The real estate industry in India has seen significant reforms, with one of the most impactful being the introduction of the Real Estate (Regulation and Development) Act of 2016, commonly referred to as RERA. This legislation was enacted to safeguard homebuyers, ensure transparency, and promote accountability in the real estate sector. Buying a RERA-registered property has become an essential criterion for homebuyers due to its numerous benefits and legal protections. This article will explore why purchasing a RERA-registered property is advantageous and necessary in today’s real estate market.
What is RERA?
RERA was introduced with the primary objective of protecting the interests of homebuyers and enhancing transparency in real estate transactions. Before, issues such as project delays, lack of accountability, and insufficient disclosure of project details by developers plagued the implementation of RERA in the real estate sector. RERA mandates the registration of real estate projects and agents with regulatory authorities established at the state level.
The key provisions of the RERA Act include:
- Developers must register their projects with the state RERA authority before advertising or selling.
- Promoters must provide all project-related information, including layout plans, approvals, land titles, and delivery timelines.
- Developers must deposit 70% of the funds collected from buyers in a separate escrow account to ensure that funds are used only for project construction.
- RERA mandates strict penalties for non-compliance, including fines and imprisonment for developers.
Why buy RERA-registered properties?
Transparency in project details
One of the most significant advantages of purchasing a RERA-registered property is the transparency it guarantees. Before RERA, homebuyers often struggled with incomplete or misleading information about the project. Developers sometimes change the project layout, amenities, or other specifications without prior notice. Under RERA, developers must disclose comprehensive information about the project, including:
- Land title and ownership
- Approved plans and layout
- Details of ongoing litigation
- Completion schedule
- Amenities provided
Buyers have the right to access all of this information on the RERA website, ensuring transparency and trustworthiness in the transaction. This level of transparency allows buyers to make informed decisions and reduces the risk of investing in projects that may face legal or logistical complications.
Timely project completion
Delays in project delivery were a common grievance among homebuyers before the RERA Act. Projects would often be delayed by several years, leaving buyers in limbo. RERA addresses this issue by setting strict deadlines for project completion. Developers are now legally obligated to complete the project by the date promised at the time of registration. If they fail to meet this deadline, they are required to compensate homebuyers.
Additionally, RERA ensures that developers can only arbitrarily delay the project with valid reasons. Buyers can file complaints with the RERA authority if they suspect foul play or unnecessary delays. In cases of delays, RERA empowers buyers to:
- Claim compensation for the delay
- Withdraw from the project and get a full refund with interest.
- Continue with the project while claiming interest for the delayed period
This focus on timely project completion protects homebuyers and encourages developers to adhere to their commitments, ultimately fostering a more reliable real estate market.
Escrow mechanism for buyer’s protection
One of the most groundbreaking provisions of RERA is the escrow account mechanism. This provision ensures that developers cannot misuse the funds collected from homebuyers for purposes unrelated to the project. Before RERA, developers often diverted the funds collected from one project to finance other ventures, leading to project delays or even project failures.
RERA requires developers to deposit 70% of the funds collected for the project into a dedicated escrow account. This money can only be withdrawn in proportion to the project’s progress and after certification by engineers, architects, and chartered accountants. The escrow mechanism ensures that the funds are used solely for the construction of the specific project, protecting homebuyers from financial mismanagement by developers.
Protection against false promises
Another common issue that plagued the real estate market was developers making false promises about the project’s features, amenities, and layout. Homebuyers were often misled by flashy advertisements or brochures that did not reflect the project specifications. Under RERA, developers are held accountable for any false promises they make.
If a developer fails to deliver the project as per the agreed specifications, buyers can:
- Claim compensation for the deviation
- Withdraw from the project and receive a full refund.
- Continue with the project and demand the promised features or compensation for their absence.
This legal protection ensures that homebuyers get what they were promised, fostering a sense of trust between developers and buyers.
Standardisation of sale agreements
Before RERA, the sale agreements between buyers and developers were often skewed in favour of the latter, with clauses that placed an undue burden on homebuyers. RERA has standardised the sale agreement process by introducing model sale agreements that protect the interests of both parties. These agreements must include:
- Project delivery timeline
- Payment schedule
- Interest rates on delayed payments
- Compensation clauses for project delays
The model sale agreement ensures that the terms and conditions of the transaction are fair and transparent, preventing developers from including unfavourable clauses that may exploit homebuyers.
Grievance redressal mechanism
One of the most significant advantages of RERA is the grievance redressal mechanism it offers to homebuyers. Before RERA, if homebuyers faced issues such as project delays, changes in project specifications, or non-delivery of promised amenities, they had little recourse to seek justice. Legal battles were often lengthy and expensive, and the power dynamics between developers and buyers were skewed in favour of the former.
RERA has established state-level Real Estate Regulatory Authorities to address grievances related to real estate transactions. Homebuyers can file complaints against developers directly with the RERA authority, and the authority must resolve the complaint within 60 days. This quick and efficient grievance redressal mechanism empowers homebuyers to seek justice without getting entangled in lengthy legal processes.
Additionally, if buyers are dissatisfied with the RERA authority’s decision, they can appeal to the Real Estate Appellate Tribunal and, if necessary, further escalate the matter to the High Court. This multi-level grievance redressal framework ensures homebuyers access justice at various stages, providing multiple avenues to resolve disputes.
Interest on delayed payments
RERA also addresses the issue of delayed payments from both homebuyers and developers. Before RERA, if a buyer delayed payment, they would often face heavy penalties, while developers faced no similar repercussions for delaying the project. RERA has introduced a balanced approach by ensuring that the interest rate charged on delayed payments is the same for both parties.
For instance, if a homebuyer delays a payment, they must pay interest to the developer. Similarly, if the developer delays the completion of the project, they must pay interest to the homebuyer for the delayed period. This parity in the interest rate structure ensures fairness and discourages both parties from delaying their respective obligations.
Quality assurance
Another critical aspect of RERA is the focus on quality assurance. The Act mandates that developers must provide a five-year warranty on the construction’s quality, including issues related to structural defects or poor workmanship. If defects arise within five years of possession, the developer must fix the problem without additional cost to the homebuyer.
This provision is essential in ensuring homebuyers receive a property meeting the promised construction standards. It also holds developers accountable for the quality of materials and workmanship used in the project, promoting higher standards in the real estate industry.
No changes in project plans without the buyer’s consent
Before RERA, developers often changed project plans, layouts, or amenities without seeking the buyer’s consent. These alterations would sometimes reduce the value or usability of the property for homebuyers, leading to dissatisfaction.
RERA mandates that any changes to the project’s plans can only be made with the consent of two-thirds of the homebuyers. This provision empowers buyers and ensures developers cannot arbitrarily alter the project after selling the units. It promotes fairness and transparency in the project development process, ensuring homebuyers get what they were promised during the sale.
Legal protection and confidence for buyers
The primary goal of RERA is to instil confidence in homebuyers by providing them with legal protection. The real estate sector was previously seen as highly unregulated, with buyers often feeling helpless against influential developers. RERA has changed this by establishing a framework that protects homebuyers’ interests and holds developers accountable for their actions.
The combination of transparency, accountability, timely project delivery, and a robust grievance redressal mechanism ensures homebuyers can invest in real estate with greater confidence. RERA’s legal protections provide a safety net for homebuyers, making the real estate market more accessible and less risky for individuals and families.
Impact on developers: Increased accountability
While RERA primarily focuses on protecting homebuyers, it has also brought about positive changes in the behaviour of developers. Developers are now required to be more accountable and transparent in their dealings. They can no longer exploit loopholes or homebuyers through false promises or financial mismanagement.
RERA has led to a shift in the real estate industry, where developers are encouraged to adopt best practices, maintain transparency, and deliver projects on time. This increased accountability benefits homebuyers and the sector, promoting healthy competition and fostering trust in the market.
RERA registered vs. RERA approved
When navigating the real estate market, you may encounter two commonly used terms: RERA registered and RERA approved. While both seem similar, they hold different meanings. Understanding the distinction is crucial for homebuyers to make informed decisions and ensure the property they invest in meets legal and regulatory standards.
What is RERA registered?
A RERA-registered project has been officially registered with the respective state’s RERA authority, as mandated by the Real Estate (Regulation and Development) Act, 2016. This registration signifies that the developer has provided all the necessary details about the project, including:
- Current project status
- Timelines for completion
- Approved layout plans
- Financial details
By registering the project, the builder agrees to adhere to RERA’s strict regulations, ensuring transparency and accountability. Homebuyers can trust a RERA registered property, knowing that the project is legally bound to follow specific standards of quality and integrity. This legal framework gives buyers peace of mind, ensuring that developers are held accountable for any delays or discrepancies in the project.
What is RERA approved?
RERA approved often refers to the project acquiring the necessary approvals from the state’s RERA body to build a property. However, this term does not officially exist within the RERA framework. Builders often use this terminology to suggest that the property complies with the Government of India’s regulations.
Despite the term’s common usage, buyers must thoroughly research any property labelled as RERA-approved. This research should include checking the project’s official status on the RERA website, verifying the builder’s reputation, and ensuring that all promised specifications are adhered to.
To confirm a property’s authenticity, customers should utilise various methods, such as digital searches, peer reviews, and examining previous projects completed by the builder. This thorough investigation can help buyers make an informed decision before purchasing.
Powers of RERA in the Indian real estate market
The Real Estate Regulatory Authority (RERA) was established under the Real Estate (Regulation and Development) Act of 2016 to regulate the real estate sector and protect the interests of homebuyers. RERA has several key powers, including the authority to request information and conduct investigations into the affairs of promoters, real estate agents, and allottees. During investigations, it has the same powers as a civil court under the Civil Procedure Code 1908.
RERA can issue interim orders to prevent violations of the Act and ensure compliance with its provisions. It can impose penalties and interest on those who fail to adhere to the regulations. Additionally, RERA is empowered to amend any order errors within two years and can recover penalties or compensation from non-compliant promoters and agents. RERA aims to promote transparency, efficiency, and accountability in the real estate market, providing a robust framework for conflict resolution and consumer protection.
How RERA impacts the resale real estate market?
The Real Estate (Regulation and Development) Act, 2016 (RERA), primarily targets the regulation of new real estate projects to enhance transparency and protect homebuyers. Its implications for the resale real estate market and the applicability to resale properties are nuanced:
Impact on the resale real estate market
- Increased demand for ready-to-move-in properties: Post-RERA, there’s been a notable shift among buyers favoring ready-to-move-in properties. This trend has invigorated the resale market, as buyers seek immediate possession to mitigate risks associated with project delays.
- Enhanced transparency and buyer confidence: While RERA’s direct regulations may not encompass all resale transactions, the overall emphasis on transparency and accountability in the real estate sector has bolstered buyer confidence across both primary and secondary markets.
Applicability of RERA to resale properties
- Registration requirements: RERA mandates that developers register their projects with the respective state regulatory authority. This requirement applies to new developments and ongoing projects that meet specific criteria, such as exceeding 500 square meters in area or comprising more than eight apartments. However, properties that have already received a completion certificate before the enactment of RERA are generally exempt from registration.
- Resale transactions: In the context of resale properties—where an individual owner sells to another buyer—the transaction typically falls outside the direct purview of RERA. This is because RERA primarily governs the relationship between developers and the initial purchasers to ensure project completion and adherence to promised specifications. Consequently, resale transactions in the secondary market are not subject to RERA regulations.
Considerations for buyers in the resale market
- Due diligence: Even though RERA may not directly apply to resale properties, buyers should exercise thorough due diligence. This includes verifying the property’s legal status, ensuring clear title, checking for any pending dues, and reviewing the original approvals and completion certificates.
- Engaging registered agents: While RERA mandates that real estate agents facilitating the sale of properties in registered projects must themselves be registered, this requirement may not extend to agents dealing exclusively in resale properties. Nonetheless, engaging with registered and reputable agents can provide an additional layer of security.
Challenges in RERA’s implementation
The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced to bring transparency, accountability, and efficiency to India’s real estate sector. While it has achieved significant milestones, several challenges hinder its full effectiveness:
1. Delays in complaint resolution
RERA aims to provide swift dispute resolution; however, in practice, the process can be protracted. Backlogs and extended timelines for adjudication diminish the act’s efficacy and erode homebuyer confidence.
2. Lack of awareness
Many homebuyers and developers remain uninformed about RERA’s provisions, leading to non-compliance and underutilization of its benefits. Enhanced educational campaigns are essential to increase awareness and ensure stakeholders can effectively exercise their rights and responsibilities.
3. Inconsistent enforcement across states
RERA’s implementation varies by state, resulting in a fragmented regulatory landscape. Some states have established robust regulatory authorities, while others lag, causing confusion and uneven protection for consumers nationwide.
4. Limited enforcement power
RERA authorities often lack the necessary power to enforce their decisions independently, relying on state agencies for implementation. This dependency can lead to delays and reduced effectiveness in holding non-compliant developers accountable.
5. Resistance from developers
Some developers resist adhering to RERA’s stringent regulations, citing increased compliance burdens. This resistance can manifest in attempts to find loopholes or delay project registrations, undermining the act’s objectives.
6. Challenges with ongoing projects
The applicability of RERA to projects initiated before its enactment remains ambiguous, leading to legal uncertainties and potential exploitation by developers to evade compliance.
7. Dependence on self-disclosure
RERA relies on developers to self-disclose accurate project information. Instances of misinformation or withheld details compromise transparency and can mislead homebuyers.
8. Limited coverage of commercial real estate
While RERA primarily focuses on residential projects, its limited jurisdiction over commercial real estate leaves a significant market segment unregulated, potentially exposing investors to risks.
9. Jurisdictional variations
Different states have formulated their own RERA rules, leading to non-uniformity and confusion among stakeholders operating across state lines. This lack of standardization complicates compliance and enforcement.
10. Limited penalties and consequences
Although RERA prescribes penalties for non-compliance, they may not always suffice to deter fraudulent practices or provide adequate compensation to affected buyers. Strengthening penalty provisions is essential to enhance deterrence.
Housing.com POV
Buying a RERA-registered property is crucial for anyone investing in real estate in India. The RERA Act safeguards homebuyers’ interests, ensuring transparency and holding developers accountable for their commitments. It offers benefits like timely project completion, quality assurance, and a robust grievance redressal mechanism, making transactions safer and more reliable.
In today’s real estate market, where trust and accountability are vital, choosing a RERA-registered property is essential. It protects your investment and provides peace of mind, knowing your rights are legally safeguarded. For homebuyers, the transparency, timely delivery, and legal protection associated with RERA registration are indispensable.
FAQs
What is RERA, and why was it introduced?
RERA, or the Real Estate (Regulation and Development) Act of 2016, was introduced to enhance transparency, accountability, and consumer protection in India’s real estate market. It ensures timely delivery of projects, regulates developers, and provides a robust grievance redressal mechanism for homebuyers.
How can I verify if a property is RERA-registered?
You can verify a property’s RERA registration by visiting your state’s official RERA website. Enter the project or developer's registration number to access details like project status, approved plans, and delivery timelines.
Does RERA apply to resale properties?
No, RERA primarily governs new projects and developer-buyer relationships. Resale transactions, where a property is sold by an individual owner to another buyer, typically fall outside RERA’s scope. However, buyers should still perform due diligence on resale properties.
What are the key benefits of buying a RERA-registered property?
Purchasing a RERA-registered property ensures transparency in project details, timely completion, financial protection through escrow mechanisms, and legal recourse for delays or deviations from promised features.
What can a homebuyer do if a developer delays the project?
Under RERA, homebuyers have several options, including claiming compensation for delays, withdrawing from the project with a full refund and interest, or continuing with the project while receiving compensation for the delay.
What is the difference between RERA-registered and RERA-approved properties?
A RERA-registered property has been officially registered with the respective state’s RERA authority, adhering to all regulations. 'RERA-approved' is not an official term and is often used by developers to indicate compliance with general regulations. Buyers should verify the registration status on the RERA website.
