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RERA Act - A boon to the home buyers


What is RERA - Real Estate Regulatory Authority

The Department of Housing, Government of Karnataka is the nodal department for implementation of the RERA Act in the State of Karnataka.

What is RERA ACT

The (RERA) Act passed in 2016 is one of the landmark in the legislations passed by Government of India. The Core purpose of this act is to completely reform the existing Real Estate Sector in India. The Act further encourages a complete transparent process and its aimed to be primarily citizen focused and to achieve accountability and also bring about a complete financial discipline, it also aligns with the ever growing Indian economy as will pave the right path for home buyers and also all forms of property investment.

The Act for Real Estate (Regulation and Development) Act, 2016 under Section 84 envisions that within a period of six months from its commencement date, State Governments will set the rules to carry out the provisions associated with the Act.

On 31 October 2016, the central government of India, through HUPA (Housing & Urban Poverty Alleviation) Ministry, have released a set of general rules of the Real Estate (Regulation and Development) Act, 2016 in India.

These rules are applicable to all the Union Territories like Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli and Andaman & Nicobar Islands.

Key Points under the REEA ACT

Transparency to the buyers: The Developers \ Builders are supposed to submit all of the original documents for all projects they have undertaken. They are further not allowed to make any changes to the plans without the prior to consent of the buyer.

To Be Fair: The act has made it mandatory and has instructed the developers and builders that they have to sell the property based on carpet area and not super built-up area. In any given circumstances that a project has been delayed, buyers are entitled to get back the entire money invested or they can choose to be invested and receive monthly investment on their money.

Security: The Act further clarifies that a minimum of 70% of the buyers’ and investors’ money will be kept in a separate account. This money will only be allotted to the builders for construction and land related costs. Developers and builders are not allowed to ask for more than 10% of the property’s value as an advance payment before an agreement of sale is signed.

Standards: The builder must swiftly rectify any issue that a buyer may face within 5 years of the property purchase & the same must be rectified within 30 days of the complaint.

Authorization: A regulator cannot advertise, sell, build, invest, or book a plot without registering with the regulator. Once the registration is complete with the regulator, all the advertisement for investments should bear a unique project wise registration number that is solely provided by RERA.

RERA in each Indian state is responsible for monitoring as well as well as adjudicate and arbitrate any disputes with respect to real estate projects in the concerned state.

An appellate tribunal and dedicated adjudicating officers – they are responsible for fast tracking the settlement of disputes.

Any New Real Estate Project must be registered with regulatory authority of the state RERA so that the regulatory authority will have complete jurisdiction over the newly registered projects. The registration of a particular project can be rejected by the regulatory authority if the developer does not adhere to the set guidelines.

If there is an event where a builder\promoter wants to transfer\assign a majority of your rights and liabilities in a real estate project to another third party, a written consent from two-thirds of the allottees will be needed in addition of the written approval of regulatory authority of the state - RERA.

If there is any forms of default from either by the promoter or the buyer then, both will parties are liable to pay an equal rate of interest.

In an event when a promoter\builder\ developer causes any losses to the buyer due to other people laying claim to property or litigations on the land with the title documents, and in the case where the property is under construction, the promoter will have to pay a compensation to the buyer. As of now there is no limitation set provided by any law currently with respect to the compensation amount that needs to be paid.

The provisions provided by the regulatory authority allows an individual to file a complaint with the Regulatory authority - RERA in the state.

During an Enquiry, The Regulatory authority RERA has the power to put breaks on the promoter \builder\ agent against whom the complaint is filed.

Further to the above if the decisions by regulatory authority is found unsatisfactory by the individual they can further escalate the issue to the Appellate Tribunal.

Any actions taken by the promoter which fails to comply with the regulatory authority's RERA passed orders, they are bound to pay a penalty. This could be up to 5% of the property evaluated cost. There could either be fine for up to 10% or imprisonment imprisonment for up to 3 years or there could also be both of the above outcomes in certain scenarios. In case of these offences the individual who is responsible for the business at the moment when the offence has been committed will held responsible, & Could face charges as per rules.

The civil court will have any jurisdiction and cannot grant any injunction, for the concerns and issues that is a part of the Regulatory authority RERA or of the Appellate Tribunal’s jurisdiction. .

Advantages of RERA

There are benefits with regulatory authority - RERA for buyers, promoters, builders alike.

Standardization of carpet area for property: A standard definition of carpet area is how a builder should calculate the price for the project unlike undefined methods, this will control the inflation of prices

Reduction in Risk Factors - In times of financial difficulty of the builder: Its common that promoters have multiple projects running and that are under construction, in due course of time they might move funds from one project to another, This will not be possible now since the regulatory authority RERA has set rules to set aside 70% of the funds raised need to be deposited in a separate bank account. These funds can be withdrawn only after certification by an engineer, a chartered accountant, and an architect.

Advance payment: The builder are not allowed to ask for more than 10% of the cost of the project from the buyer as an advance or other fees. This saves the buyer from having to source funds fast and having to pay a large amount.

Rights to the buyer in case of any defects: Within 5 years of possession, if there is any structural defects or problems in quality, the builder has to rectify these damages within 30 days at no cost to the buyer.

Interest to be paid in case of default: Prior to RERA, if the promoter delayed possession of the property, the interest paid to the buyer was much lower than if the buyer delayed payments to the promoter. This has changed with RERA and both parties have to pay the same amount of interest.

Buyer’s rights in case of false promises: If there is a mismatch in terms of what was promised by the builder and what has been delivered, the buyer is entitled to a full refund of the amount that was paid as advance. At times, the builder may have to provide interest on the amount as well.

If defect in title: If at the time of possession, the buyer discovers that there is a defect in the title of the property, the buyer can claim compensation from the promotor. There is no limit to this amount.

Right to information: The buyer has the right to know all the information about the project. This includes plans related to layout, execution, and completion status.

Grievance Redressal: If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA. If they aren’t pleased with RERA’s decision, a complaint can also be filed with the Appellate Tribunal.

The Impact of RERA Act

After the Real Estate (Regulation and Development) Act, 2016 enforcement, registration of sale deed of a project unit cannot be done in the office of the sub-registrar without obtaining Occupancy Certificates or Completion Certificates.

Fewer project will be launched as the promoters and builders will spend time to understand the impact of the Real Estate (Regulation and Development) Act, 2016. However, the honest promoters / builders / developers will benefit from this scenario as they will face lesser competition.

Dishonest builders will disappear as they will fail to sustain in the market after the RERA Act is implemented.

The 32 sections that have been added to the Real Estate (Regulation and Development) Act, 2016 will encourage a financial discipline in this sector.

After the Act implementation, the developers will have to follow several formalities if they wish to make certain changes to the project after its commencement. A short-term chaos might break out in the real estate industry but in the long run, it will boost the confidence of the customers and they will invest more.

The Karnataka Government RERA website: is a one stop solution for all rear act and the process and procedure for property that are within Karnataka.

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