The Real Estate (Regulation and Development) Act 2016 (RERA/the "Act") is an Act aimed at promoting transparency and honesty in the real estate sector in India. One of the benefits of regularizing the real estate sector in India is the expected increase in the flow of investments into the sector from both national and foreign investors.
The provisions of the Act do not hamper the projects that are on-going at the time of commencement of the Act. A window of time is provided from the date of commencement of the Act, to developers to register their ongoing projects with the relevant state RERA.
The Act stipulates that every project measuring more than 500 square meters or having more than 8 apartments has to compulsorily be registered with RERA and no project or unit in a project will be allowed to be sold to a buyer unless it has received all necessary building permissions from the local authorities. (see Section 3 of the Act)
As per RERA, before the allotment of the project to buyers promoters have to mandatorily submit all information regarding the project, i.e. project plan, layout, government approvals, land title status, sub-contractors to the project and scheduled completion date with the relevant state RERA and this information will be made available to the prospective buyers. The developer cannot make any changes to the plans without prior written consent of the buyers. Any change in project plans would require the consent of at least 2/3rd of the buyers of the project. With this provision, developers will be estopped from changing project plans and layouts while the project is underway, thereby safeguarding the rights of the buyers. (see Sections 4 and 14 of the Act)
Any delay in the project completion date will make the developer liable to the buyers. (see Section 18 of the Act)
As per the provisions of this Act is that the Promoter has to maintain an account in a separate bank account where 70% of the collection received against allotments has to be compulsorily deposited. The funds so collected are to be utilized only for construction costs and land costs. Developers cannot use these funds to invest in any other projects or for any other purpose. (see Section 4 of the Act )
As per the Act, developers are not allowed to make any false representation in their promotional or advertorial material so that the buyers are protected from false misrepresentation and the resulting losses therefrom. No project can be advertised before it has been duly registered with RERA (see Section 12 of the Act).
Additionally, if the buyer finds any deficiency in the project within one year of taking possession of the allotted unit, the buyer can demand after sales service from the developer by asking him in writing to correct the defect so found. In this way promoters are liable to the buyers for any structural defects in the project upto a period of 5 years from the date of completion.
No deposit or advance can be taken by the promoter from the buyer unless an agreement for sale has been entered into between them. In this way the promoter cannot take a sum from the buyer that exceeds 10% of the cost of the unit to be purchased, without first entering into an agreement for sale and such agreement must be in the form prescribed by the RERA. (see Section 13 of the Act).
The provisions of RERA also define and clarify certain key concepts in real estate terminology such as carpet area and therefore the sale of units on the ambiguous basis of built up and super built up area will come to an end.
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