RERA ACT – Real Estate Regulatory Authority & RERA Rules [2016]

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RERA act

RERA Act was introduced by the government in 2016 to curb highly unregulated malpractices and corruption practiced by many stakeholders in Real estate markets, such as agents, brokers and developers. Real estate industry was largely unregulated, and standardized business practices were rarely followed. While homebuyers felt that the developers had limited legal liability, the incessant installment delays by homebuyers caused losses to the builders. To address and safeguard the issues faced by builders and homebuyers, the Real Estate (Regulation & Development) or RERA Act was introduced.

In this blog, we will discuss how the RERA Act benefits all stakeholders and how it has ushered an era of accountability and transparency in the real estate industry.

What is the RERA Act?

The introduction of RERA (Real Estate Regulatory Authority) in 2016 aimed to safeguard homebuyers and stimulate investments in the real estate sector. Implemented nationwide, the RERA Act of 2016 serves to regulate the industry, ensuring efficient dispute resolution processes. In addition to this, the act establishes a Real Estate Regulatory Authority (RERA) in each state to provide a uniform regulatory environment for speedy dispute resolutions.

Under the RERA Act, any residential or commercial real estate project must be registered with RERA if the land area exceeds 500 square meters. This registration fosters transparency in project implementation.

RERA Act and Rules 

These are some highlights of RERA rules regarding Real estate:

1. Compulsory Project Registration: Properties exceeding 500 square meters (5,382 square feet) or comprising eight apartments require mandatory registration with the State’s RERA Authority prior to commencing development. Failure to register incurs penalties.

2. Regular Construction Updates: Developers are mandated  to furnish consistent quarterly updates on the project’s progress and ensure all relevant details are publicly available on the RERA website.

3. Standardized Sale Agreements: It is mandatory to use standardized sale agreement, this ensures transparency for the buyers

4. Accurate Carpet Area Disclosure: Developers must accurately disclose the actual indoor living space (carpet area) within the sales contract.

5. Defect Liability Period: Under the Act, there is a defined window during which purchasers can report any identified flaws in the property, generally upto five years from the date of possession.

Important Terms and Definitions

Before we delve into the provisions of the RERA Act, let us take a quick look at some of the important and reoccurring terms which you must know of.

TermsMeaning
Carpet AreaAs per the RERA Act, the carpet area is the net usable floor area that is covered by the internal partition walls of the apartment.

The area covered by the external walls, areas under services shafts, exclusive balcony or verandah area, and exclusive open terrace area is not included in the carpet area of a property.
Commencement CertificateThe RERA act defines the Commencement Certificate as a building or construction permit that allows the promoter to begin the development of a property as per the sanctioned plan. This certificate is only issued after the submission of necessary documents and permits.
Completion CertificateA Completion Certificate is issued to a real estate project registered under the RERA Act if it has been developed according to the sanctioned plans, layouts and specifications. Approval of the competent authority under the local laws is required to obtain this certificate.
Occupancy CertificateOccupancy Certificate is issued to a project when provision for civic infrastructure such as water, sanitation and electricity has been made. The certificate permits the occupation of any building.
Equal Interest PenaltyThe definition specifies that the interest charged by the promoter from the allottee in case of any default in payment should be equal to the rate of interest that the promoter is liable to pay to the allottee in case of default.
Sanctioned PlanThe sanctioned plan for a project registered under the RERA Act includes the site plan, building plan, service plan, parking and circulation plan, landscape plan, layout plan, zoning plan, and other plans.

Structural designs, if applicable along with permissions such as environment permission are also included.
AllotteeAn individual to whom a building/plot/apartment has been sold or transferred by the promoter is called an Allottee. It does not include individuals to whom the concerned property is given on rent.
PromoterAny individual who is constructing a real estate project or is converting an existing building into apartments is known as a Promoter. The primary objective of such developments is to sell some of the apartments.

What Benefits does the RERA Act Offer?

The RERA Act was implemented to streamline the grievance redressal mechanism in the real estate industry in India. It has created a systemic mechanism of identifying and addressing homebuyers and builders’ issues with transparency.

1. Right to Information

RERA Act provides the buyers with the right to access information on the project they want to invest in. This includes the plan layout, execution plan, stage-wise completion status, etc. Such information empowers the homebuyers with adequate knowledge of the under-construction properties they intend to purchase.

2. Necessary Clearances

RERA Act has made it mandatory for builders and developers to obtain clearances before starting with the project. These property documents range from NOC and completion certificate to occupancy certificate. In addition to this, all the residential or commercial projects with land more than 500 square meters, or eight apartments have to be registered with the concerned states’ RERA.

3. Registration of Real Estate Agents

The RERA Act mandates the registration of every Real Estate Agent after which the agents will be allotted a registration number by the authority. This number must be quoted by the agent in every deal that is facilitated by her/him under this act. One cannot facilitate the sale or purchase of any project that is not registered under the act.

4. Balanced Agreement and Transparency

RERA ensures a balanced agreement between the developer and the buyer as opposed to the former having an upper hand in making contracts in his favour. The act also maintains transparency between both parties through stringent rules and regulations.

5. Ensures Construction Quality

As per the RERA Act, the developer is responsible for any structural damage caused to the property, up to 5 years from the date of handing over possession. He will have to pay for all the repairs that would be needed by the allottees. After being notified of any such defect, the promoter has to rectify it within 30 days. Failing to do so will make the aggrieved allottee entitled to receive appropriate compensation.

6. On-time delivery of Projects

RERA Act ensures that there is no delay in handing possession of the property within agreed timelines. In case of any default on the delivery date, the developer is liable to pay 2% interest over the above State Bank of India’s lending rate to the home buyers. The builder also risks imprisonment for up to three years. 

7. Sale based on Carpet Area

RERA Act defined the carpet area and standardized it as the basis for pricing the properties. Selling property based on the super built-up area has been prohibited. Along with this, a builder must have the consent of two-thirds of the buyers of the project before making any change to the design or structure of the project. 

Impact of RERA Act

RERA Act 2016 had a big impact on the Indian real estate landscape. Before this Act, the Real estate industry lacked transparency issues and was very unorganized, rampant corruption and malpractice was common.

Since its introduction, several important impacts have been seen in the Real estate Industry.

First, with the RERA Act enforced, all real estate projects must be registered with the regulatory body. After the RERA Act 2016 implementation, registration of the sale deed in the registrar can only be done after obtaining Occupancy Certificates or Completion Certificates.

This way RERA Act has helped the Realty sector to become more transparent, Developers more accountable, and brought trust in the transactions. Like before, developers can’t issue unit registrations without facing the legal consequences of not having a completion and occupancy certificate.

Also, Developers must share key information regarding projects, details such as carpet area, project timelines, and approvals on the RERA website. This provides potential buyers with accurate data, decreasing instances of deceitful practices.

RERA has also implemented a dispute resolution mechanism for conflicts between homebuyers and developers. By setting regulations and holding everyone responsible, the law has increased professionalism within the real estate industry.

RERA’s impact extends further than these aspects. It has revitalized the property market and attracted international investors. Additionally, RERA imposes severe consequences for rule-breaking builders, who may face fines equivalent to 10% of the project cost or even imprisonment for up to one year. Homeowners might also face jail time for noncompliance, amounting to three years, thereby enhancing the Indian real estate sector overall.

List of States with RERA Act Enforcement

RERA act is implemented by different states in India, with its own customized set of rules in each state, according to latest information 20 states and 6 Union Territories have successfully implemented RERA. 

The states are Andhra Pradesh, Assam, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand.

These are Union Territories that have implemented the RERA: Andaman & Nicobar Islands, Chandigarh, Dadra & Nagar Haveli and Daman & Diu, Lakshadweep, NCT of Delhi, Puducherry.

What are the Duties of Promoter Defined in the RERA Act?

The RERA act identifies and comprehensively defines solutions for various problems that were common in the real estate industry. Here are some provisions that you, as a homebuyer, must know of.

1. Quarterly Updates

The promoter of a project is responsible for publishing all the details of the project on the official RERA website, including:

  • The details of the registration granted by the Authority;
  • Quarterly update-do-date the list of number and types of property (apartments or plots) booked;
  • Quarterly up-to-date the list of number of garages booked;
  • Quarterly up-to-date the list of the approvals that have been taken and that are pending after commencement certificate;
  • Quarterly up-to-date the status of the project

2. Registration Number

A promoter must mention the registration number and the official RERA website where all the details of the project are mentioned, on the advertisement and prospectus. 

3. Advance Payment

The RERA act mandates that the promoter must not accept more than 10% of the cost of the property as an advance payment or application fee from a person. For more payment, both the parties must enter a written agreement for sale and register that agreement. 

4. Disclosure at the time of Allotment

As per the RERA Act, the promoter of a project is responsible for providing information such as stage-wise completion schedule, civic amenities, sanctioned and layout plans, etc. at the time of booking and issue of allotment letter. 

5. Completion and Occupancy Certificate

The promoter is responsible for obtaining the completion certificate for the Occupancy certificate or both (as per the local laws) and making it available to the allottees.

Additionally, the promoter is also responsible for executing a registered conveyance deed in favour of the allottee. This has to be done in favour of the allottee or the association of allottees within 3 months from the issue of the Occupancy Certificate.

6. Maintenance and Property Alteration

The promoter is responsible for providing and maintaining essential services, at reasonable charges, till this duty is taken over by the association of the allottees. 

Additionally, taking the consent of the allottee before making any changes to the plans for his/her unit/property is now essential as per the RERA act. Any additions or alterations in the plans for the buildings or common areas require the consent of at least two-thirds of the total allottees. 

Note: Here, the plans refer to the sanctioned plans, layout plans and specifications of the project as approved by the competent authority that were disclosed before the allotment. 

7. Transferring Rights

Under the RERA act, a promoter has to obtain prior written consent from two-third of allottees (except the promoter) and the RERA before transferring his majority rights and liabilities to a third party. 

8. Transfer to Association of Allottees

The promoter must hand over the necessary documents and plants, including common areas to the association of allottees within 30 days of obtaining the Occupancy Certificate.

9. Escrow Account

The promoter of the project or any person authorized by the promoter has to sign a declaration stating that 70% of the amount realized through the allottees will be deposited in a separate account which will be maintained by the scheduled bank.

This ensures that the builder uses the money only for the project concerned and not for the construction of any other projects, thereby reducing the chances of frauds and ensuring timely delivery of projects. 

Note: Developers are allotted a specified time period within which they have to complete the construction of the project. Though the act is very strict about handing over the possession on time, it allows extension of the construction period in the case of force majeure.

How can Allotters Claim for Compensation Under RERA Act?

If a promoter is unable to complete or provide possession of the property by the specified date or due to discontinuation of his business (or for any other reason), he is liable to pay compensation to the allottees. If the allottee wishes to withdraw from the project, the promoter must return the amount made by the allottee along with interest. In case an allottee does not intend to withdraw, the promoter has to pay him interest for every month of delay till the date of possession.

Duties of an Allottee

If the allottee delays a payment towards any amount of charge, he is liable to pay interest on such amount. Furthermore, It is the responsibility of an allottee to take physical possession of the property within a period of two months from the issue of the Occupancy Certificate. 

Real Estate Appellate Tribunal

The most important provision enshrined in the RERA Act is regarding the establishment of an Appellate Tribunal. As per the act, a tribunal was to be established within a year of the act coming into force. Any person aggrieved by the decisions, directions or orders of the Real Estate Regulatory Authority or the adjudicating officer can appeal to the Tribunal.  

  • Its primary focus is to prevent the developers, builders, or promoters from taking advantage of their customers.
  • The Tribunal has to address and dispose-off the appeal within 60 days from the date of its receipt. Failing to do so, the Appellate Tribunal has to record its reasons in writing for not disposing of the appeal within the time frame. 
  • The act ensures transparency in the system along with the timely delivery of projects. It also makes sure that the appeal of the aggrieved is being heard and resolved within a short span of time. 

Check if the Property is RERA Compliant?

It is very important to verify if property is RERA compliant before purchasing it, as RERA act insures buyers many rights and power such as, refund money from RERA account if project is delayed from promised time, also builders can’t modify structural plans without buyer’s consent, and in general it insures proper accountability by developer.

So these are some things to keep in mind for checking if a Property is RERA compliant:

  • If the property area is more than 500 square meters, the builder is mandated to register under RERA Act, before launching or advertising the project.
  • Builders should be able to prove that they have kept 70% of the total payment in a separate escrow account, this ensures that funds are only used to build the project not somewhere else.
  • Always first visit the official RERA site of respective state to check about the Project, and verify important information related to developer, project ID and list of registered projects. Verify if the developer is trustworthy by also checking his other projects and status of completion.

Also remember to check the RERA certificate, this certificate checks if a developer has completed all legal obligations related to RERA.

Penalties Listed in the RERA Act

Tabulated below are the offense-wise penalties for developers or builders if the project does not meet the requirements of the RERA act.

OffenceDefined Penalties
Allottees who do not comply with the provisions of the act or authorityFine for the default period which may extend up to 5% of the total cost of the apartment or building
Allottees who do not comply with the verdict of the tribunalImprisonment up to 1 year or everyday fine (till default continues). This fine can cumulate up to 10% of the cost of the building or apartment.
Promoter not registering the project with RERA10% of the total estimated project cost
Promoter not complying with the order issued by the competent authority on project registrationUp to 3 years imprisonment and/or an additional fine of 10%
of the estimated project cost
Promoter sharing false information regarding the project5% of the total estimated project cost
Not complying with the order issued by the tribunal10% of the total estimated project cost and/or imprisonment
of up to 3 years.
Agents selling properties without getting registeredRs. 10,000 penalty charged every day (the period for which the default continues). This may extend up to 5% of the estimated cost of the real estate project for which the transaction has been facilitated.
Agent does not complying with the verdict of the tribunalImprisonment for up to 1 year/fined every day till the default continues. This may further extend up to 10% of the transaction cost.

Registration of Project by Promoters and Agents Under RERA

For Promoters:

  1. Prepare a checklist of required documents, including the bank  account number opened as per Section 4(2)(I)(D) of the Act.
  2. Fill out Form A (the registration form) and Form B (promoter’s statement under Section 4).
  3. Submit Form G, This the draft version of agreement for allotment of the project.
  4. Provide an affidavit stating compliance with RERA rules and confirming that details filled in form G does not contradict the RERA rules.
  5. Also Provide another affidavit in which you declare that no advanced deposit was collected from prospective buyers regarding the project and in complete compliance with the provisions of section 3 of the Act.
  6. Pay for the fees which may vary in different states.
  7. Forward a copy of all the said documents with a duly signed cover letter through registered post to RERA authority concerned.
  8. Finally, fill out Form C to obtain the registration certificate.

For Real Estate Agents

  1. Fill up the application form and submit the documents along with the fee to RERA.
  2. A registration number will be sent to you. This number should be mentioned in sale of property.
  3. It is the agent’s responsibility to keep books of accounts, documents, and records of  all transactions on a quarterly basis.
  4. All the information and documents of the project have to be shared with the buyer.
  5. If you deliberately give misleading information during the registration process, your account could be suspended immediately.

Filing a RERA Complaint

According to Section 31 of RERA, Complaints can be filed against promoters, buyers, or agents. These are the steps to follow for registering complaint:

  • Access Your State’s RERA Portal: Locate your state’s RERA website, where you can lodge complaints through their online system.
  • Choose the Right Form: Utilize the mandated form for your state, like “Form M” for  Madhya Pradesh, and U for Uttar Pradesh.
  • Fill Out the Form Properly: Provide essential information, including personal data, project registration number, and a thorough description of your issue. Add any relevant documents if available.
  • Make the Complaint Payment: The typical fee is INR 1000. Once the form is submitted, go to the payment portal to finish processing the payment.
  • Send Your Complaint: Following the payment, re-enter the RERA website to officially submit your complaint. You will be informed about its submission status.
  • File an Appeal When Required: In case you are unsatisfied with RERA’s response, you may file an appeal with the RERA Appellate Tribunal using “Form L” within 60 days from the date of the decision.

What documents must be submitted by developers to register a project under the RERA scheme?

These documents required to be submitted by developers to register a project under the RERA scheme.

Identification and Proof of the Promoter’s Residence

  1. Images.
  2. Identification number.
  3. E-Mail ID.
  4. Start Certificate and Sanction Plan.
  5. Plan of arrangement.
  6. Details about the project’s location.
  7. The suggested path for the project’s execution.
  8. The availability of parking spaces within the project.
  9. Documentation confirming the promoter’s title to the land where the project is planned.
  10. Any previous project experience of the promoter, including project title, progress, and any instances of delays in completion.

Additional Documents are Required for Promoters who are Companies

  • The Certificate of Organization.
  • Numbers for CIN and TAN.
  • The constitution and the rules of the association.
  • The audited financial statements for the preceding three fiscal years, the audited report, and the director’s report.
  • The details of the directors or any other person with authority

FAQs

Q1. Are all projects registered under the RERA act?

While registering real estate projects has now been mandated by the RERA act, a property does not have to be registered if:

1. The area of the proposed development is less than 500 sq. m and the total number of apartments that are to be constructed does not exceed 8, in all the phases combined,
2. The completion certificate has been issued prior to the commencement of the RERA act,
3. A project is being renovated repaired or redeveloped and there is no involvement of marketing advertising selling or new allotment of the building,

Note: If there are multiple phases in a real estate project, then each phase is considered as a stand-alone project and needs separate registration under the act.

Q2. What documents have to be submitted by developers for registering a project under RERA?

To register a project under the RERA Act, the promoter has to enclose various documents along with the application. The developer also has to specify the number, type, and the carpet area of properties; area exclusive of the balcony, veranda, and open terraces; name and addresses of developers, real estate agents, contractors, architect, and structural engineer (if any) have to be disclosed. 

Q3.  What are the benefits of getting registered with RERA as a real estate agent?

1. It is required for all brokers to get registered under RERA Act for property related projects. This act gains confidence from clients and improves broker’s reputation.

2. Getting registered with RERA is a sign of competence and trustworthiness among all real estate stakeholders.

3. It safeguards consumers by encouraging openness and accountability in property transactions.

4. Competence and commitment to the real estate industry distinguish registered RERA agents from those who aren’t.

Q4. Are both residential and commercial properties covered by the law?

Yes, The law applies to both commercial and residential properties with exceptions to industrial and all non residential ones are included. There is no distinction made between future projects and current.

Q5.  Can homebuyers appeal against decisions made by the Real Estate Regulatory Authority (RERA)?

Yes, Appellate Tribunal is established by RERA Act to address and resolve appeals of homebuyers against decisions made by RERA or the adjudicating officer. It allows a window of 60 days to raise such appeals from the date it’s receipt, allowing aggrieved parties to have a fair opportunity to seek justice.

Q6. What is the role of the Real Estate Appellate Tribunal in resolving disputes?

Disputes arising from property transactions can be settled by the Real Estate Appellate Tribunal. Appeals against rulings, guidelines, or instructions issued by the adjudicating officer or the RERA are considered and decided by the appeal. The Tribunal protects all parties involved in real estate transactions and expedites the administration of justice.

Q7. What happens in case a term is used under the Act but has not been defined?

Section 2(zr) provides that terms that have not been defined under the Act or the Rules and Regulations made thereunder will have the same meaning as assigned to them under the relevant Municipal laws or under any law for the time being in force. This ensures the clarity and uniform interpretation of the terms used in Act 1.

Thus, the RERA Act aims to create a healthy and competitive environment in order to boost investment in the sector. Its provisions ensure that the Indian real estate industry is a safe haven for investors and home buyers. While there are many provisions that safeguard the rights of a homebuyer, not complying with the act also makes an allottee liable for penalties.

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