RERA aims to improve the state of the industry, which in turn could pave way for rise in confidence and investments
India introduced the Real Estate (Regulation and Development) Act, 2016 ('RERA') partly on May 1, 2016 and fully on May 1, 2017. It is necessary to know the implications of RERA, as it is applicable throughout India and its provisions are to be observed mandatorily by promoters, purchasers and real estate agents ('Agents').
Till now there was no pan-India central legislation applicable to the real estate industry. The definition of a 'Real Estate Project' under RERA includes not only apartments and buildings, but also plots of land.
The development of layouts and sale of plots in India is now governed by RERA, which aims to bring the unregulated housing sector under its ambit and usher in an era of transparency and accountability.
Several states in India are required to appoint a Real Estate Regulatory Authority, ('Authority'), which is empowered to exercise administrative, executive, regulatory and judicial functions at the state level. A real estate project must first be registered with such an authority by means of a detailed application, coupled with a declaration and an affidavit by the Promoter. Once registration is completed, all requisite information and particulars in regard to the project will be published on the web page of the Authority as well as on the website of the Promoter.
RERA necessitates for the first time, the stringent specification of declaring the date of completion of a project, which is not easily extendable on frivolous grounds. Similarly, RERA has now stipulated that 70 per cent of the amount received by the Promoter for a project classified as an 'Under Construction Project' will have to be deposited in an escrow account or a special designated account and can only be withdrawn in the case of pro rata construction of the Project, vis-à-vis the apartment sold, after obtaining certification from three professionals, i.e. an Architect, Engineer and Chartered Accountant.
Experience shows that in India, the major reason for delay in the execution of real estate projects is largely because promoters divert the sales proceeds of one project to another and overtrade in business.
This malady is curbed by RERA, which prescribes that 70 per cent of such sales proceeds be deposited in an escrow account and that the withdrawal of such amounts be controlled by a stringent regulatory mechanism.
Further, RERA has for the very first time come up with a, 'Self Sufficient Legislation Scheme', which controls and provides, from the inception of a real estate project to its completion, a Dispute Resolution Mechanism together with a comprehensive Adjudicating Mechanism, all in a single legislation.
RERA also provides for a time bound scheme of adjudicating disputes between the promoter and purchaser and prescribes a period of 60 days for dispute resolution in the first instance and a further 60 days for any appeal from the Order of the Authority.
There are various states like Maharashtra and Karnataka that have local laws, but these are not comprehensive and RERA provides an overarching central legislation, which is a complete code by itself.
It is pertinent to note that not only does a real estate project have to be registered but even real estate agents must be registered under RERA. Unregulated agents operating in the market were responsible for numerous malpractices but now, like America, Europe and the U.K., India also has a system in place for 'Registered Real Estate Agents' to conduct the business of marketing real estate projects.
These registered agents are subject to stringent provisions under RERA and this will bring about immense discipline and accountability on the part of these agents.
RERA has paved the way for systemic changes in the manner in which Indian promoters think and operate. It will change the way the Indian real estate industry acts and responds to the market and the consumers, in turn following, the several compliances prescribed under the law.
Without a shadow of a doubt, RERA will bring in a great deal of professionalism in the real estate industry, and also lead to standardisation of the product and the process of functioning of the industry at large. In its truest sense, RERA has brought the real estate industry under its regulatory regime.By: Parimal K. Shroff
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