- The Real Estate (Regulation and Development) Act, 2016 (RERA) is a law passed by the Indian Parliament to regulate the real estate sector and protect the interests of homebuyers. The Act was enacted in 2016 and came into force on May 1, 2017.
- RERA aims to bring transparency and accountability to the real estate industry by ensuring that developers register their projects with the regulator and provide accurate information about their projects to buyers.
- The law also establishes a grievance redressal mechanism to address disputes between buyers and developers and imposes penalties on developers who fail to comply with its provisions.
The Need for RERA Act in India
- Protection of Homebuyers: Prior to the enactment of RERA, homebuyers often faced significant challenges, such as delayed possession, incomplete or substandard construction, and fraudulent practices by developers. The RERA act was introduced to protect the interests of homebuyers and ensure the timely delivery of properties.
- Transparency and Accountability: The RERA act promotes transparency and accountability in the real estate sector by making it mandatory for developers to register their projects with the regulatory authority, provide all necessary details about the project, and adhere to strict guidelines for the construction and delivery of the project.
- Reducing Project Delays: One of the significant reasons for project delays in the real estate industry is a lack of accountability and transparency. RERA ensures that developers adhere to strict timelines and complete projects on time, reducing delays and providing timely delivery of properties to homebuyers.
- Addressing Developer Default: RERA aims to address developer default by ensuring that developers fulfill their financial obligations and complete projects as per the agreed timelines. In case of default, RERA provides a mechanism for homebuyers to seek compensation and remedy for their grievances.
- Promoting Growth in the Real Estate Sector: By promoting transparency, accountability, and efficiency in the real estate sector, RERA aims to boost investor confidence, promote foreign investment, and contribute to the overall growth of the real estate sector in India.
Key Benefits of RERA in India
Some key benefits of RERA (Real Estate Regulatory Authority) in India are:
- Protection for Homebuyers: RERA provides protection to homebuyers by ensuring that developers follow strict guidelines and deliver their projects on time. Homebuyers can file complaints with RERA if the developer does not fulfill their obligations, and RERA can impose penalties and order compensation.
- Increased Transparency: RERA ensures greater transparency in the real estate sector by requiring developers to register their projects and provide regular updates on the project’s status. This ensures that homebuyers are aware of the progress of the project and can make informed decisions.
- Accountability of Developers: Developers are held accountable under RERA for any violations or delays in the completion of the project. This leads to greater accountability and responsibility on the part of developers, which ultimately benefits the homebuyers.
- Standardization of Practices: RERA ensures standardization of practices in the real estate sector by requiring developers to follow strict guidelines and obtain necessary approvals before launching a project. This leads to better quality projects and standardization of prices in the real estate market.
What is RERA Act Impact on Home Buyers?
- The Act has had a significant impact on homebuyers, as it has brought in more transparency and accountability in the sector. It mandates that developers register their projects with the regulatory authority and disclose all relevant information, such as project timelines, carpet area, and approvals obtained.
- Additionally, RERA also establishes a mechanism for grievance redressal, allowing homebuyers to file complaints and seek remedies for any issues faced during the course of a project. Overall, the RERA Act has been a welcome move for homebuyers in India, as it has helped to bring more credibility and trust to the real estate sector.
What is RERA Act Impact on Real Estate Agents?
- The RERA Act has had a significant impact on real estate agents in India. Under the Act, all real estate agents are required to register with the regulatory authority and obtain a unique registration number, failing which they are prohibited from facilitating any real estate transaction. This has brought in more professionalism and accountability in the sector, as unscrupulous agents who were previously operating without any regulation have been forced out of the market.
- Additionally, the Act also mandates that real estate agents disclose all relevant information about a project to buyers, such as the status of approvals and the carpet area of the property. This has led to more transparency in the sector and has helped to build trust between buyers and agents. Overall, while the RERA Act has posed some initial challenges for real estate agents in terms of compliance, it has also helped to professionalize the sector and create a level playing field for all stakeholders.
What is the Registration Process?
The registration process under RERA involves the following steps:
- The promoter of a real estate project is required to register the project with the respective state RERA authority before advertising, marketing, or selling any units in the project.
- The promoter is required to provide details of the project, such as location, layout plan, approvals, and the timeline for completion in the registration form.
- The registration fee varies from state to state and is based on the area of the project.
- After successful registration, the promoter is issued a registration number and certificate, which is to be used in all the marketing and advertising materials related to the project.
- The promoter is required to provide regular updates on the progress of the project to the RERA authority and homebuyers. Failure to comply with the provisions of RERA can result in penalties and imprisonment.
How to Register Real Estate Projects under RERA in India?
To register a real estate project under RERA in India, the following steps can be taken:
- Visit the respective state’s RERA website and click on the “Project Registration” tab.
- Fill in the required details of the project, such as the name, location, type, and number of units in the project.
- Provide details of the promoter, including name, contact details, and PAN card details.
- Upload relevant documents such as the layout plan, building plan, approvals, and timeline for completion.
- Pay the applicable registration fee, which varies from state to state and is based on the area of the project.
- After successfully submitting the registration form and payment of the fee, the promoter is issued a registration number and certificate.
- The promoter is required to update the status of the project regularly on the RERA website and provide information to homebuyers regarding the progress of the project.
Advantages of the RERA Act for Builders
- Streamlined Approvals: RERA has brought in a level of standardization and transparency in the process of obtaining approvals for real estate projects. This has resulted in the reduction of the time taken to obtain approvals, leading to faster project approvals and, ultimately, faster project completion.
- Enhanced Credibility: RERA has established a regulatory framework for the real estate sector, and developers who comply with the Act are perceived to be more credible by homebuyers. This has led to an increase in investor confidence and demand for properties from RERA-compliant developers.
- Access to Funds: RERA has made it mandatory for developers to deposit 70% of the funds received from homebuyers in a separate escrow account, which can only be used for the construction of the project. This has led to an increase in trust among financial institutions, who are now more willing to lend funds to RERA-compliant developers.
- Dispute Resolution: RERA provides a mechanism for dispute resolution between developers and homebuyers, and this has led to the timely resolution of disputes. This has resulted in a reduction in the number of disputes between developers and homebuyers, leading to fewer project delays and cost overruns.
Disadvantages of the RERA Act for Builders
- Increased Compliance Burden: RERA has introduced a significant compliance burden for builders, as they need to adhere to several guidelines and regulations. This has resulted in increased costs for developers, as they need to employ additional staff and consultants to ensure compliance.
- Delayed Project Launches: The process of obtaining RERA approvals can be time-consuming, leading to delays in project launches. This has resulted in a slowdown of new project launches and, in turn, a reduction in revenue for developers.
- Increased Project Costs: RERA has made it mandatory for developers to deposit 70% of the funds received from homebuyers in a separate escrow account, which can only be used for the construction of the project. This has led to an increase in the cost of capital for developers, as they need to borrow funds at a higher cost to meet their working capital requirements.
- Lack of Clarity in Some Provisions: There are certain provisions in the RERA act that are not very clear, and this has led to confusion among developers. For instance, the definition of “carpet area” is not very clear, leading to disputes between developers and homebuyers.
Which Projects are exempt from the RERA Act?
While the Real Estate (Regulation and Development) Act, 2016 (RERA) applies to most real estate projects in India, there are a few exemptions where the Act does not apply. These include:
- Projects where the land area is less than 500 square meters or the number of apartments is less than eight: The RERA act does not apply to real estate projects where the land area is less than 500 square meters or the number of apartments is less than eight.
- Projects that have received a completion certificate before the implementation of the RERA act: The RERA act does not apply to projects that have received a completion certificate before the implementation of the Act. However, if the developer wants to make any changes to the project or sell any remaining units, they must register the project with the regulatory authority.
- Projects that are for the renovation or repair of an existing building: The RERA act does not apply to projects that involve the renovation or repair of an existing building, provided that the cost of such repairs does not exceed 25% of the market value of the existing building.
- Projects that are owned or promoted by the government: The RERA act does not apply to projects that are owned or promoted by the government, including projects by public sector undertakings and local authorities.
What are the penalties under RERA Act in India?
It is important to note that all real estate projects in India, including new and ongoing projects, are required to be registered under RERA. Failure to comply with the provisions of RERA can result in penalties and imprisonment.
Here are some of the penalties under the RERA Act in India:
- Developers can face penalties for non-compliance with the Act, which can include imprisonment for up to three years and/or a fine of up to 10% of the project cost.
- Real estate agents who fail to register with the regulatory authority can be penalized with imprisonment for up to one year and/or a fine of up to 10% of the property value.
- Projects that are not registered with the regulatory authority can face penalties of up to 10% of the project cost or imprisonment of up to three years.
- Developers who violate any of the provisions of the Act can be fined up to 5% of the project cost for each day that the violation continues.
- The regulatory authority can also revoke the registration of a project or a developer if they are found to be in violation of the Act.
Rera Law across India
The Real Estate (Regulation and Development) Act, or RERA, is a central law enacted by the Indian government in 2016 to regulate the real estate sector in the country. The Act mandates that all new real estate projects must be registered with the state regulatory authority, and developers must provide complete and accurate information about their projects to buyers. RERA has been implemented across all states and union territories of India, with some variations in the rules and regulations to suit local conditions.
Overall, RERA has brought significant positive changes to the real estate sector in India by protecting the interests of homebuyers, promoting transparency and accountability, and ensuring the standardization of practices.
Frequently Asked Questions about RERA Act
Q 1. Who needs to register under RERA?
Ans. All new real estate projects and agents who facilitate real estate transactions need to register under RERA. Developers who have ongoing projects that are yet to be completed also need to register them with the regulatory authority.
Q 2. What are the penalties for non-compliance with RERA?
Ans. Developers, agents, and projects that are found to be in violation of RERA can face penalties, including imprisonment, fines, and revocation of registration.
Q 3. How does RERA protect the interests of buyers?
Ans. RERA mandates that developers provide complete and accurate information about their projects, establishes a mechanism for grievance redressal, and provides for the establishment of a separate account where 70% of the sale proceeds are to be deposited for the specific project. All of these measures help protect the interests of buyers.
Q 4. How has RERA impacted the real estate sector in India?
Ans. RERA has had a significant impact on the real estate sector in India. It has brought in more transparency, accountability, and professionalism, which has helped build trust between buyers and developers. The Act has also led to increased investment and growth in the sector, benefiting the overall economy.