REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016 (RERA) AND ITS EFFECT ON BUILDERS, DEVELOPERS AND REALTORS
Impact of the Real Estate (Regulation and Development) Act of 2016 (RERA) on builders, developers and realtors (a person who acts an agent for the sale and purchase of buildings) includes the following:
1] Under RERA builders are mandated to register critical information regarding the project which includes layout, promoter details, land title status, statutory approval status, agreements, and details of the brokers, architects and contractors. Failure to register this information will lead them to penalties.
2] They are bound by a five-year agreement with the buyer for quality assurance. This means that within five years of selling a property if construction quality issues arise they will have to repair it. Moreover, they have to ensure the formation of Resident’s Welfare Association within three months of the project completion.
3] RERA clause that buyers can claim a refund in case of delay or dissatisfaction with property puts developers in a fix.
4] Apart from disclosing critical information mentioned above to buyers, they also have to state the exact size (carpet area) of the property. They can no longer state super-built up area (i.e. common area, verandah, etc.) as the size of the property. Due to this they can no longer charge buyer the amount for a super built-up area.
5] Real estate agents who facilitate selling or purchase of properties must take prior registration. Such agents will be issued a single registration number for each State or Union Territory, which must be quoted by the agent in every sale facilitated by him.
In short it can be explained as:
- Full and complete disclosure on websites.
- Approval of 2/3rd majority of allottees is now needed to make alterations of the property (minor or major alterations).
- Specifying the exact carpet area is necessary.
- 70% of the funds collected from the property allottees must be deposited in a separate bank account and will be treated as a reserve account.
- Withdrawal of funds must be in proportion to the completion of project (such withdrawals must also be audited by professional statutory auditors or a CA).
- Interest levied for delay in the completion of projects.
If the developers/builders abide by the rules of RERA in India, they will not only lose the registration of the project but will liable for the punishment. The punishment may vary – imprisonment for a term that may extend up to three years or fine that may extend up to ten percent of the estimated cost of the project, or both.
Brig. (Retd.) Kamal Sood vs M/S. DLF Universal Ltd. on 20th April 2007
The NCDRC (National Consumer Disputes Redressal Commission) observed that the aforesaid practices were unfair trade practice on the part of the builder to collect money from the prospective buyers without obtaining the required permissions such as zoning plan, layout plan and schematic building plan.
NCDRC stated that it was the duty of the builder to obtain the requisite permissions or sanctions such as sanction for construction, etc., in the first instance, and, thereafter, recover the consideration money from the purchaser of the flat/buildings.
Secondly, in such a case, if there is any express promise that the premises would be delivered within the stipulated time, and, if not done so, escalation cost is required to be borne by the builder.