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RERA Revolution: How It Makes Real Estate Investing Safer and More Secure

  • User Icon By Atharvlifestyle
  • Calendaer Logo June 11, 2024
  • Grid List Icon Uncategorized
RERA Revolution: How It Makes Real Estate Investing Safer and More Secure

The Real Estate (Regulation and Development) Act, 2016 (RERA), enacted by the Indian Parliament, marks a transformative shift in the real estate sector, empowering consumers with new protections and transparency. This legislation enables the establishment of the Real Estate Regulatory Authority (RERA) in each state to oversee the sale of plots and residential or commercial properties, ensuring efficient and transparent transactions while safeguarding investors’ interests..

RERA was passed by the Rajya Sabha on March 10, 2016, and by the Lok Sabha on March 15, 2016. It came into effect on May 1, 2016, offering significant protections for both builders and buyers. This landmark law has ushered in unprecedented transparency and accountability within the real estate industry.

Benefits of the RERA Act

RERA offers numerous advantages to various real estate stakeholders, including developers, consumers, and agents. These benefits are:

Standardization of Carpet Area

Prior to RERA, there was no uniform method for calculating carpet area, leading to confusion and disputes among builders, buyers, and third parties. RERA has now standardized this definition, specifying that carpet area refers to the net usable floor area of an apartment, excluding walls, shafts, and balconies. This clarity has made property pricing more transparent and reduced the risk of disputes.

Reduced Risk of Builder Bankruptcy/Insolvency

Builders often manage multiple projects simultaneously and previously had the liberty to transfer funds from one project to another. This practice led to delays in project completion and possession. Under RERA, builders must deposit 70% of the project cost into a separate bank account, restricting fund withdrawals until project completion is certified by an architect, civil engineer, and chartered accountant. This regulation ensures that projects are completed on time and reduces the risk of insolvency.

Advance Payment Cap

RERA restricts builders from demanding more than 10% of the property’s cost as an advance payment, fostering trust and protecting consumers from the burden of making large upfront payments.

Buyer’s Right to Defect Rectification

If any structural defects or damages are found within five years of possession, builders are required to rectify them at no additional cost to the buyer. Repairs must be completed within 30 days of reporting. If the builder fails to address the issue, the consumer can claim compensation through a dispute resolution process.

Consumer Rights in Case of Possession Delays

Before RERA, delayed possession was a common issue, leaving investors’ funds tied up for years. RERA empowers consumers with the right to withdraw from a delayed project and receive a full refund with interest. Alternatively, consumers can choose to continue with the project and receive compensation with interest for the delay.

Right to Information

Investors have the right to full disclosure about the project, including layout, design, execution, and completion status. Builders are legally obligated to provide accurate information under RERA.

Protection Against Title Defects

RERA allows consumers to seek compensation from builders in case of title defects, ensuring legal protection and financial redress.

Grievance Redressal

Consumers, concerned parties, or authorities can raise grievances with RERA at any project stage. If unsatisfied with RERA’s decision, consumers can appeal to the Appellate Tribunal.

Enforcing Timely Project Delivery

  • Withdraw their booking and receive a full refund with interest.
  • Continue with the project while receiving monthly interest payments until possession is granted. Refunds must be issued within 45 days of becoming due.

Verification of RERA Registration

All builders must register their projects with RERA and obtain a registration number before selling. Project details, construction progress, certificates, and sales information must be regularly updated on the RERA portal, ensuring transparency.

Financial Safety via Escrow Accounts

RERA mandates that developers deposit at least 70% of the buyers’ money for a project into an escrow account, preventing the diversion of funds to other projects. This measure significantly reduces the risk of project delays.

Verifying Builder’s Track Record

Buyers can now choose properties from reputed developers who comply with RERA norms. This ability to verify a developer’s track record and financial stability enhances buyer confidence. RERA has revolutionized the real estate sector by introducing transparency, accountability, and consumer protection, making real estate investing safer and more secure for all stakeholders.