Impact of RERA on Real Estate
The real estate sector got its own regulator from May 1 , 2017 the date when the Real Estate ( Regulation and Development ) ACT , 2016 ( RERA) became effective in the entire country. Each state and UT have its own Regulatory Authority (RA) which will frame regulations and rules according to the Act. The ACT intends to protect the interests of home buyers and enhance transparency in the real estate sector.
Why RERA ?
For long ,home buyers have complained that real estate transactions were lopsided and heavily in favour of the developers. RERA and the government’s model code , aim to create a more equitable and fair transaction between the seller and the buyer of the properties , especially in the primary market. RERA , it is hoped , will make real estate purchase simpler , by bringing in better accountability and transparency , provided that the states do not dilute the provisions and the spirit of the central ACT. The RERA will give the Indian real estate industry its first regulator. The Real Estate ACT makes it mandatory for each state and union territory , to form its own regulator and frame the rules that will govern the functioning of the regulator.
How will RERA impact home buyers:
Some of the important compliances are :
• Informing allottees about any minor addition or alteration.
• Consent of 2/3rd allottees about any other addition or alteration.
• No launch or advertisement before registration with RERA.
• Consent of 2/3rd allottees for transferring majority rights to 3rd party.
• Sharing information project plan, layout , government approvals , land title status , sub- contractors.
• Increased assertion on the timely completion of projects and delivery to the consumer.
• An increase in the quality of construction due to a defect liability period of five years.
• Formation of RWA within specified time or 3 months after majority of units have been sold .
The most positive aspect of this ACT is that it provides a unified legal regime for the purchase of flats , apartments , etc., and seeks to standardise the practice across the country.
RERA definition of carpet area :
The area of a property is often calculated in three different ways – carpet area , built-up area and super built-up area. Hence , when it comes to buying a property , this can leads to a lot of disconnect , between what you pay and what you actually get .
According to the RERA , carpet area is defined as “the net usable floor area of an apartment , excluding the area covered by the external walls , areas under services shafts , exclusive balcony or verandah area and exclusive open terrace area , but includes the area covered by the internal partition walls of the apartment.”
Impact of RERA on Real Estate Industry :
• Initial backlog.
• Increased project cost.
• Tight liquidity.
• Rise in cost of capital.
• Increase in project launch time.
Initially , a lot of work is to be done to get the existing and new project registered. Details such as status of each project executed in last 5 years , promoter details , detailed execution plans , etc .,needs to be prepared.
With the advent of RERA , specialised forums such as the State Real Estate Regulatory Authority and the Real Estate Appellate Tribunal , are established for the resolution of disputes pertaining to home buying and the aggrieved party have no recourse to other consumer forums and civil courts ,on such matters. While the RERA sets the groundwork for fast-tracking dispute resolution ,the litmus test for its success , will depend on the timely setting up of these new dispute resolution bodies and how these disputes are resolved expeditiously with a degree of finality.
Which projects come under RERA :
• Commercial and residential projects including plotted development.
• Projects measuring more than 500 sq mts or 8 units .
• Projects without completion certificate , before commencement of the ACT.
• The project is only for the purpose of the renovation / repair / re-development which does not involve re-allotment and marketing , advertising , selling or new allotment of any apartments, plot or building in the real estate project , will not come under RERA.
• Each phase is to be treated as standalone real estate project requiring fresh registration.
Market situation after one year of RERA :
• There have been fewer project launches and the focus has been on execution.
• Developers have tried to adhere to compliances , to avoid litigation.
• Relaxed delivery timelines for existing projects has granted developers an escape window .
• The market is yet to witness any landmark judgement that could set a precedent.