Real Estate (Regulation and Development) Act

Why in news?

• The Supreme Court stepped in to protect home buyers from exploitation by builders, who delay transfer of possession and often re-draft delivery schedules on their whim and fancy.

More about the news:

• The court was hearing a petition filed by an advocate on the lack of a ‘uniform or model’ form for agreements entered into between builders, agents and buyers
• The petition said Real Estate (Regulation and Development) Act (RERA) of 2016 had hardly been implemented.

About Real Estate (Regulation and Development) Act:

• Real Estate (Regulation and Development) Act (RERA) seeks to protect home-buyers as well as help boost investments in the real estate sector by bringing efficiency and transparency in the sale/purchase of real estate.
• The Act establishes Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution.

Need for the RERA:

• Unregulated:
  • Real estate sector had been largely unregulated, no standardization of business practices and transactions.
  • This led to prevalence of issues like delays, price, quality of construction.
• Diversion of funds and cheating:
  • Diversion of funds received by the developer towards one project to more lucrative ones
  • Developer changes the layout or building plans after purchase
  • There are numerous instances where developers cheated property buyers.
• Huge cost overrun due to delays in projects.
• Lack of grievance redressal mechanism.
• Huge generation of black money in real estate sector.

Objectives of RERA

• Enhance transparency and accountability in real estate and housing transactions.
• Boost domestic and foreign investment in the real estate sector.
• Provide uniform regulatory environment to ensure speedy adjudication of disputes.
• Promote orderly growth through efficient project execution and standardization.
• Offer single window system of clearance for real estate projects.
• Empower and protect the right of home buyers.

Key Provisions of the Act:

• Establishment of state level regulatory authorities - Real Estate Regulatory Authority (RERA):
  • The Act provides for State governments to establish more than one regulatory authority with the following mandate:
    • Register and maintain a database of real estate projects; publish it on its website for public viewing,
    • Protection of interest of promoters, buyers and real estate agents
    • Development of sustainable and affordable housing,
    • Render advice to the government and ensure compliance with its Regulations and the Act.
  • RERAs are intended to perform the same role for your property transactions as the SEBI does for security transactions in the capital markets
• Establishment of Real Estate Appellate Tribunal
  • Decisions of RERAs can be appealed in these tribunals.
• Mandatory registration:
  • All projects with plot size of minimum 500 sq.mt or eight apartments need to be registered with Regulatory Authorities.
• Deposits:
  • Depositing 70% of the funds collected from buyers in a separate escrow bank account for construction of that project only.
• Liability:
  • Developer’s liability to repair structural defects for five years.
• Penal interest in case of default:
  • Both promoter and buyer are liable to pay an equal rate of interest in case of any default from either side.
• Cap on Advance Payments:
  • A promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale.
• Defines Carpet Area as net usable floor area of flat. Buyers will be charged for the carpet area and not super built-up area.
• Punishment:
  • Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.

PRELIMS QUESTION

With reference to ‘Real Estate (Regulation and Development) Act’, consider the following statements:

1. The Act provides for establishment of state level regulatory authorities

2. All real estate projects irrespective of their size need to be registered with regulatory authorities under the Act.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer