Do you know about RERA and its impacton real estate?
Both houses of the Indian parliament, Rajya Sabha and Lok Sabha have passed RERA on 10th March and 15th March of 2016 respectively to regulate the real estate sector of this country. Due to the irregularity and lack of transparency, the real estate industry was losing its sheen. Thus, there are some RERA rules and regulations that are needed to be followed.
After this Act came into effect on 1st May 2016, a total of 33,906 real estate industrial agents and 42,726 residential projects have been registered under this regulatory body by 2019 as per a Supreme Court report. Furthermore, this authority has also resolved 20,000 and more complaints regarding real estate.
Before proceeding to the impacts, you just need to know the RERA act.
What is RERA?
RERA full form is the Real Estate Regulatory Authority that works according to the Real Estate (Regulation and Development) Act. The prime object of this regulatory authority is to protect the interests of investors. By bringing regulations and transparency, RERA is aiming to cut down the malpractices of builders.
Some specific rules and conditions have been introduced by RERA that the builders are mandated to follow, viz. –
Precise calculation of carpet area
Builders used to calculate the carpet area of the property by their own made-up rules due to the lack of any standard way of the calculation process. Thus, RERA has introduced some fixed norms to measure it. Carpet area implies the total usable space or floor within 4 internal walls of a property. It must exclude areas such as exclusive balconies and open terrace, places under the service shaft, etc. Yet, the carpet area includes the department's internal dividing walls.
You must know that you only need to pay for the carpet area. That means –
Price of the property = Measurement of the carpet area X cost per sq. Ft.
Limited pre-payment
RERA mandates that builders are not allowed to take any more than 10% of the entire cost of the property as token money. Whether it is an apartment or a villa, 10% is the maximum limit for any monetary transaction prior to the legal sale agreement.
Project registration
RERA registration is compulsory for any residential or commercial real estate project of more than 500 sq. m. or 8 units under this Act. So, any public promotion or advertisement of the project is legally not allowed if the concerned plan is not a RERA registered project.
Lower the risk of default
Previously, builders often used one project’s capital for another. But after the introduction of RERA, builders are mandated to deposit 70% of the entire realization amount in a separate account which can only be used for the concerned project. This regulation has cut down the risk of builder insolvency and protects a buyer’s investment.
Buyer’s right if the builder couldn’t meet the promise
Buyers can receive a full refund if developers couldn’t fulfill the promises of completing the project or if any mismatch happens between the blueprints and real-life design as per RERA. Even if the project is getting delayed, the buyer could avail of a full refund or compensation after possession.
Buyer’s right if any defect comes out after possession
To provide adequate customer service, any structural, quality or artistry defects within 5 years of the possession will require builders to renovate it within 30 days of the complaint without any extra cost. Along with this Act, you also need to know about the RBI guidelines for a home loan to ensure proper guidance.
The RERA has brought a lot of transparency in this industry. Hence, as a buyer, now you have legal assistance in the form of this regulatory authority.
Also for your own financial management, you should know how to reduce home loan tenure and EMI. Lastly, if you are looking for a safe investment in the real estate industry, RERA has paved the path for you. Hence, now is the best time to go ahead with your maiden residential property purchase.
