Real Estate (Regulation & Development) Act (RERA), 2016, India’s big-bang real estate reform, became effective from May 1, 2017. Every real estate project (either above 500 sq. mt. or 8 apartments), new or ongoing, is to be sold or advertised by the builder falls under the ambit of this new regulation. The new act aims to boost buyer confidence by infusing more transparency in the real estate sector.
As per an Economic Times article, out of a total of 35 states and union territories, excluding Jammu & Kashmir, 23 states and union territories in the country have already notified their respective rules for the Real Estate (Regulation & Development) Act. But just seven states have started the process of online registration of real estate projects and agents. There is also some regulatory flux which is expected to be resolved in the coming days. Let’s look at some effects of RERA as felt at ground-zero after three months of its implementation.
RERA Has Made it Mandatory for Builders to Charge on Carpet Area Basis
According to the new act, it is the responsibility of the developer to disclose the carpet area of the property to home buyers. The law also mandates quoting of prices based on the carpet area, or the net usable floor area, and not on the super built-up area as was the case earlier.
This brings clarity as there was no uniformity about charging on the basis of the super built up area earlier.
This clears confusion and brings the international practice of pricing based on carpet area in the Indian market.
Apart from this, the availability of garages/covered car parking is to be clearly mentioned. There will be no open car parking on offer in most states.
Advertisements Are Becoming More Factual: No More Ambiguous or Misleading Ads
The new real estate law has laid down a set of guidelines related to property advertisements to make sure real estate deals are made in a transparent manner. As per the new regulation, no developer can advertise, market, book, sell or offer for sale any plot, apartment or building in any real estate project without getting the project registered with the Real Estate Regulatory Authority. From now on, every advertisement has to provide the RERA registration number.
RERA makes it mandatory to upload the copy of a number of documents related to licenses and permissions on the company/project website as well as inform in detail about the various information related to a project.
In the first instance of the regulatory tightening, a Chembur-based real estate consulting firm has been asked to pay Rs 1.2 lakh by MahaRERA, Maharashtra Real Estate Regulatory Authority, as fine for a misleading advertisement of an ongoing construction project in Thane, Maharashtra.
Developers Are Stressing on Detailed Written Agreements
After the implementation of RERA, the ‘promoter’s promise’ will carry a legal standing.
Most builders, in order to avoid any ambiguity, are emphasizing on comprehensive details on the agreements. The sale agreements will also be also executed in a uniform prescribed format for each state bearing the registration no. of the project with RERA.
Developers are providing buyers with written affidavit mentioning the time frame within which the project will be completed, along with the interest rate as mandated by RERA, in case there’s a default. Builders are also providing an affidavit authenticating the legal title to the land on which the project is being developed.
Banks to Shut Out Builders without RERA Listing
Low-key builders who have been figuring out various ways to beat the effects of RERA are running out of time as the banking body of the country, in consultation with the Reserve Bank of India, has decided to stop financing projects that are not registered with the Real Estate Regulation Authority. Banks have also decided to seek additional collateral, including personal property, as guarantees while disbursing loans to new real estate developers.
After RERA Builders Are More Cautious About Their New Launches
The new act mandates a slew of regulations to free the real estate sector from shady deals. Builders, in case of not adhering to the RERA rules, not only stands to lose the registration of the project but may also be punished with a fine which can extend up to ten percent of the project cost, or imprisonment for a term of up to three years, or both. Real estate brokers and agents will also need to register and adhere to the guidelines. This is making developers extra-cautious about their overall activity, especially new launches. There are also some instances of complaints by the homebuyers in some states.
Henceforth, builders are required to submit all necessary information and documents and a page will be automatically created on the regulation authority’s website for public viewing of all projects for which registration has been provided. The viewers can also download certain documents. It should display up-to-date information on the project including the quarterly status of booked apartments. This will help the existing buyers as well as the new ones to know the status of an ongoing project or whether their future home is RERA-compliant or not.