Did you know? What the Real estate (regulation and development) Act, 2016 is about2 min read . Updated: 26 Dec 2016, 05:18 PM IST
One of the most important clauses of the Act stipulates compulsory registration of all the residential real estate projects with plot size more than 500 sq. meters, with the regulator
The year brought an end to a long awaited demand to have a regulator for the real estate sector. The Real Estate (Regulation and Development) Act, 2016, was proposed in January 2009, and got implemented from 1 May 2016. Though it took 8 years for this to happen, it is expected to be the biggest reform in the sector.
One of the most important clauses of the Act stipulates compulsory registration of all the residential real estate projects with plot size more than 500 sq. meters, with the regulator. For this, the developer will need to disclose names of promoters, project layout, plan of development works, land status, status of statutory approvals, draft of builder buyer agreements, and names and addresses of real estate agents, contractors, architects and structural engineers, to the authority. All this information has to be made available on the regulator’s website. Plus, these details have to be regularly updated by the developer. A clear picture of the number of units sold and construction status also has to be disclosed.
Apart from this, a buyer will be able to get information on defaulting developers.
RERA also requires that a written agreement for sale or builder buyer agreement be submitted along with other documents at the time of project registration. The builder-buyer agreement has to be offered for signing to the home buyer before accepting more than 10% of the property value as advance.
Most importantly, the Act makes it mandatory for the developer to open an escrow account for each project. As much as 70% of the money collected against a particular project has to be deposited in this account.
Another problem area that the Act addresses is the ambiguity in selling area (super built-up area) and usable area (carpet area). It has been decided that a developer can sell only on the basis of carpet area. This helps a home buyer understand how much she is paying for each sq. ft that she will get for her use.
The Act also binds promoters to have the consent of two-thirds (66%) buyers before making any change in the number of units or structural changes.
There are several clauses of penalty also. Incorrect or incomplete disclosure will attract a penalty of 5% of project cost. In fact, the project may even be cancelled if rules are regularly flouted. If a developer leaves a project half-way, for any reason, the association of allottees will have the right to refuse and get their money back with interest. They can also demand from the authority to get the project completed by another developer or any other means.
The Act also aims to provide faster judgments or relief to home buyers in disputes; 644 district-level consumer courts are proposed for the purpose. A time limit has been prescribed for tribunals and regulatory authorities.
The aim of the Act is to safeguard the interest of home buyers in the primary real estate market. Till now, this was restricted to the builder-buyer agreement, which was skewed towards protecting the builder’s interest.