Having a place to call home is a dream many people cherish. Yet, a significant number struggle with escalating real estate prices that often exceed their income levels.
The Real Estate Regulations Act, or RERA, was introduced in 2016 to protect the interests of homebuyers. This act sets standards meant to shield buyers from the unfair practices of some developers.
RERA establishes certain guidelines governing the construction and advancement of properties, which are designed to enhance transparency in real estate transactions.
Officially, the RERA Act came into play across the nation on May 1, 2017.
Key Benefits of the RERA Act:
- Establishment of a Regulated Carpet Area: Previously, builders used varied methods to calculate the carpet area when pricing properties. RERA has clarified these calculations, mandating that all developers adhere to a unified method. The pricing formula follows: Property Cost = Carpet Area x Rate per sq. ft. This standardization directly impacts real estate pricing.
- Minimizes the Risk of Builder Bankruptcy: In the past, developers often funded multiple projects simultaneously, leading to financial risks. RERA mandates that developers must deposit 70% of the funds received for a project into a designated bank account. They can only withdraw from this account when project milestones are met, validated by professionals like civil engineers and chartered accountants. This ensures that the funds are used solely for the intended project.
- Buyer Rights Against False Claims: If a developer fails to meet the promises made regarding the project, the homebuyer has the right to withdraw from the project and receive a full refund of any advance payments, or potentially pursue a claim for interest and compensation.
- Buyer Rights for Post-Possession Defects: If a buyer discovers structural issues or defects in quality within five years of taking possession, the builder is required to rectify these problems at no additional cost within 30 days.
- Right to Information: Homebuyers have the right to access detailed information about the project, including plans, timelines, and stages of completion.
- Establishment of a Grievance Redressal Authority: Complaints against builders can be filed with a state authority set up under RERA to address grievances. If a buyer is still dissatisfied, they have the option to appeal to the Appellate Tribunal, which must review the case within 60 days. In the event of appeal, the builder must deposit at least 30% of the penalty or a greater percentage as directed by the Tribunal.
Exemptions from RERA:
RERA applies to builders and developers, with some exceptions:
- If the plot of land proposed for development is less than 500 sq. meters or if the number of homes does not exceed 8.
- If the builder has secured a completion certificate prior to RERA's implementation.
- For repairs or redevelopment activities that do not involve marketing or selling of new buildings, plots, or apartments.