Have you already bought your home or you have booked a flat but did not get the possession? The Real Estate Regulatory Authority (RERA) act will smooth your job. An act has come to the most unregulated sector in India i.e. real estate. Builders are playing with the customers from fixing of booking amount to late delivery on every step of buying a home.
A Regulatory Authority comes into real estate sector from May 1, 2017. Every state and Union Territories has their own regulatory authority to frame rules and regulations according to the act. After extending the benefits of Pradhan Mantri Awas Yojana scheme to buyers, it is also a significant step taken by the Government of India for the housing sector.
We will see how the buyers will be benefited from this real estate bill:
1. Key Facts of RERA
RERA covers all the ongoing projects and the projects which have not got the completion certificate before May 1, 2017. And obviously, it is applicable for new launches. In this act, a builder has to register the property before its selling and advertising. If the property is not registered, the developer may have to pay a fine of 10% of overall estimated project cost.
Only the projects with less than 500 SQ meters of plot area or total eight apartments including all phases are exempted from registration to the real estate regulation.
Now, home buyers are going to consumer court, if they have any issue with the developer. Consumer courts are already piled up with a large number of other cases also which delays the judgment. Home buyers will go to RERA for any dispute with builders. If they are not happy with the decision of RERA, they can move to Appellate Tribunal against the decision.
The builders are now cannot demand more than 10% of the project cost as advance. Some builders demand huge pay as advance and delay the whole process after that. The customers need to follow up the builders regularly. Now, the customers pay maximum 10% of the project cost as an advance or without an agreement. Builders need to do agreement for before proceeding for any further payment.
As the builders need to register the property with the RERA first, they cannot sell the property before sanction of all the documents from Government authorities. The sale of pre-launch property shall also become difficult for builders.
3. Late Delivery of Project:
Late delivery of projects is the biggest problem in the real estate sector. Now, the act has a rule that says developers need to open a separate account for the project which will hold 70% of the amount collected from buyers of the project. This money will be used only for the construction of the said property. The money cannot be routed to any other purpose or other projects of the developer. And also the account is to be audited in every six months.
If the projects get delayed, the builders have to return the money to the customer with interest as agreed on the sale agreement within 60 days. If the buyer does not want to take the money and remains interested in buying with the flat, shall be paid the price of every month’s delay of the project.
4. Carpet Area:
Builders are selling flat on the basis of super built-up area. The Super built area is the addition of carpet area, wall area, and common area. It is very difficult to measure the wall and common area for each apartment. Hence, the builders are loading the carpet area by 25% to 35% as they feel and do the pricing accordingly. There is no proper validation of the margin on the carpet area to arrive at the super built up area. Now RERA defines that the pricing should be based on carpet area only. The builders will have to show the carpet area more to sell a project by proper engineering.
There is no proper validation of the margin on the carpet area to arrive at the super built up area. Now RERA defines that the pricing should be based on carpet area only. The builders will have to show the carpet area more to sell a project by proper engineering.
5. Registration of Projects:
The builders will have to register their projects with the authority. They have to submit the plans, copy of the legal deed, financial statement etc. Then they will have a registration number. After the registration, the builder shall have a login id and password to upload the project details on the website. The developers need to update the booking status, construction status etc. quarterly in the website. This will ensure that the buyers shall have proper information right away every time they need it.
6. Quality of Construction:
Under this act, builders need to pay a special attention to the quality of the construction too. Builders need to give a protection of 5 years after the date of possession on the structural stability, workmanship, quality or services which were committed by the builder during the agreement. The builders need to rectify the issue within 30 days from the complaint issue date.
Will Prices of the Real Estate be reduced?
The biggest question among the buyers’ mind is that whether the price of the residential apartments will go down or not? Even if there are huge unsold flats, reduction of interest rates, no new demands, the prices of the flats are not going down. Moreover, the introduction of GST has also impacted the buyers and now they are waiting for changes to happen.
In some cases, the builders are luring the customers by giving some freebies which are not very substantial compared to the price. Some of the experts think that building prices will not go down as the builders are now more regulated and they are having no headroom available to adjust the costs. Other experts think that transparency amongst the builders will reduce the cost marginally.
The actual market corrections will happen after few months of application of RERA. Then only we will know the actual effect of RERA on the prices of real estate.
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