RERA and its benefits to the consumers "EMPOWER IAS"

In news:

• The article highlights the various provision of RERA and its overall impact on the sector.

 

How it changed the real estate sector

• Real Estate (Regulation and Development) Act (RERA) was enacted in 2016 and it had been in the works for more than a decade.
• RERA has infused governance in a hitherto unregulated sector.
• Along with demonetisation and GST, it has, to a large extent, cleansed the real estate sector of black money.
• It has transformational provisions, conscientiously addressing issues which have been a constant bane for the sector.

Introduction

• Real Estate (Regulation and Development) Act (RERA) is an act passed by the Parliament in 2016 that came into effect fully from 1st May, 2017.
• It 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 RERA

• Real estate sector had been largely unregulated, no standardization of business practices and transactions.
• Prevalence of issues like delays, price, quality of construction. Delays in projects had been a major issue plaguing real estate sector- huge cost overrun due to delays.
• Numerous instances where developers cheated property buyers.
• No 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 Real Estate Regulation Act

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• 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.
• 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.

 

Important provisions of RERA

• The Act stipulates that no project can be sold without project plans being approved by the competent authority and the project being registered with the regulatory authority.
• This provision ended the practice of selling on the basis of deceitful advertisements.
• Promoters are required to maintain “project based separate bank accounts” to prevent fund diversion.
• The mandatory disclosure of unit sizes based on “carpet area” strikes at the root of unfair trade practices.
• The provision for payment of “equal rate of interest” by the promoter or the buyer in case of default reinforces equity.
• These and many other provisions have empowered consumers, rectifying the power asymmetry prevalent in the sector.

   

How RERA is an effort in cooperative federalism

• Though the Act has been piloted by the Central government, the rules are to be notified by state governments.
• The regulatory authorities and the appellate tribunals are also to be appointed by them.
• The regulatory authorities are required to manage the day-to-day operations, resolve disputes, and run an active and informative website for project information.
• Since RERA came into full force, 34 states and Union territories have notified the rules, 30 states and Union territories have set up real estate regulatory authorities and 26 have set up appellate tribunals.
• The operationalisation of a web-portal for project information, which is at the heart of ensuring full project transparency, has been operationalised by 26 regulatory authorities.
• Around 60,000 projects and 45,723 real estate agents have been registered with regulatory authorities.
• Twenty-two independent judicial officers have been appointed to redress consumer disputes, and 59,649 complaints have been disposed-off.