RERA Set To Empower Homebuyers

“We have been discussing about some regulation in real estate for the last 11 years because all the buyers across the country are not getting adequate redressal system as per the previous arrangement,” said Minister of Urban Development and Housing, Venkaiah Naidu initiating the debate on the Real Estate (Regulation and Development) Bill, 2016 in the Lok Sabha, in May 2016.

One year later the Act— popularly known as RERA—has finally come into effect, and experts say it will help consumers breathe easy and bring back confidence in the sector. It is also expected to ensure timely completion of the project.

It will not only help revive end-user sentiment but help open up the Indian housing sector to foreign investments, he added.

Project Completion

A builder has to set aside 70 percent of the funds received from the sale of a particular project in an escrow account which can be used only for that construction site, under RERA.

This rule will ensure timely delivery and also help avoid the possibility of the developer defaulting on the project said Gulam Zia, executive director - advisory, retail, and hospitality, at Knight Frank India.

“The biggest concern that a home buyer always had was delay in getting possession, which will now be taken care of,” he added.

Builders will no longer be able to collect funds for one project and invest in another, a practice said to be followed by many developers. The law mandates the builder to declare details of the project, including cost, or lien on the project, land clearances, status, and so on.

“This will increase the confidence of home buyers and ensure if there is any wrongdoing by the developer, there will be an addressal mechanism through RERA court or consumer forum,” said Sanjay Dutt, chief executive officer of India operations and private funds, Ascendas Singbridge.

Pay Only For The Apartment

The prevalent practice of builders charging on super built-up area, including the terrace and common spaces, will also have to stop, with the law making it clear that prices have to be based only on the carpet area of the apartment (floor space within the walls).

“This translates to actual usable area - and not the far more ambiguous built-up area basis as was the norm before,” said Puri.

Sticking To The Plan

Builders are also barred from changing the development plan mid-way through a project, without the consent of the homebuyers. In other words amenities promised by the builder at time of sale, have to be ready at the time of possession.

Equal Footing

The most important safeguard according to Gulam Zia is the new rule of agreement which lays down clear guidelines for any change in the delivery timeline. Earlier in case a buyer defaulted on an installment the penalty was at least 24 percent, whereas the developer paid hardly 8-9 percent interest if there was a delay in completing the project, he added.