“Do Deewaney Shahar Main, Raat Main Ya Dopahar Main… Aabodana Dhundhtey Hain, AASHIYANA Dhundhtey Hain”… This song played on many Chitrahaars & Rangolis and depicts the inner state of a Home Seeker- His Own Roof. People have lost a huge amount of money, time and dreams chasing their own home but finally a relief now. Well after RERA Real Estate Regulatory Act, which got implemented from May 1st, 2017 the mental agony will be less at least.
When you try to buy a home the 3 most important things comes to mind is:
1) Is the project/flat compliant with local rules/authority? Many times permissions are not sought and regulatory authorities demolish/seize the premises
2) Whom should you trust? Builders are known to delay/default.
3) What if I do get what has been promised? Builders are known to escalate the cost.
Premises on which RERA Real Estate Regulatory Act stands
RERA or Real Estate (Regulation and Development) Bill, 2016 is aimed at bringing Financial Discipline, Transparency, Accountability on part of the Real Estate Seller. If the seller is compliant and fair the buyers get confidence and the sale goes well.
Hence the act covers comprehensive guidelines of registration, uniformity of terms, certification, and complaint redressal mechanism for the investors. Doesn’t it look like that the sector has been regulated like banking or telecom? Yes RERA Real Estate Regulatory Act is determined to tame the wild players.
Key Points under RERA Real Estate Regulatory Act
1) The project needs to be registered under RERA. All ongoing projects (who have not attained completion certificate till 1st May 2017) also need to get a registration certificate by 31st July 2017. A RERA registration means you can be assured of civic/local pre-clearance.
2) No new project can be launched or even advertise without RERA Registration. All project even small like 500 sq. mts need RERA registration from State RERA. Never buy even if builder says that registration is under process. If your builder says the registration is still due after 31 July, this is a red flag.
3) All the builders, brokers/Agent need to be registered with RERA. So do not engage with people whom you cannot bring to justice afterward. Ask for certification as you ask your financial planner. All registered builder will have their page on RERA website and all details related their projects will be available online.
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4) Developers have to disclose project related details, including project plan, layout, and government approvals related information to the customers such as sanctioned floor space index (FSI), the number of buildings and wings, the number of floors in each building, etc.
5) The builder needs to tell and quote the price in CARPET AREA you are buying. No other units like built-up, super built-up, PFS etc is allowed. This is done to bring uniformity in price terms used by builders.
6) A consent of 2/3rd of the buyers is required for any major structural or amenities change. This was quite common as a builder would sell a 9-floor building and then in the middle of the project, they tell you that 15-floor permission has arrived. And, you are wondering “are they building 15 floors on 9-floor foundation?”
7) Any structural defect, or any other obligations of the promoter as per the agreement for sale, brought to notice of promoter within five years from possession to be rectified free of cost. It is sort of 5-year manufacturing guarantee.
8) Once a project has been registered the progress detail needs to be updated on RERA website on a quarterly basis. So don’t drive on weekends with family to the site where you have purchased a flat to check the progress. Just click.
9) Builder need to keep 70% of the funds in one escrow account opened in the name of the project. He cannot invest one projects money in another thereby causing a delay in the projects. If money is siphoned and builder is caught, he can be heavily penalized and jailed (max 3 years) too (the penalty clause are different for each state). So expect more discipline in project completion on time.
10) Builder can be held accountable for delays and compensation will be paid as per markets linked rates. It is fixed at 2% above SBI’s lending rates (currently it is around 10%). The builder has to give the new date of project completion with the compensation.
11) Earlier the dispute resolution was limited to courts of law and consumer court. And we all know how difficult it is for a common investor. But now you can complain to State RERA Tribunal and this can be done online too.
RERA Complaint Redressal Mechanism
State RERA will handle all the complaints about the Promoter/Agents/projects under their jurisdiction. The process will be:
1) The complainant can make a complaint by visiting State Rera Office Complaints officer or by Online submission.
2) RERA Office will conduct their investigation and call for documents proofs or records. They will also hear the other side and give a fair chance.
3) They will issue an order of resolution.
4) If the complaint is not satisfied, he can escalate complain to RERA Appellate Tribunal within 60 days.
5) The Tribunal decides and issues its order and resolves the issue.
6) It the complainant is still not satisfied he may appeal to State High Court within 80 days.
Implication for builders
Just one- Register & Follow Code of Conduct & be Prudent or go out of the market.
Does this means the REAL ESTATE SECTOR will Change?
Yes, it will impact Industry, Promoters and the end user or the buyer.
Real Estate purchase is a big transaction. Majority people do 1 or 2 transactions in a lifetime and they put their present and future earnings online. It gets painful when their dreams are delayed or shattered. Finally, even after huge lobbying against this Act, the central government notified the act and since land is a state matter 13 states and 5 union territories have adopted the act. The legislation is on-the-way for 16 more states.
It may take around 3 months for your state to put the RERA website and office, but act if notified by your state (Big states like AP, Bihar, Gujrat, Delhi, Rajasthan, Maharashtra & UP have notified it already) is active on the day of notification.
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Update: WealthWisher (TW2) has always kept investors interest above all, as I feel – Country can survive without Mutual Funds or PPF but it cannot survive without Investors. Product-taker rights should be protected first.
In other words: We Hate Mis-selling. Hence we have written a lot on the protection of investor interest and providing them help to resolve disputes:
If you have a grievance you may read/follow these links:
Income Tax: Link
NBFCs/Fraudulent companies: Link
RBI-Link to Ombudsman: Link
Addresses of RBI Ombudsman: Link