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Property buyer's complete guide to RERA
With RERA coming into force, the realty landscape of the country is not going to be the same anymore.
Indian real estate has seen significant changes in the last year, especially with regards to government policies, the major ones being demonetisation, Real Estate Regulatory Authority (RERA), FDI relaxations, Benami Transactions (Prohibition) Amendment Act 2016, and Goods and Services Tax (GST).
RERA was passed by the Parliament in March 2016.All States are expected to meet the deadline of implementing RERA, i.e. May 1, 2017. This being a major pro consumer law, it is expected to bring in transparency within the sector along with establishing an adjudicating mechanism for speedy dispute redressal and also establishing an Appellate Tribunal.
The Appellate Tribunal will directly help in hearing appeals from the decisions, directions or orders of RERA and the adjudicating officer(s) and for matters connected therewith or incidental thereto. RERA is expected to ensure that real estate projects are completed and delivered on time to key stakeholders. Provisions in the Act, such as the imposition of similar penal interest for developers and buyers, will encourage timely delivery of projects.
Based on key observations and discussions, one can see RERA impacting in these ways:
Unorganized sector to organized RERA
coupled with the recent demonetisation move is expected to bring in discipline within the real estate sector, which should lead to a significant consolidation and clean-up. Developers and promoters must adapt to the changing environment and make suitable changes to the business model while adhering to compliances.
Pre-launches and soft launches of projects before obtaining adequate approvals and permissions have been a common phenomenon during the last few years. The Act attempts to address this issue by prohibiting sales and marketing of the units before registering the project with the regulatory authority. With developers disclosing approval status, project layout and timeframe for project completion to regulators and buyers, RERA is set to increase transparency in the real estate sector.
Today, aggrieved homebuyers must reach out to consumer courts, which are already loaded with cases from various sectors. Once the real estate authorities are set-up, buyers can expect faster redressal of their complaints as these authorities will handle only real estate related matters.
Change in investor approach
While investors are expected to show an increased interest in the real estate sector in the coming times, there might a change in their approach, to accommodate risks and legal aspects in their contracts with developers. Many investors are showing concern on the RERA provisions that might define them as 'promoter' and, hence, may increase their responsibility towards legal contractual obligations.
The investors would now be more careful while finalizing contracts with developers, thus keeping a check on their (investor) liabilities in case of non-compliance with RERA. They might also be looking to dilute their stakes in existing troubled investments contracts and might renegotiate terms to limit liabilities.
Empowerment of consumers
Minister of Housing and Urban Poverty Alleviation, M Venkaiah Naidu said, "Real Estate Act is one of the most consumer-friendly laws passed by the Parliament and States have no power to dilute its provisions. This law, which was widely welcomed and appreciated benefits both, the buyers and sellers of real estate properties besides enhancing the credibility of the sector".
Also, the preamble to the Act says, "An Act to establish the Real Estate Regulatory Authority for regulation...and to protect the interest of consumers in the real estate sector". The Act includes multiple provisions to protect and empower real estate buyers. It wouldn't be wrong to say that consumer empowerment and protection would be the most important themes of RERA.
The key provisions empowering a real estate buyer include, refund of the amount paid along with interest and compensation if the promoter fails to comply with the terms and conditions of the agreement for sale or is unable to give possession of the unit purchased; prior written consent of at least two-thirds of the allottees for any structural changes, or transfer assignment of the majority rights and liabilities by the promoter; defect liability period of five years from the date of possession.
Sound real estate market
There might be a possibility of a reduction in new launches of projects, as developers aim to complete existing projects and take a pause to clearly understand RERA implications before launching new projects.
While it's a long road ahead with several opportunities for improvement, RERA signals towards a path leading to a more sound and robust real estate market in India. Much, however, will depend on the government avoiding past mistakes and the success of implementing RERA.