14 Key-Points Every Real Estate Investor Should Know in Perspective with RERA Act


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For a long time, the real estate sector in India operated without regulations, leaving homebuyers vulnerable to various issues such as delayed possession and project cancellations. In many cases, buyers had to bear the brunt of these problems, even after living in a property for 10-15 years, due to the builder's failure to obtain necessary government approvals. To make matters worse, filing complaints against such malpractices often resulted in lengthy legal battles.

However, to bring transparency and accountability to the real estate sector, the Real Estate Regulatory Act, 2016, or RERA, was introduced. RERA aims to establish a fair and equitable relationship between property sellers and buyers. It is designed to protect consumers from unfair practices and ensure their rights are safeguarded.

In this article, we will explore 14 key points that highlight how RERA benefits real estate investors. Before we delve into these points, let's take a look at some of the common loopholes and malpractices that builders and agents used to engage in within the real estate sector.

·       Delayed Project Completion: Builders often delayed completing projects, causing significant inconvenience to buyers.

·       Providing False Information: Builders and agents would sometimes mislead buyers with false information.

·       Diverting Funds: Funds intended for a specific project were occasionally redirected for other purposes.

·       Substandard Construction: Subpar construction quality was sometimes a concern.

·       Pre-Booking Rates: Special pre-booking rates were offered, which might not reflect the actual property value.

·       Empty Possession Date Clauses: Agreements sometimes lacked clear possession dates.

·       Altering Project Developments: Changes to project plans were made without obtaining consent.

 

Now, let's explore the 14 crucial rules under RERA that every real estate investor in India should be aware of:

1. Project Registration with RERA:

   - All commercial and residential real estate projects with a land area exceeding 500 square meters or comprising 8 or more apartments must register with the Real Estate Regulatory Authority (RERA).

   - Builders must disclose project details, including sanctioned plans, layouts, location with clear land demarcation, carpet area, garage information, and more.

   - Before entering into any contract, buyers can verify project details on the state's RERA website.

2. Quarterly Construction Updates:

   - Builders are required to provide quarterly updates on project progress, including the number and types of units sold, approval status, and completion schedules.

   - Any ongoing litigation related to the property must also be documented online.

3. Escrow Account:

   - Developers must transfer 70% of customer payments to an escrow account.

   - Money can only be withdrawn from this account after engineer and chartered accountant approvals, ensuring funds are utilized solely for the project.

4. Standardized Sale Agreements:

   - RERA mandates a standard sale agreement format to ensure fairness.

   - The agreement should specify project details, construction, possession dates, and other crucial aspects.

5. Maximum 10% Advance Payment:

   - Builders cannot accept more than 10% of the project's cost as an advance payment without a written sale agreement.

6. Defect Liability Period:

   - Developers are responsible for rectifying structural defects or poor construction quality for five years.

 

7. Carpet Area:

   - Developers must disclose apartment sizes based on carpet area, ensuring transparency in pricing.

8. Title Representation:

   - Builders must provide clear title representation, and buyers can claim compensation for title defects.

9. False Information:

   - Buyers can seek refunds if they paid based on false information from prospectuses or advertisements.

   - Builders may also face penalties up to 5% of the property's cost.

10. Timely Possession:

    - If a builder fails to provide possession on time, buyers can opt for a refund or receive interest for each month of delay.

11. Alteration Approval:

    - Builders need buyer approval for changes in individual flat plans and project layouts or common areas.

12. Transfer of Real Estate Project:

    - Builders cannot transfer major project rights and liabilities to a third party without two-thirds of buyer consent and RERA authority approval.

13. Agent Registration:

    - Real estate agents must register with RERA before selling or advertising properties, adhering to all regulations.

14. Grievance Redressal:

    - Buyers, promoters, or agents with complaints can file with RERA.

    - State regulatory departments aim to resolve disputes within 60 days, with further recourse to the Appellate Tribunal, high court, and supreme court if necessary.

 

In conclusion, RERA introduces significant reforms in the real estate sector in India, aiming to protect the interests of homebuyers, ensure transparency, and hold builders and agents accountable for their actions. As a real estate investor, understanding these 14 rules is crucial for making informed decisions and safeguarding your investments."

“14 Key-Points Every Real Estate Investor Should Know in Perspective with RERA Act”

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