How RERA Affects Homebuyers

Key Provisions:

1. Notification of Changes: Any minor additions or alterations must be communicated to the allottees.

2. Approval for Major Changes: Any other additions or alterations require the consent of two-thirds of the allottees.

3. No Pre-Registration Advertising: No advertisements or releases before registering with RERA.

4. Transfer of Majority Rights: Approval of two-thirds of allottees is required to transfer majority rights to third parties.

5. Project Information Sharing: Sharing details about the project plan, layout, government approvals, land title status, and sub-contractors.

6. Timely Completion: Increased emphasis on completing projects on time and handing them over to consumers.

7. Quality Assurance: A five-year defect liability period has led to improved construction quality.

8. Formation of RWA: Creation of the Residents' Welfare Association within a specified time or within three months of selling the majority of units.

Unified Regulatory Framework:

The most advantageous feature of this law is that it provides a unified regulatory framework for purchasing flats, apartments, and standardizing practices across the country. Some key features of the law are as follows:

Establishment of Regulatory Authority:

The absence of a proper regulator in the real estate sector (similar to SEBI for capital markets) was long felt. This law establishes a Real Estate Regulatory Authority in each state and union territory. Its functions include protecting stakeholders' interests, collecting data in a designated repository, and creating a robust grievance redressal system. To avoid delays, the authority is mandated to dispose of applications within a maximum of 60 days unless an extension is recorded with reasons. The Real Estate Appellate Tribunal (REAT) serves as the appellate body for disputes.

Mandatory Registration:

As per central law, every real estate project (with a total area exceeding 500 square meters or more than 8 apartments in any phase) must be registered with the respective state's RERA. Ongoing projects without a completion certificate (CC) or occupancy certificate (OC) must comply with registration requirements under the Act. Promoters must provide detailed information about the project, such as land status, promoter details, approvals, and completion schedule during registration. Once registered, projects can be marketed only after obtaining subsequent approvals related to construction.

Reserve Account:

One of the primary causes of project delays is the diversion of funds collected for one project to finance new or different projects. To prevent such diversions, promoters are now required to deposit 70% of all project receipts in a separate reserve account. The funds in this account can only be used for land and construction costs and must be certified by a professional.

Continuous Disclosures by Promoters:

After implementing the Act, promoters are required to make periodic submissions to regulators regarding the project's progress, which must be available on the RERA website.

Title Representation:

Promoters must now provide a positive warranty of title and interest over the land, which can be used later against them if any title defects are discovered. Additionally, they must obtain insurance against title and construction quality, the benefits of which will pass on to the allottees upon executing the sale agreement.

Standardized Sale Agreement:

The Act prescribes a standardized model sale agreement between promoters and homebuyers. Typically, promoters would include penal provisions against homebuyers, imposing fines under any circumstances, while ignoring or incurring no penalties themselves. Such penal provisions may now become a thing of the past, and homebuyers can expect more balanced agreements in the future.

Penalties:

To ensure the Act's provisions are not taken lightly, strict monetary penalties (up to 10% of the project cost) and imprisonment for violators have been introduced.