How does RERA help you in your homebuying journey?

In 2016, the government made a landmark decision by introducing the Real Estate Regulatory Authority (RERA), paving the way for transparency and a huge positive change in how the real estate sector operated. The Real Estate (Regulation and Development) Act, 2016, was implemented to regulate the real estate sector and protect home buyers’ interests by addressing their issues. Prior to this, the industry was majorly unorganised with fragmented regulations, which resulted in several challenges for the end-users, such as project delays by the developers, fraudulent activities, black money in the sector, etc.

Real estate is seen as one of the most secure, long-term investment options in India. More importantly, with a regulatory authority to oversee the sector and business transactions, it boosts the confidence of buyers and investors, fostering trust between them and the builders.  

In this article, we explain some of the key roles that RERA plays in supporting homebuyers in India, including first-time buyers.

How does RERA help buyers during property purchase?

RERA helps a homebuyer in many ways, especially during the property buying phase. It lays down guidelines that developers must follow.

Access to project information

RERA provides homebuyers with the right to get real-time information regarding residential projects.  They can get access to the complete details of projects by visiting the official RERA website in their state. According to the RERA laws, developers must disclose project details, including the timeline, permissions, project status, etc. This ensures transparency in the system and enables homebuyers to make an informed decision regarding their investment.

Standardisation of carpet area

Before the implementation of RERA, the method by which developers calculated the project price was not clearly defined. Earlier, developers used to charge for the built-up and super-built-up areas. This means if the buyer paid for super built-up area of 1,300 square foot (Sqft), they would only be able to use the carpet area of around 900 to 1,000 sqft. Selling properties based on super built-up area is not allowed.

However, RERA has defined a standard formula used to calculate carpet area. Builders are now required to compute property cost as follows: Cost of property = Carpet area x rate per sqft

Developers across India can sell properties based on the carpet area standardised by RERA. They cannot charge buyers for the super built-up area, which encompasses an area covered by external walls, including an elevator, staircase, balcony, hallway, and other common spaces.

With this rule, promoters cannot provide inflated carpet areas to increase prices, thus safeguarding the homebuyers’ interests and eliminating confusion over calculating costs.

Check on project delays by developers

Before RERA, several developers often defaulted on the project delivery, leaving home buyers waiting several years to get possession. This led to mistrust among the buyers. However, one of the most significant changes observed after implementing the RERA Act was the strict enforcement of project delivery timelines. Developers must communicate the project delivery date and adhere to the specified project deadline or face action from the authority, including heavy compensation to the home buyers.

Check on false promotions

Before the implementation of RERA, many developers made false commitments and offers when promoting their projects. Such false advertisements would mislead buyers and pose problems for them. However, under RERA, projects cannot be advertised without the RERA registration number clearly displayed on the website. The developer must mention all the relevant information on its marketing collateral, and the official website must be updated from time to time on the project status.

Also, a QR code of the project must be used on all projects. All the promotions or advertisements by the developers must be completely honest without any false commitments. Otherwise, the authority will send a notice to the developer.

Establishing escrow account

According to RERA, builders are required to put a specified percentage of funds for property development in the escrow account. This way, the authority ensures that funds are utilised only for their intended purpose during property development, preventing diversion. Further, it gives the homebuyers a sense of security by reducing project delays or additional costs incurred by the developers. Further, in case developers violate the rule, they may face action, including freezing the bank account.

Accountability of builders for any construction defect

In the absence of a regulatory authority, buyers would often have to deal with quality issues, and the lack of accountability created challenges for end users. However, the RERA laws keep a check on such issues, thus protecting the buyers. Any structural defect taking place on the property for up to five years from the date of handing over possession must be repaired by the developer, according to the RERA laws. It will be the duty of the promoter to rectify such defects within 30 days without further charge.

Right to refund in case of false promises

In case the developer fails to meet the commitments on the project, buyers have the right to withdraw from the project. Moreover, a buyer can receive a complete refund of the amount paid in advance. If the buyer wants to continue with the project till its completion, they will be entitled to compensation along with interest payable from the due date of completion until the project is completed.

Rules on advance payment

Advance payments in real estate transactions are quite common. However, before RERA, there was no proper regulation to keep a tab on the amount of money builders asked from homebuyers. Builders cannot ask for more than 10% of the cost of the property as advance or application fees, as the case may be, before entering into the sale agreement.

Disclosures to be made

Developers should make several disclosures under RERA, which protects buyers’ interests and ensures transparency. These disclosures are related to project registration, complete project information, financial details, etc.  Moreover, RERA mandates that developers must disclose details about ongoing litigations connected to projects in recent years on the official website. This will ensure transparency with such details available to potential buyers who can make an informed decision on investment in the project.

How does RERA help buyers after they buy a property?

RERA has laid out regulations that protect homebuyers after they invest in a property.

Compensation for defects in construction after possession

If a homebuyer finds any structural defect or any defect in workmanship, quality, provision or service related to the property within five years after the possession of the house, such defect will be rectified by the builder without any extra charges within 30 days. In case the builder fails to do so, the buyer will be allowed to claim compensation for the same.

Protection against unauthorised structural changes

According to RERA, developers cannot make any changes, alterations or modifications to the property plan/ layout and specifications without obtaining official consent from homebuyers. The buyers have the right to know about any possible change by the developer and to prevent changes that might impact the value or functionality of the property.

Resolution of grievances and disputes

The RERA has set up a grievance redressal mechanism to resolve homebuyers’ issues. A buyer can register a complaint against developers for non-compliance or for causing financial or emotional distress. The authority appoints a dedicated body of adjudicating officers and appellate tribunals who work to provide quick resolution to these complaints. This is a crucial function of the RERA, which helps develop trust among property buyers and safeguards their rights.

RERA helps enhance the efficiency of developers and agents

The RERA works towards not only protecting the buyers’ interests but also supporting developers and agents and enhancing their efficiency. It lays down regulations to streamline how businesses take place in the sector and encourages fair practices. This paves the way for increased efficiency in operations. Builders get access to organised funding through the escrow account, which encourages financial discipline. Through stricter laws on project completion and false promotions, builders become more accountable and get an edge over competitors who engage in fraudulent practices.

As a result, this positively impacts the industry and builds confidence among buyers and investors. RERA laws govern the standardisation and quality of construction and regulate how projects are promoted. Apart from making the promoters accountable for the timely completion of projects and ensuring high construction standards, RERA plays a key role in overseeing real estate agents or brokers. According to RERA, real estate agents must register themselves with the authority. Like developers, they must comply with the RERA laws.

With a regulatory authority in place, developers and realtors have greater accountability towards the consumers. In the past, the industry has seen many builders going into insolvency. This caused challenges for buyers who had invested in the project by these builders. One of the key benefits of RERA is the reduced risk of insolvency of the builders.

Most promoters develop multiple projects at the same time. Earlier, they were allowed to move funds raised from one project to that of another. With RERA, 70% of the funds raised must be deposited in a separate bank account. This helps in the timely completion of projects, ultimately benefiting the buyers.

Housing.com News Viewpoint

The introduction of RERA has brought about a positive change in India’s real estate sector. With every state having its own regulator, buyers looking to invest in a property have become confident that their rights will be protected. There are laws to ensure their money remains safe, and there is transparency in how it will be utilised. Moreover, RERA provides a mechanism to address their grievances in a prompt manner. The real estate sector has seen positive developments in recent years due to the presence of the regulatory authority. It has attracted more people to the sector looking for a safe investment option.

According to some experts, it has been eight years since RERA was introduced, but there is still a long way to go before all the challenges are addressed and improvements are seen. There are certain loopholes that builders continue to exploit and many cases are pending with RERA and other courts. Some builders do not comply with the orders, which further adds to distress among buyers. Many industry players believe that key amendments to existing regulations and efforts to speed up processes must be made so that buyers’ interests can be safeguarded.

Click to read our article on RERA with useful information on RERA in different states

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