RERA, the regulatory Act for the real estate sector was passed in the year 2016 and implemented the following year to ensure fair practices in this sector. It also implements rules for the imposition of penalty on erring builders, protecting the overall interest of buyers as well as other parties involved.
As of July 2020, almost 50,000 customer grievances were resolved under this Act, ensuring greater transparency in the sector.
● Out of this impressive number, around 57% of the matters were resolved in just the last year alone.
● This percentage corresponds to almost 27,600 cases.
The Real Estate Regulatory Authority (RERA full form) Act was introduced to bring the much-needed clarity for real-estate buyers, ensuring that builders and real estate developers could no longer overcharge or sidestep an average homebuyer of any benefits.
Still, a potential buyer should know his/her rights under this important Act to ensure a favorable transaction.
RERA: A brief introduction
As stated previously, the primary objective of the Act was to reduce any hassle for real estate buyers, while also limiting the risk of malpractice. With respect to that, all completed, as well as under-construction building projects with a RERA registration, need to stick to a rigid schedule when it comes to completion and handover to owners.
Lastly, with this Act, an online portal was also introduced, wherein prospective homebuyers can check extensive details of any housing project where construction is underway. They can also check whether their real estate agents are registered with the Act or not to ensure a fair and legally valid transaction.
Impact of the Act on the real estate sector
Before regulations came into place, the Indian real estate sector operated with benefits mostly channeling to the developers but often missed on protecting buyers’ rights. However, after RERA’s implementation, developers encountered immense challenges regarding their undefined practices, with regulations under the Act enforcing them to reassess their operations.
While everyone associated with the sector knew RERA was going to alter the real estate market, how the change would transpire remained a matter of debate. The following are some major impacts of this Act on the sector as a whole.
● Restrictions imposed on funneling advances from customers
Real estate companies often followed a shady practice of diverting advances from a customer toward the completion of other projects. While doing so helped developers continue work on several building projects at once, this process lacked transparency for customers.
With no disclosure of how their advances were utilized, these customers often remained in the dark. The RERA Act thus restricted such a practice by mandating the utilization of 75% of such advances to the concerned project.
● The Act alongside other economic factors slowed the real estate sector
India’s real estate sector was booming before 2016. However, with the introduction of this Act, demonetization, and the liquidity crunch of 2018, the real estate sector suffered substantial setbacks. Four years down the line, developers are still unable to recover from these effects.
Thus, the introduction of RERA led to depreciating property prices. Although such a change hampered the industry as a whole, it helped homebuyers acquire their choice of residential property conveniently. This recovery is one of the reasons to invest in real estate now.
As a potential homeowner, you must also know about the various other benefits that first-time homebuyers can experience with RERA.
Benefits of the Act for customers
One primary advantage of this new regulatory system is the heightened transparency it brings for homebuyers.
● According to GRETI, a global real estate transparency index, India is currently ranked at 34.
● In 2014, India’s rank was 39, which underwent a change after the Act came into effect.
Listed below are some of the distinct advantages of the Act for real estate customers –
● A standardized system of carpet area calculation
Previously, builders employed different procedures to calculate the carpet area of a residential project, leaving customers confused. Nevertheless, builders now registered under the Act need to follow a standardized calculation process. Since the carpet area of a home is inherently tied to its price, a distinct calculation method helps ensure transparency. It thus allows homeowners to make an informed decision during property purchase.
● Equal interest liabilities for builders and customers in case of delays
Under the Act, both homeowners and project developers are liable to pay equal interest to the other party in case of delays. Previously, builders would need to pay a smaller interest amount in case of completion delays as opposed to customers.
The latter thus needed to service significant sums as interest in case of payment delays, widening the pay gap with further delays. Such an unequal system has now been scrapped to ensure equality in interest levy for both parties.
● Limitation on advance payment
Builders cannot charge more than 10% of a property’s price as an advance when booking a home. Such a cap on charge should reduce funding challenges, especially for individuals financing their property purchase with a home loan.
Read Also: Simple and secure ways to purchase a home under MahaRERA
Speaking of home loans, financial institutions in India only provide such credit to applicants if the property in question is registered under this Act. Individuals buying such registered houses can also acquire additional benefits from their lenders.
For instance, borrowers should opt for an HFC that provides pre-approved offers to accelerate the lending process. These offers are available on several financial products, such as home loans and loans against property. Borrowers can check their pre-approved offers only with their essential contact details.
It can thus be concluded that the implementation of RERA has led to several distinct benefits for homebuyers while checking any deviations from standard practices as specified under the regulations. It has ensured that they no longer fall victim to malicious practices within the sector. Now that you know all about the RERA Act, ensure you take advantage of it when buying a home.
