Historic Real Estate Act comes into effect today
The much-awaited Real Estate (Regulation and Development) Act RERA, 2016 comes into force from May 1, with a promise of protecting the right of consumers and ushering in transparency but only 13 states and Union Territories (UTs) have so far notified rules.
The government has described the implementation of the consumer-centric Act as the beginning of an era where the consumer in king. Real estate players have also welcomed the implementation of the Act, saying it will bring a paradigm change in the way the Indian real estate sector functions. The government has brought in the legislation to protect home buyers and encourage genuine private players.
The Real Estate Regulation and Development Act comes into force 9 years after it was first mooted. PM Narendra Modi’s personal interest has made it a reality now. Enacting the act gained momentum under the Modi government.
It has been made more effective, even going beyond the Select Committee’s report. The Act forges a happy, mutually beneficially alliance between buyers & developers. Rights & duties of buyers and promoters are now clearly defined.
Key Points under the Act
- The developers will now have to get the ongoing projects that have not received completion certificate and the new projects registered with regulatory authorities within 3 months from May 1.
- Under the rules, it is mandatory for the states and UTs to set up the authority. This Authority will address redressal of grievances against any builder. Some of the major provisions of the Act, include depositing 70 per cent of the funds collected from buyers in a separate bank account for construction of the project. This will ensure timely completion of the project as the funds could be withdrawn only for construction purposes.
- However, only 13 states and UTs have so far notified the rules. The states that have notified the rules are Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharasthra, Madhya Pradesh and Bihar.
- The law also prescribes penalties on developers who delay projects. All developers are required to disclose their project details on the regulator’s website, and provide quarterly updates on construction progress.
- In case of project delays, the onus of paying the monthly interest on bank loans taken for under-construction flats will lie on developers unlike earlier, when the burden fell on home buyers.
- Other highlight of the Act is imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of appellate tribunals and regulatory authorities.
Protection of buyers
- The Act prohibits unaccounted money from being pumped into the sector and as of now 70 per cent of the money has to be deposited in bank accounts through cheques.
- A major benefit for consumers included in the Act is that builders will have to quote prices based on carpet area and not super built-up area, while carpet area has been clearly defined in the Act to include usable spaces like kitchen and toilets.
Clearly the Real Estate (Regulation and Development) Act will usher in a paradigm shift in the realty sector, making the home buyer king.
Real Estate Regulatory Authority and Appellate Tribunal
- It will help establish state-level Real Estate Regulatory Authorities (RERAs) to regulate transactions related to both residential and commercial projects and ensure their timely completion and handover.
- Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days and Regulatory Authorities to dispose of complaints in 60 days while no time frame was indicated in earlier Bill.
As per industry data, real estate projects in the range of 2,349 to 4,488 were launched every year between 2011 and 2015, amounting to a total of 17,526 projects with investments of Rs13.70 lakh crore in 27 cities, including 15 state capitals. About ten lakh buyers invest every year with the dream of owning a house.
The Real Estate (Regulation and Development) Bill, 2016, (RERA Act), was passed by Parliament in March last year and all the 92 sections of the Act comes into effect from 1 May.
The housing ministry had last year notified the rules for five UTs—Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, while the urban development ministry came out with such rules for the National Capital Region of Delhi. The other states and UTs will have to come out with their own rules.
“The Real Estate Act coming into force after a nine-year wait and marks the beginning of a new era,” Housing and urban poverty alleviation (HUPA) minister M. Venkaiah Naidu said. The minister said the law will make “buyer the king”, while developers will also benefit from the increased buyers’ confidence in the regulated environment.
Real estate industry bodies Confederation of Real Estate Developers Associations of India (CREDAI) and National Real Estate Development Council (NAREDCO) said the implementation of this law will bring paradigm change in the way Indian real estate functions. They expect property demand to rise but supply may get affected in the near term. “It will bring a paradigm change in the real estate sector. It will protect buyers who have purchased flats in the past. The regulator under the RERA should find ways to help complete ongoing projects and provide relief to home buyers,” NAREDCO chairman Rajeev Talwar said.
CREDAI president Jaxay Shah said RERA will increase transparency in the sector and boost confidence of both domestic and foreign investors. He, however, said there will be some “teething problem” initially in implementation of this law. Asked about the impact on prices, Shah said, “Supply will dip during this year but demand will improve as buyers will have increased confidence about investing in the property market” The real estate prices will remain stable now but rates could rise by 10% in the next six months, he added.