Parth was looking to buy a new home. After a long search, he finalised a property with an ideal location and all amenities. But the new Real Estate (Regulation & Development) Act, 2016 raised several questions for Parth. While real estate experts had positive reviews about RERA, Parth didn’t know how it would impact his decision to invest in a real estate property.
Let’s take a look at how RERA Act, 2016 will serve home buyers like Parth
What is RERA and What are its Objectives?
RERA stands for Real Estate Regulation and Development Act. This Act was passed with a view to protecting the interest of real estate investors from the wrongful activities of builders and promoters. The Act has various investor-friendly rules and aims to make the real estate investment simple and transparent.
Here is a list of some very common questions which investors and builders have with regards to RERA.
- Who is Called a ‘Promoter’ Under the Act?
According to the Act, all private as well as public bodies, development authorities and housing boards who develop real estate projects with an intention of sale are called promoters. Moreover, in case of joint development of a project, all involved promoters are held liable for the development and sale of the project and any relevant grievances from the investors.
- Who is an Allottee Under the Act?
According to Section 2(d) of the RERA Act, an allottee is a person who acquires a particular apartment or plot through transfer or sale but excludes the person to whom the apartment or plot is given on rent.
- Are ‘Completion Certificate’ and ‘Occupancy Certificate’ Same?
No, a ‘completion certificate’ is very different from an ‘occupancy certificate’. According to Section 2 (q), completion certificate is for the completion of the total project. The certificate certifies that the project has been developed in line with the layout plan, sanctioned plan and specifications which were approved by the competent authority.
Contrary to this, according to Section 2 (zf), occupancy certificate certifies the occupancy of the apartment or building. The apartment or building must have minimum provisions for civic infrastructure like water, electricity and sanitation and should be habitable.
- Are Residential and Commercial Properties both Covered Under RERA?
Yes, the RERA Act covers both residential as well as commercial properties which are still under construction and have not been completely developed.
- What are Separate Account and Escrow Account?
As defined by Section 4 (2)(I)(D), every promoter is required to maintain a ‘separate account’ for every project which is undertaken by him. In the separate account, 70% of the money received from the allottees should be deposited and the money should be used for construction and land related costs. The account should be self-maintained by the promoter. The separate account would not be considered as an escrow account as the escrow account requires the authority’s approval for making any withdrawals.
- What Happens When the Construction Quality is Bad?
If the quality of construction is bad or if there is any structural defect or workmanship defect in a completed project, the promoter is held liable for up to 5 years. If the home buyer notices the bad construction quality and notifies the same to the promoter within 5 years of buying the house, the promoter would have to bear the costs of correcting the defects.
- What Would be the Punishment for a Delay in Delivery of Houses?
The promoter is held liable for delays in completion of the project beyond the stipulated date. For any delay, the promoter is required to refund any amount of money received from the investor along with applicable interest. However, if the home buyer does not want to get the money refunded and wants to buy the house despite a delay, the promoter would have to pay an interest charge to the buyer for every month of delay. The rate of interest is usually mentioned in the sale agreement.
- Under What Circumstances can the Promoter Withdraw Money from Separate Account?
Withdrawal from separate account is permitted only for covering the cost of the project and then too the withdrawal should be in proportion to the rate of completion of the project. Moreover, withdrawal is allowed only after an engineer, an architect and a chartered accountant certifies that the withdrawal is in proportion to the completion of the project.
- Does RERA Cover Real Estate Agents too?
Yes, real estate agents are also required to be registered with RERA to get a valid registration number which would allow them to represent real estate developers.
- Is RERA Applicable in All States?
Yes, RERA applies to all Indian states except Jammu and Kashmir.
The RERA Act aims to bring transparency and accountability in the real estate sector and address issues faced by home buyers and investors.