REAL ESTATE REGULATORY AUTHORITY
(RERA) ACT 2016
SHASHANK. S
VINAY YADAV
VII - T
The Real Estate (Regulation and Development) Act, 2016 is an Act of the Parliament of India which
seeks to protect home-buyers as well as help boost investments in the real estate industry.
RERA BILL : 2013 The Bill was Proposed
RERA ACT : 2016 The bill was passed and it became an act.
RERA IMPLEMENTATION : 2017 The act was finally implemented.
Why this RERA ACT?
Systematic Approach
Enhanced Transparency
Safeguard Buyer Interest
Ensure Accountability
Timely Project Completion
Improved Credibility in the Long Run
Uniform Regulations and Guidelines
RERA ACT CONSTITUTES
Builder’s Liability:
•5 Year Warranty for Structural Defects
•Liable to pay equal interests in case of default and delays
•Bound by Law to refund payments collected in case client exits, within 45 days
Home Buyers and Exit Clause:
•Freedom to exit the project at any stage of construction
•Is not entitled to the booking amount paid to the builder
•Buyer can terminate the agreement in case of delays and is entitled to refund
Definitions:
•Carpet Area – definition of the term and mandated for the builder to mention Carpet Area
•Escrow Account – separate account for each project to be used for that specific account only (70 percent)
ALSO IT LAYS DOWN RULES AND REGULATIONS FOR
Establishment of State RERA
Registration and Public Disclosure of RE Projects
Adherence to Project Plans (layouts / designs)
Phase-wise Project – each phase a separate project
Residents Welfare Association (based on units allotted – within 3 months)
Real Estate Agents to Register with RERA
Advertisement and Marketing of Projects as per Actuals
Guidelines for Home Buyers
SCOPE OF RERA
● Both residential and commercial real estate projects are covered under the Act.
● The real estate developer needs to register the project with the concerned State RERA Authority
and obtain a valid registration number before starting the project. On non-compliance, despite the
project meeting RERA criteria, the authority can levy a penalty of up to 10% of the project cost.
● The registration is time bound and valid only for a specified period mentioned in application form. It
is mandatory for the real estate developer to adhere to the specified timelines, otherwise he/she will
be subjected to losses and penalties.
● The Act also applies to on-going (under-construction) projects i.e. the projects and buildings which
haven’t received their occupancy certificate
● The RERA criteria as per the Act is projects on 5000 sq.mt. area or with eight flats.
IMPACT ON SELLERS
+ POSITIVE IMPACTS - NEGATIVE IMPACTS
• Increase efficiency – • Initial Backlog –
Due to compliance requirements Additional effort to get existing projects registered,
clear unsold inventory
• More best practices –
Only genuine builders • Increased project cost –
Window of price escalation reduced & Only legal
• Consolidation of sector – funds to be used
Established builders with funds will survive
• Tight Liquidity –
• Corporate branding – No more pre-launches to generate funds
Through Quality and compliance
• Rise in cost of capital –
• Higher investment – Increased construction cost
Due to less risk and increased transparency
• Consolidation –
• Increase in organized funding – No more fly by night builders
Due to inherent nature of the law
• Increase in project launch time –
Raising funds & Getting required approvals
IMPACT ON BUYERS
+ POSITIVE IMPACTS - NEGATIVE IMPACTS
• Significant protection – • Rise in prices –
RERA assurance Due to increased project cost –
Compliance to committed quality –
• Quality products and timely delivery – Only genuine and branded builders
Commitments to match reality
Penalties for delays • Less negotiation power for buyers –
Increased transparency
• Grievance redressal mechanism in place –
One of the objectives of RERA • Almost white transactions –
Little scope for cash transactions
• Balanced agreements –
No hidden clauses • Supply likely to reduce –
Builders will initiate less risky projects
• Carpet area –
Disclosed upfront as per RERA • Demand likely to go up –
Increased confidence among buyers
• Transparent utilization of buyer’s money –
Reduced cross utilization of funds
IMPACT ON CONSTRUCTION INDUSTRY
The real estate and construction industry had widely welcomed the passage of Real Estate (Regulation &
Development) Act, 2016. The impact of RERA on the construction sector are:
1. All new projects are required to be registered with the regulating authority. This will help provide greater
transparency about the project for the customers. If a developer fails to register his property, he will have to
pay up to 10% of the project cost as a penalty.
2. As per the new Act, developers cannot collect more than 10% of the value of the project in advance unless
a sale deed has been executed.
3. Developers must adhere to sanctioned plan and specifications – For customers, this means that they can
avoid delays in construction schedule due to the subsequent change in plan/layout made by the developers.
Under the law, if there is a delay in completion, the developer is liable to pay the same interest as the EMI
being paid by the customers back to the customer.
4. In case of any structural or other defects found within 5 years by the buyers, developers have to bear the
responsibility of repairs. This will boost the demand for good quality of construction and buyers will have
increased willingness to pay a good price for good quality buildings.
5. Developers have to put aside 70% of project funds in a dedicated escrow account linked to the project. This
will act as an incentive for developers to use allocated funds for the specific project and prevent them from
diverting the booking money to invest in other projects.
6. Norms on the size of projects to be registered with RERA has been made 500 sq.m. instead of 1,000 sq.m.
The law states that super built-up area is no longer valid – properties have to be sold on clearly defined carpet
area.
7. Other than developers, real estate agents must also register with their State RERA.
8. Developers have to post details like the project plan, layout plan, approvals, land title status, details of
promoters, contractors, architects, date of completion with the State RERA – Customers can access this
information from the RERA websites.
9. Any violation of an order by the RERA Appellate Tribunal will invite jail term of a maximum of 3 years or
more. Real estate agents will face the penalty up to Rs 10,000 per day during the period of violation.
10. These measures will increase transparency during the funding phase which will invite increased foreign
Investment.
11. Most importantly, as developers will be held accountable for details furnished, they will have to ensure that
false promises are not made to homebuyers.
