Geographically, India is the seventh largest country in the world with around 3,287,240 sq. km area. Real estate is a highly recognized and regulated sector globally. In the past few decades, this sector has proliferated largely in India, making it the second-largest player in the world economy. Until 2016, apart from the general consumer and property laws in the country, there was no specific statute to regulate and govern this sector. This led to many anomalies resulting in various unfair practices, which ultimately affected the homebuyers adversely. Therefore, this Government passed The Real Estate (Regulation and Development) Act, 2016 so as to ensure transparency and accountability.
Real Estate sector is one of the largest contributors to the economy and the second largest employer. Real Estate Sector contributed around 7% to India’s GDP in 2018-19 and its share is expected to grow to around 13% of India’s GDP in 2025. Clearly, growth of Real Estate Sector has serious socio-economic gains to offer. Real Estate is an important sector with strong forward and backward linkages, particularly with the core sectors of the economy, such as steel, cement and other buildings materials.
It directly/ indirectly impacts 270 different industries. Apart from real economy, an upswing in Real Estate Sector has strong implications for other sectors as well, especially the financial sector. Private players have important role to play in rejuvenating existing cities & sculpting new growth centres, especially in available urban land parcels.❖ Era of RERA:
With the enactment of Real Estate (Regulation and Development) Act, 2016 [RERA], the Country got its first real estate regulator.
In pre-RERA era, Indian Real Estate sector was largely unregulated till the year 2016, which led to many anomalies resulting in various unfair practices, which ultimately affected the homebuyers adversely. Real Estate Sector was facing various issues and irregularities such as duping of homebuyers by builders through various malpractices, rampant use of black money, diversion of funds and lack of accountability. In the absence of any specific law to regulate this sector, homebuyers were constrained to seek remedy under the laws such as- Indian Contract Act and Consumer Protection Act, involving lengthy litigation process. There was no recourse to any speedy grievance redressal mechanism in case of any genuine problem faced by either the homebuyers or developers. In other words, for want of a preventive law, recourse was made to curative measures.
Despite full payment, homebuyers were facing problems regarding the timely completion and delivery of homes. Builders would unscrupously divert funds to other lucrative investments and the homebuyers would not only loose their life time savings but also be saddled with the burden of repaying the loan along with interest to the banks with no roof of their own over their heads.
Due to one-sided agreements tilted heavily in favor of developers, homebuyers were forced to pay various extra charges including cost escalation whereas developers were not held responsible even in case of any contravention of promised deliverables. Moreover, there was unequal rate of interest to be paid by the promoters and buyers in case of default or delays thus bringing inequity and injustice in operations. Home buyers would fall prey to unscrupulous builders, luring them to invest in nonapproved projects, promising high returns. Developers used to mislead homebuyers by making false promises regarding various features, layout and amenities of project but later retracted on the same.
Therefore, a need was being felt for long time to regulate the sector in such a way so as to ensure transparency and accountability.
RERA marked the beginning of a new era in the Indian real estate sector and a step towards reforming the real estate sector in India, encouraging greater transparency, citizen centricity, accountability and financial discipline. The core objective of this transformative legislation is to ensure regulation and promotion of real estate sector in an efficient and transparent manner and to protect the interest of the home buyers.
RERA ensures Good Governance through greater transparency & accountability. RERA is aimed at establishing real estate regulatory authority for regulating and promotion of the real estate sector, ensuring efficient and transparent transactions and establishing an adjudicating mechanism for speedy dispute redressal, thereby protecting the interests of consumers. It seeks to address vital issues of fair transactions, timely delivery and quality construction. Enactment of the RERA marked the beginning of a new era in Real Estate Sector as a step towards reforming the sector, encouraging greater transparency, citizen centricity, accountability, and financial discipline, thus empowered the home buyers. Section 2, Sections 20 to 39, Sections 41 to 58, Sections 71 to 78 and Sections 81 to 92 came into effect from 1st May, 2016 and remaining sections were notified with effect from 1st May, 2017.
RERA, a transformative legislation, seeks to address vital issues of fair transactions, timely delivery and quality construction through speedy adjudication of disputes. Now under era of RERA, homebuyers’ interests are protected as only registered projects can be launched. Implementation of RERA is bringing in much required positivity, transparency and accountability in real estate sector. It has boosted the confidence of investors as well.❖ Salient Features of RERA:
• Registration with Regulatory Authority of Real Estate Projects of above 500 square meters and above 8 apartments is mandatory. RERA extends to residential and commercial real estate. It applies to both private and public bodies engaged in sale.
• Promoter is not permitted to advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, in any real estate project or part of it, in any planning area, without registering the real estate project with Regulatory Authority.
• Every promoter while making application for registration has to make disclosure of all the relevant information and documents related to its real estate projects such as details of promoters, layout plan, plan of development works, land status, status of the statutory approvals, number of parking, time period for project completion etc. for public viewing; and comply with approved plans and project specifications.
• The promoters must upload details of the project on the website of the Regulatory Authority. These include the site and layout plan, and schedule for completion of the real estate project etc. This would bring transparency in sector.
• RERA provides for comprehensive list of disclosures to be made by the promoters while applying for registration of the projects. Those disclosures are meant to reveal true nature of the project as well as background of the promoters to the general public. These disclosures are meant to enable prospective buyers to take informed decisions about investing their money in a particular project.
• RERA mandates the promoters to deposit 70% of the amount collected from homebuyers for a project in a separate bank account and only be used for construction of that project only and land cost. Withdrawal of money from this account shall be done after certification of engineer, architect & chartered accountant with regards to project completion.
• Promoter is not allowed to make any major alterations or additions in the sanctioned plans, layout plans and specifications of the buildings or the common areas within the project without the previous written consent of at least 2/3rd of the allottees.
• In case of any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale brought to the notice of the promoter within a period of 5 years by the allottee from the date of handling over possession, it shall be the duty of promoter to rectify such defects without further charge, within 30 days. If promoter fails to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under RERA.
• If developer fails to complete the project as per terms of agreement for sale, homebuyer can either seek refund of paid amount along with interest or ask for interest for every month of delay, till the handing over of the possession.
• RERA provides for a fast-track dispute resolution mechanism by making the provision of disposal of matter by Adjudicating Officer, Real Estate Regulatory Authority and Appellate Tribunal within 60 days.
• RERA provides for fast-track dispute resolution mechanism through Real Estate Regulatory Authority and Appellate Tribunal and Adjudicating Officers within prescribed 60 days timeframe.
• Under the provisions of RERA, the Developers have to enable the formation of Association of homebuyers/Residents and after paying all outgoings, execute a registered conveyance deed for common areas in favour of Association of homebuyers.
• RERA has brought transparency and enabled the availability of project information thereby promoting informed decision making. The Disclosure of ‘carpet area’ for sale has curbed unfair trade practices.
• RERA also provides strict penal provisions of imprisonment in addition to provisions for refund, interest and penalty in case of non-compliance by developers, allottees and agents.❖ Implementation Status of RERA (as on 22nd May, 2023):