The Real Estate Act makes it mandatory for all commercial
and residential projects where the land size is over 500 sq. mtr. or 8 apartments/flats/units,
to register with the Real Estate Regulatory Authority (RERA) for launching a
project, in order to provide more transparency in any project. For under
construction property, builder will have to complete the registration of the
said property within 3 months. Application for registration must be either
approved or rejected within a period of 30 days from the date of application by
the RERA. On successful registration, the promoter of the project will be
provided with a registration number, a login id and password for the applicants
to fill up essential details on the website of the RERA. In case of fails to
register, builder has penalty of up to 10% of the project cost or 3 years
imprisonment may be imposed. It has made to smoothen the real estate practices,
timely delivery, payment schedule as per actual constructions & most
importantly, to deliver what builders show in sales & marketing collaterals
during the sale of the property/flat. Further builder has to share all the
details related to particular projects like- project lay out plan, floor plans,
land status, government sanctions & approvals, etc.
Also RERA made mandatory for real estate agents/broker as
well who promotes to sell or purchase of properties, must take prior
registration from RERA. Such agents or brokers will be issued a single
registration number for each state, which must be quoted by the agent in every
sale done through them.
Following
are the points which cover under RERA:
1. All the builders has to have Escrow account & 70%
funds of the deposited money in the project account will not be diverted
anywhere, only now builder can play with 30% of the project funds. Means, only
profit margin amount can be diverted now.
2. Builder has to quote/sale price on carpet
area only. So consumer may understand costing of the any particular flat
better. Consumer has to pay now only for what he/she is getting now. As of now,
may consumer does not know the difference between carpet are, saleable area,
built-up area or super built-up area, so sell on carpet area will give more
transparency in actual flat size.
3. Timely delivery of the projects, since
builder has to give the delivery date of the project if fails huge penalty on
builders. Delaying the possession dates is the most common practice today. This
has huge financial and personal implications for the buyers. In order to ensure
strict adherence to the promised schedule, the Bill is entitled to impose 100
percent refund from the builder to the buyer with interest, in case of a long
delay in handing over the flats.
4. Builders often promote their projects by
showcasing infrastructure and amenities on paper, that are absent from the
finished project. In order to hold the builders accountable for all such
promises that they make, the Bill does not allow any changes in the project at
a later stage. If the builder is found guilty of over-promising and
under-delivering, then he can be penalized at 10 percent of the project cost or
up to three years of imprisonment.
5. Most of the builders do not share with consumers pending approval
or sanctions of the project. This may affect the project later or trouble the
consumer. The Bill clearly states that it’s mandatory for builders to ensure
all government clearances for the project well before they start selling flats.
6. It would be mandatory for
builders to get all the required clearances from relevant authorities before
formally launching the project. Right now builders launch the project when
there is nothing at the land and have no permissions for anything. They give
rosy pictures to investors, end users and start taking the money from public &
then start the getting approvals and coming up with the structure. This means
there will be obvious delays and lots of confusion for investors & end users. Now, the concept of “pre-launch” offers will vanish.
7. The Bill offers the buyers to approach the builders even
after possession. Consumer can approach builder even after 1 year from
possession in case of any defects or deficiency in the property. Thus the
builder shall be liable to rectify the issue at hand as early as possible.
8. A builder will not be able to
take more than 10% advance money from buyers without a written agreement.
Currently builder asks for huge money as an advance.
9. Builders will have to use the
actual site pictures or the actual construction work pictures for
advertisements for the project. Right now builders do not use the actual
pictures for promotional purpose. It’s easy to create an illusion by using
graphics and shiny pictures and that is what happens most of the times.
Almost all the states has
submitted the final draft bill of RERA to central government & central
government would be making mandatory to all the states & UT to implement
asap.
May Real Estate industry would
have golden time soon, since demonetization has been done, GST implementing
soon, Pradhan Mantri Awas Yojana i.e Pakka Ghar for every Indian & now also
focus on affordable housing developments. Few of the builders have already
started the process to build the affordable housing which will definitely
increase the demand.
Awaiting for the Golden Period
of Real Estate……
Best Wishes
Praveen Kumar
+91 91 588 922 86
