Minister of Housing and Urban Affairs, Hardeeop Singh Puri in an article on Wednesday wrote, Real Estate (Regulation and Development) Act (RERA) has transformational provisions, conscientiously addressing issues which have been a constant bane for the sector.
The RERA, that came into effect in 2017, seeks to protect the interests of home buyers and also boost investments in the real estate sector.
Here’s a look at what the Act seeks to achieve and why it is necessary:
What is RERA?
The Government of India enacted the Real Estate (Regulation and Development) Act 2016 on 26th March 2016 and all its provisions came into effect, from May 1, 2017.
Developers have been given until the end of July 2017, to register their projects under RERA. Likewise, real estate agents, who also fall under its ambit, are still in the process of registering themselves. Several states still need to notify the rules under the Act and most importantly for buyers, developers or promoters need to register their projects under RERA.
Why was there a need for 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 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 states do not dilute the provisions and the spirit of the central act.
The RERA gave 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.
Definition of carpet area under RERA
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 lead 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
With the advent of RERA, specialised forums such as the State Real Estate Regulatory Authority and the Real Estate Appellate Tribunal, have been established for the resolution of disputes pertaining to home buying and the aggrieved party will 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.
What are the projects that 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 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.
How has RERA impacted real estate agents?
Under the Real Estate (Regulation and Development) Act (RERA), real estate agents need to register themselves, to be able to facilitate a transaction. The broker segment in India, is estimated to be a USD 4 billion industry, with an estimated 5,00,000 to 9,00,000 brokers. However, it has traditionally been unorganised and unregulated.
With RERA in force, brokers cannot promise any amenities or services that are not mentioned in the documents. Moreover, they have to provide all information and documents to the home buyers, at the time of booking. Consequently, RERA is likely to filter out the inexperienced, unprofessional, fly-by-night operators, as brokers not following the guidelines will face hefty penalty or jail or both.