RERA Act, 2016: Its Conceptual Analysis and Impact on Indian Market

The Real Estate Regulatory Act, 2016 makes it obligatory for every builder and Promoter to register their real estate projects in order to sell, market, advertise, book or purchase. Further, obtaining Registration under RERA will help in administering the contract between the buyer and seller in order to ensure the sale of the apartment, building, or plot in an efficient, effective as well as transparent manner. Moreover, RERA registration offers a high level of accountability towards the customer and also helps in reducing delays and frauds as well as the high transaction cost.

List of the States that have Enforced RERA Act

Objectives of the RERA Act

Following are the main objectives annexed with the concept of RERA Act, 2016 – 

1. Instituting a Fast-Track Dispute Resolution mechanism

2. Ensuring accountability and responsibility towards buyers and protect their interest

3. Incorporating transparency, ensuring fair-play and reducing frauds & delays

4. Ensuring the sale of a real estate project, in an efficient, effective and transparent manner

5. Establishing professionalism and Pan India standardization

6. Establishing symmetry of information between the buyer and developer

7. Imposing certain responsibilities on both the developer and buyers

8. Promoting good governance in the real estate sector and aiming to create investor confidence

Applicability of the RERA Act, 2016

Following list is the applicability of the RERA Act, 2016 – 

1. It applies to the promoter, projects, builders and real estate agents.

2. RERA registration applies on the commercial, residential and plotted development.

3. Earlier, the requirement of getting compulsorily registered was on those projects which either exceeds 500 Sq. Meters or have more than eight apartments, but now it covers even the small projects which are less than 500 sq. meters or eight apartments under its ambit.

4. Real estate agents who are working for the sale and purchase the properties shall obtain the RERA registration certificate, which will remain valid throughout the State.

5. After the successful registration under RERA Act, a unique identification number (UIN), user id together with the password are generated. Further, the concerned promoter can use the provided user id and password to log in to its project or for updating the details.

Benefits of RERA Registration

Following are the Benefits annexed with the concept of RERA Registration – 

1. Timely Details - It has been seen that Builders often make false promises regarding the completion date of the concerned project, but hardly delivers it on time. As per the RERA act, strict regulations are enforced on the builders to ensure that construction is running on time and the flats are delivered to the buyers as per the decided time. In case if the concerned builder is unable to deliver the flats on time, he or she will be liable to refund the all the amount to the purchaser with interest.

2. Accurate Project Details – At the construction stage, builders promote their housing projects, defining the various amenities, facilities and features related to projects. According to RERA act, there cannot be made any changes to a prescribed plan. And if in case a builder is found guilty then, he or she will be penalized 10 per cent of the project's costs or would even face imprisonment of up to three years.

3. All Clearances - Builders often attract buyers or purchasers by offering huge discounts and pre-launch offers. And, the buyer, who is enticed by the offers, does not care about the clearance. But, due to the delay caused in obtaining clearance, the buyer is not offered flat on time. This Act ensures that the builders get all the clearances before selling flats.

4. Proper Structure - If in case the buyer finds that any structural deficiency in the building’s development, then it is the builder’s responsibility to get repaired all the structural defects, that too up to five years.

5. No advertisement without obtaining RERA Registration - Promoters are not allowed to advertise any project without obtaining RERA registration with the Real Estate Regulatory Authority (RERA) established under this Act. In addition, each advertisement has to carry the provided RERA registration number compulsorily.

6. Booking Amount - The amount which is required to be paid by the buyer has been reduced from 20 per cent to 10 per cent, which must be paid only after entering into agreement for sale with the concerned builder. Further, termination of the agreement is permitted only if the buyer defaults thrice in making payment. Also, the Buyer is also entitled to a 15-day notice.

7. Grievance Redressal - If the buyer, promoter, or the agent has any complaints or grievance with respect to the concerned housing project, then they can file a complaint with RERA. Moreover, if they are not happy, the decision passed by RERA, they also have a right to file a complaint in the Appellate Tribunal.

8. Right to Information - The buyer has the absolute right to get information about the concerned project. The term Right to Information includes the plans related to layout, execution, and completion status.

9. Buyer’s Right in case of default - If there is a mismatch in terms of what was promised by the concerned builder and what has been delivered by him, the buyer has the full right to a refund of the amount that was paid as an advance by him. At times, the builder may also have to provide interest on the advance paid as well.

10. Advance Payment - As per the rules prescribed, a builder cannot take more than 10 per cent of the actual cost of the project as advance or the application fees from the buyer. Hence, this will save the buyer from paying a large amount.

11. Reducing the Risk of builder becoming Insolvent - Most of the promoters and builders tends to develop multiple projects at the same time. Earlier, the builders were allowed to move funds raised by one project to that of others project. This is not possible with the RERA since 70 per cent of the funds raised are required to be deposited in a separate bank account. These funds raised can be withdrawn only after certification by an architect, a chartered accountant, and an engineer.

12. Standardization of Carpet Area - Before RERA the manner in which a builder calculated price of a project was not defined. But, with RERA there is now a prescribed standard formula that is used for calculating carpet area. This way, promoters cannot offer inflated carpet areas to increase prices.

Impact of RERA Act

After the enforcement of Real Estate (Regulation and Development) Act, 2016, registration of a sale deed of a project unit will not be done in the office of the sub-registrar without acquiring Occupancy Certificates or Completion Certificates. At present, unit registrations are happening without checking. It is occurring without acquiring Occupancy Certificates or Completion Certificates. Also, no one is bothered about the legal consequences and results. Further, the Department of Stamps and Registrations know about the RERA Act implications, but they have not taken the required steps to stop the unlawful sale deed registrations of such properties. Following listed are the few impacts – 

1. Fewer projects will be launched as the concerned promoters and builders will spend time to understand the impact of the RERA Act, 2016. However, the honest promoters, builders or developers will benefit from this situation as they will face lesser competition.

2. Dishonest builders will fade away as they will fail to carry on in the market after the implementation of RERA Act.

3. The 32 sections that have been incorporated into the Real Estate (Regulation and Development) Act, 2016 will promote financial discipline in this sector.

4. After the implementation of the concerned act, the builders will have to follow several formalities and requirements if they wish to make certain modifications to the project after its commencement. Also, short-term chaos might break out in the real estate sector, but in the long run, it will improve customer’s confidence, because of which they will invest more.

How to Register Projects under RERA

1. For Promoters 

• Prepare a checklist and collect all the required documents for registration.

• Obtain the number of the concerned bank account opened as per Section 4 (2) (I) (D) the Act.

• Complete and submit Form A. This concerned form is the application form for registration.

• Complete and submit Form B. This concerned form will act as a declaration made by the promoter as per the Section 4 of RERA.

• Complete and submit Form G. This concerned form will act as a draft agreement of allotment or sale of the concerned project.

• Submit an affidavit declaring that the details filled in Form G are not contrary to the rules prescribed by the RERA.

• Submit an affidavit declaring that no booking amount has been taken from any prospective buyers and is in accordance with the Section 3 of the Act.

• Pay the specified fees required for registration, which varies from state to state.

• Dispatch a duly-signed hard copy of all of the submitted documents by way of a registered post to the relevant RERA authority.

• Complete and submit Form C, which then helps in obtaining the registration certificate.

2. For Real Estate Agents 

• Complete the application form and submit it together with the required documents and prescribed fee to RERA.

• A registration number will be allotted to the applicant. This provided number is required to be mentioned for every property sale.

• The applicant is required to maintain all the books of accounts, records and documents related to all transactions on a quarterly basis.

• All the information and documents concerning any project must be shared with the prospective buyer.

• The applicant might get suspended if he or she misrepresents him or her or commits any fraud during the process of registration.

Documents required by the Developer regarding the Registration of an On-going Project

Following are the Documents required for the registration of an on-going process - 

1. Development plan

2. Copy of PAN card

3. Aadhaar card of Promoter

4. Project details such as the location, layout, and the sanctioned plan of the project

5. Basic details of the individual such as the name, address, contact details and a photograph in case the concerned Promoter is an individual

6. If the applicant is an entity other than the individual, then it needs to provide details and particulars of the Partners, Chairman, Directors, Authorized Person, and name and address of the entity together with nature and type of entity

7. Audited financial statements and the Income Tax Returns (ITR) of the concerned entity for the last three years

8. Details of the Engineers, Architect and others

9. Title Deed together with the chain of title

10. Ownership documents such as the proforma of the Allotment Letter, Conveyance Deed and the Sale Agreement;

11. Details of the construction technology type, resistant measures and designing standards in the case of uncertain events etc.

12. Consent detail of the actual property owner together with the Development Agreement, Title Deed, Joint Development Agreement, Collaboration Agreement, Development Agreement or any other required agreement involved between the concerned Owner and Promoter;

13. Other documents, as required.

Documents required by the Real Estate Agent for obtaining Registration

Following are the Documents required for the registration of a Real Estate Agent – 

1. Copy of the PAN card of the concerned real estate agent

2. Copy of Aadhaar card

3. Copy of the address proof

4. Basic details of the real estate agent such as the name, address, contact details and the photographs of Partners or Directors or individual

Consequences of Not Obtaining RERA Registration

According to Section 59 of RERA Act, 2016, if anyone continues with the Real estate activities without obtaining RERA Registration, a penalty of up to 10 per cent of the calculated project cost will be imposed. On the other hand, if in case the default continues, an extra fine of up to 10 per cent of the calculated project cost will be imposed or a three years imprisonment or both.

Further, according to Section 31 of RERA Act, the aggrieved person has a right to file a complaint with the authority in case the Promoter violates or infringes any provided RERA provisions. Furthermore, the Authority has the power to impose penalties or take measures, as may be deemed fit. But, in some cases, the concerned authority may issue a interim order regarding the refund of the amount that the Promoter has received.

Penalties provided under RERA

If anyone fails to follow any of the provided RERA’s rules, then the following penalties will become applicable – 

Conclusion

In the conclusion of the Analysis of RERA, the act is a great program for regulating the Indian real estate sector. Further, the act does not only improve the processing times but also helped in introducing transparency and accountability in the system. However, the promoters, builders, and prospective customers should exercise due caution in the issues like the political reluctance hindering the implementation of the project. Also, there is, still a huge possibility for the improvement in the implementation of the concerned act, i.e. RERA Act. And it also needs legislative amendments by consulting stakeholders. Lastly, on a positive note, this is a kind of legislation, which attempts to improve the regulation prevailing in the real estate sector and is a breath of fresh air in the prevailing system.