Why homebuyers can’t expect any RERA relief soon

It has been two years since the Real Estate (Regulation and Development) Act, or RERA, was enacted. The deadline to form state-level regulators was 1 May 2017, and the one for setting up a consumer-facing website gets over on 1 May 2018. A look at what has changed for consumers.

What is RERA?

The Act took effect on 1 May 2016 to regulate and promote the real estate sector. It aims to bring about transparency and efficiency in an opaque industry and has a mandate to protect consumer interest, including establishing a speedy redressal system. Each state has to set up its own regulator, keeping the central law as the framework.

Where is it applicable?

The Act is applicable all over India, except Jammu and Kashmir. It applies to all under-construction projects with a plot size above 500 sq. m or projects with eight apartments or more. Real estate agents must be registered with the authority before executing any transaction.

What are the main provisions of RERA?

(1) Developers cannot advertise, market, book, sell or offer for sale, or invite persons to purchase a plot, apartment or building without registering the project with the regulator; (2) 70% of the money received from homebuyers must be deposited in a separate account to cover the cost of land and construction only; (3) Withdrawal can be made only an engineer, an architect and a chartered accountant certify that the withdrawal is proportional to the stage of completion; (4) Developers will sell based on carpet area only and clearly define what it stands for; (5) Incorrect or incomplete disclosure will attract a penalty of 5% of project cost; (6) The project can be cancelled if rules are not regularly followed; (7) Developers are accountable for after-sale services; (8) The developer is liable to rectify structural damages for five years.

What were the deadlines?

All states were required to notify rules within six months (31 October 2016) for the regulatory authority. The last date to set up a regulatory authority was one year from the enactment of the Act, which was 1 May 2017. Also, within another year, every state and Union territory was required to set up a stand-alone website for the consumer.

What is the current position?

With several missed deadlines, prospective homebuyers and those struggling with delayed projects under construction are not expected to get immediate relief . About 25 states do not have a permanent regulator, while 15 states do not even have an exclusive website. Given the progress in various states, it seems that it will at least take six months to a year for any concrete action on the ground.