RERA

The introduction of the real estate regulation act was in March 2016. This is for bringing in greater transparency and protection of consumer rights in the real estate field. Under this act, no developer shall advertise, promote, market, book, sell or offer to sell, or tell persons to purchase any plot, apartment or building, without registering the project with the Real Estate Regulatory Authority.

This act also made provisions for ongoing projects which have not received completion certificates and to apply for registration within three months of commencement of the act.

Provisions of the act include

1. For the speedy and formulated implementation of this law, each state is mandated to form a Real Estate Appellate Tribunal within one year from the commencement of the act.

 2. The builder must deposit 70 per cent of the funds collected from buyers in an independent bank account for new projects and 70 per cent of unused funds in case of ongoing projects.

3. Any project with a plot size of 500 sq mt or eight apartments shall mandatorily register themselves with RERA.

4. Builder cannot take advance as a booking amount of more than 10 % of sale consideration from any buyer. If he takes, then he has to do a written agreement.

Checks and measures

Both developer and the buyer will be liable to pay penal interest of SBI’s marginal cost of lending rate+ 2 % in case of delay in payments. Punishment by way of up to three years imprisonment for developers and up to one year in case of buyers and agents, for not following and violating orders of Appellate Tribunals and Regulatory Authorities 

Pre-launch –booking is prohibited.

Builder can sell flats on a carpet area basis.

Benefits of this law to consumers, developers and real estate agents

Gains to buyers: Buyers will benefit from greater transparency and defined laws under this act.  It protects buyers’ interests and enhances customer confidence in the real estate sector. As per the law, 70 per cent of the funds taken by the buyer should be kept in an independent bank account which is a security call for an individual’s money.

This would also mitigate the risks of diverting the buyer’s money towards projects other than their respective investment. Also, the buyer’s consent for making any structural reform in the project has strengthened the rights of consumers. These regulations will bring in buyer confidence and contribute to stabilizing housing prices.

Gains to builders: Builders will also enjoy a regulated framework for dealing with projects. These regulations would remove the unhealthy competition and protect the rights of a genuine builder. Builder can also lodge their complaint against the buyer who is not paying the dues on time and impose penal interest.

These structural reforms would channelize the investment. Hence generating healthy demand and better prospects for emerging builders.

Gains to banking sector: The banking sector would also benefit from a pick-up in demand for housing and a regulated framework. This law would help in business generation . It will aid in maintaining proper due diligence for the builders who would mitigate the generation of new bad assets in this sector.

Under this regulation, an increase in housing demand would help in credit pick-up to this sector. Also, builders would park 70 per cent of the fund with banks, generating current accounts for banks.

Gains to the economy: 

The economy would benefit from this law and benefits each participant of the sector.

First, a regulated environment would mitigate the illicit flow of money and thereby regulating the prices.

Second, tax collection from this sector is expected to double coming from proper channels and registered builders nearly. Also, on average, about 10 lakh buyers invest every year for owning a house.

Stringent laws and defined regulatory structures would enhance the growth of this sector. This contributeS to overall GDP in the future.

Conclusion

Implementation of this law has been a historic move in the real estate sector of the economy. Sighting the overall gains to the economy, this law has been a welcome move to revive the sector. From May 01, 2017, its final implementation was a unanimous decision of both the centre and state.

Henceforth, any project imitated would go to the respective states’ real estate tribunal. A case-by-case review would be put in place for every hearing. These developments together benefit the economy for greater transparency and stringent regulatory framework.