. Developers will have to keep the buyers and prospective buyers on the website of RERA informed about their ongoing projects and other details like submitting the original approved plans for their ongoing projects and the alterations that they made later, furnishing details of revenue collection from the allottes, utilization of those funds, timeline for construction, completion, and delivery which should be certified by an Engineer/Architect/practicing Charted Accountant.
3. In case of structural defect arising after the possession, the regulator will ensure protection of buyers for five years from the date of possession. If any issue is highlighted by the buyers in this period including quality of construction and the provision of services; the developer will have to rectify the same in the period of 30 days.
4. Developers can invite, advertise, sell, offer, market or book any plot, apartment, housing, building, investment in projects, without first registering it with the regulatory authority. However, after registration, all the advertisements inviting investment should possess the unique RERA registration number.
5. If the promoter defaults on delivery within the agreed deadline, he will be required to return the entire money invested by the buyers along with the pre agreed interest rate mentioned in the court 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.
6. The regulator has the power to fine and imprison errant builders based on case by case basis. The imprisonment can be extended for a period of three years for a project.
7. After receiving complaints from a buyer of the house, RERA has to give its decision within 60 days. This includes government agencies engaged in housing construction.
8. Under RERA, residential properties have to be sold as per carpet area and not as per super area as before.
9. Buyers can complain about the registered real estate projects on RERA’s website for that particular state. Complaints can also be made against real estate agents. All the documents related to the complain should be furnished in RERA’S office.
So now after knowing the provisions, functions and powers of do you think RERA is the organization which is governing the real estate industry from the very beginning? That’s not so actually. If we consider the State of Maharashtra; Maharashtra Ownership Flats Act, 1963 (MOFA) was governing the real estate industry till the time RERA was established. There is a huge difference between both the Acts though. Under MOFA deemed conveyance was applicable within six months of notice and under RERA it is applicable within three months of completion certificate of the project if the date isn’t specified in the sale agreement. Defect period under MOFA was three years and under RERA its five. MOFA had very stringent, non practical terms of payment but payment terms under RERA are liberal and practical for both Promoter and Allottee. Interest rate under MOFA was as developer’s discretion but under RERA its not so. It is MCLR plus 2% of SBI Bank Rate. Registration wasn’t required under MOFA but is compulsory under RERA. Just insuring your building was fine under MOF but on the other side you have to insure both building and title. Under earlier Act disclosures were available on the site only, but now they are available both on the site and website. MOFA had imprisonment and nominal fines for offences and penalties but that not the case with RERA. Here there are heavy fines and imprisonment if the rules are not followed by both developer and the allottee. It worked for MOFA if the agents did not register themselves but not for RERA. These are just few differences among the two Acts. The list is quite long!
Fun Fact? Section 3(i),(j), (m)(ii)(iii), Section 4(1A),(a),(vii),(viii),(ix),(x),(b)(ii), Sections 4(2), 5, 9, deemed conveyance provision under Sections 11,12(1), 12(2) of Maharashtra Ownership Flat Act (MOFA), 1963 are still in force.