Table of Contents
- Impact of inclusion of brokers under RERA
- RERA rules to be followed by real estate agents
- Rules for registration of brokers
- Documents needed for registration of real estate agents
- Penalty against defaulting real estate agents
- Important rules to be followed by real estate brokers in India
- RERA makes real estate brokerage professional
- The early days of RERA and broker compliance
Under the Real Estate (Regulation and Development) Act (RERA), which came into force on May 1, 2017, real estate agents will need to register themselves, to be able to facilitate a transaction. The broker segment in India, is estimated to be a USD 4 billion industry, with an estimated 5,00,000 to 9,00,000 brokers. However, it has traditionally been unorganised and unregulated.
According to Shubhika Bilkha, business head, the Real Estate Management Institute, “In more advanced markets, real estate brokers or agents need to register, be verified and certified, in order to facilitate a real estate transaction. As India’s real estate industry prepares for increased regulatory vigilance, organising this essential and yet, largely overlooked segment, in line with global best practices, is required. This will improve the overall transparency and accountability in the sector.”
Impact of inclusion of brokers under RERA
Once brokers are managed under the RERA regulations, investors’ and home buyers’ trust is likely to increase and this could lead to an increase in sales and revenue for both, brokers and builders.
Anil Pharande, chairman, Pharande Spaces says, “It will go a long way in cleaning up the sector and making it more attractive for all stakeholders. Customers will now be protected on all fronts and can make their purchase decisions with a lot more confidence.”
RERA rules to be followed by real estate agents
Every state’s regulatory authority has in place a set of guidelines, to be followed by the brokers/real estate agents. The law states that no real estate agent can facilitate a sale or purchase of any property, or even act as mediator, if he/she is not registered with the state Real Estate Regulatory Authority.
Rules for registration of brokers
Every real estate agent is mandated to make an application to the state Real Estate Regulatory Authority, for registration, along with the fee and documentation that is prescribed. For example, MahaRERA charges Rs 10,000 from an individual, proprietor, or proprietorship firm and Rs one lakh from partnership firms, societies, private limited/limited company, LLP, etc.
Once the authority scrutinises your application, it will grant a single registration for the state or union territory, as per your case. The authority may even reject your application at this stage with sufficient reason that will be provided to you in writing. However, before such a rejection, your reasons will also be heard. If you do not receive any communication from the authority, consider your application to be accepted. Note that the authorities shall deliver the registration number, along with the certificate, within 30 days from the date of registration.
Documents needed for registration of real estate agents
- Application form and prescribed fees.
- Personal information, such as name, address and type of enterprise.
- Income tax returns for the previous three years preceding the date of application for registration.
- Details of projects, promoters and their advertisers, with whom the broker associated for business over the last five years.
- Any detail of civil, criminal cases that are pending against the broker or his/her firm.
- Copies of letterheads, rubber stamp, receipts that the broker intends to use.
Quote your registration number
Once you are registered with the Real Estate Regulatory Authority, you will receive a registration number and you must quote this number in every sale that you facilitate. The registration also has an expiry date, prior to which you must renew it with the necessary fees. The certificate is valid for five years and renewal needs to be done at least 60 days prior to the expiry of the registration.
Penalty against defaulting real estate agents
The RERA has stringent rules in place, to ensure that all stakeholders are compliant. The same stands true for brokers or agents. In case of violation, such as securing registration with misrepresentation of facts, fraud, etc., the authority can suspend the broker’s registration for a time period that it deems appropriate. A penalty of Rs 10,000 per day during the period of failure and a maximum of up to 5% of the value of the deal or project value, will be levied on an unregistered broker dealing with a registered project. However, the broker will be allowed an opportunity to be heard.
Important rules to be followed by real estate brokers in India
- Brokers cannot facilitate the sale of a property that is not within a planning area and not registered with the authority.
- Real estate agents must maintain books of records, documentation and accounts.
- It is punishable by law to be involved in any unethical practice, which includes making false statements regarding quality, grade, registration, approval status, advertisements and other misleading information or service that cannot be offered as per rules. All advertisements, marketing, selling or purchase papers, should have the registration number.
RERA makes real estate brokerage professional
Sam Chopra, founder and chairman of RE/MAX India, maintains that agents are important stakeholders and it is an excellent move to bring them under the ambit of RERA.
“It will bring a lot of accountability in the industry and the ones who believe in professional and transparent business, will reap all the benefits. Now, the agents will have a much larger and responsible role to perform, as they will have to disclose all the appropriate information to the customer and even help them chose a RERA-compliant developer,” says Chopra.
Gaurev Kapur, managing director of Golden Bricks, points out that “Home buyers and investors put their hard earned money in properties, trusting the brokers and the builders. Unfortunately, some brokers sell properties where the title is unclear or the property is disputed, merely for their own financial gain. With RERA, all this cheating will come to an end.”
With RERA in force, brokers cannot promise any amenities or services that are not mentioned in the documents. Moreover, they will have to provide all information and documents to the home buyers, at the time of booking. Consequently, RERA is likely to filter out the inexperienced, unprofessional, fly-by-night operators, as brokers not following the guidelines will face hefty penalty or jail or both.
The early days of RERA and broker compliance
Initially, states were not ready with the infrastructure and resources to implement RERA. “Brokers, especially the smaller ones were worried about the increased cost of compliance, which would eat into their profits. Now, this sector will become an untenable marketplace for freelancers and part-time operatives because brokers will no longer be able to afford to operate without an institutional framework,” explains Pakshal Sanghvi, director, Sanghvi Realty.
Another issue, is that there is no time-frame for brokers to register themselves, or a body that could train and certify the brokers on guidelines. Shammi Sethi, director of Rare Earth, a real estate consultancy, feels that while it is a great idea to have a proper system, brokers’ interests should also be kept in mind.
“A lot of brokers do not have a clarity on the Act and are confused. It would take the brokers some time, to understand and abide by the norms, but in a few months, when things get clearer, I think it should be good for all,” he says.
What is the RERA registration time frame for brokers in India?
The authorities usually deliver the registration number, along with the certificate, within 30 days from the date of registration.
What is the penalty to be borne by the real estate agent in case of default or violation?
Any violation of the RERA rules by a real estate agent, may result in suspension of registration, penalty of Rs 10,000 per day and a maximum of up to 5% of the value of the deal.
What is the validity period of registration for brokers under RERA?
The RERA registration is valid for five years. Renewal to be done at least 60 days prior to the expiry of the registration.
(With inputs from Sneha Sharon Mammen)