Why Real Estate Regulation Act is a blessing for home buyers
You can now safely bid goodbye to the no-end-in-sight under construction projects that you have put your hard-earned money into. With the Real Estate (Regulation and Development) Act, 2016 – RERA – finally kicking into effect on May 1, 2017, homebuyers can now look forward to fair practices and timely completion of projects.
The RERA has also given India its first regulator from today, and it seeks to protect the interests of buyers while ensuring that errant builders face penalty for inconveniencing consumers, or indulging in illegal profiteering during the course of the construction projects.
RERA also helps developers by ruling that buyers must make payments on time and ensure that every step of the process of completing a home purchase – including registration, MCD tax and payment to public and private parties – should be done in an orderly and well-documented manner.
Happy that HDFC chairman noted that #RERA act will further bring down real estate prices. This will help in realizing goal of #HousingforAll
— M Venkaiah Naidu (@MVenkaiahNaidu) May 1, 2017
While Venkaiah Naidu, Union minister for housing and urban poverty alleviation, has called RERA coming into force the “beginning of a new era” when the “buyer is the king”, this is likely to improve the buyers’ confidence and create a regulated environment where there exist well-written robust laws, checks and balances to control the real estate sector.
Here are the key points to remember about the Real Estate Regulation Act, and it has got something for everyone in it.
For homebuyers
Existing and new homebuyers can now expect better protection of their rights under RERA, with most of the transaction now in white and also digital. Project approvals and registration certificates of every property – whether part of a multi-storeyed building or individual residences – should be available in due time.
For the regulator to have an official website to be up and running, and to have the related infrastructure – digital and otherwise – it would take another three months. Under RERA, it is now required for the developer or seller to sell the unit on the basis of carpet area and give details of common areas and parking areas separately. This means that homebuyers would have a far better idea of what they are getting into when they look up a project or enter an agreement.
#RERA Act coupled with #GST & #BenamiAct will increase transparency in real estate sector and attract higher FDI at competitive rates.
— ShivrajSingh Chouhan (@ChouhanShivraj) May 1, 2017
For promoters
Developers and promoters can also expect formalisation of a sector that was notorious for corruption and as a sink to make black money white. In fact, the black/white division has encouraged hundreds and thousands of companies with next-to-nothing credibility pose as real estate developers and loot gullible homebuyers. With RERA bringing in greater checks and balances, promoters can finally offer clean and efficient services to the prospective consumer.
Promoters of ongoing projects can use the three-month window to get required documentation, RERA registration number and website address. If they fail to comply within three months, their marketing and selling operations would be illegal under RERA.
Also, builders will have to submit project-related information such as sanctioned and proposed plans, pending approvals, estimated project cost (separately for land and construction), and other cost-related data to the real estate regulatory authority (RERA) for obtaining registration.
Accuracy of each and every bit of information provided to RERA will be scrutinised carefully to avoid any oversight and non-compliance on part of the promoters. In effect, real estate sector is likely to become more transparent, accountable and user-friendly than ever before.
Real estate prices
Prices are likely to fluctuate for a while until the best practices kick and developers/banks rework the cost to include project-related risks. Earlier, adequate addressing of issues, insurance of projects, quality check on materials and ingredients used, etc, were not spelled out clearly and the reigning confusion made the process of home-buying both extremely cumbersome and confusing.
Under RERA, the circle rate is expected to rise a little and then plateau. This is because the black component of the transaction would now be significantly reduced, thereby bringing the overall cost for the homebuyer slightly down.
Moreover, with GST kicking in on July 1 of this year, this will impact prices of ingredient such as brick and cement etc, and might cause further fluctuation in the prices of real estate for a while. State revenues are likely to be hit for a little while as fewer projects are launched and green-lighted.
States that have notified
So far, 13 states and Union territories that have notified that RERA has come into effect. The states include Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar, while the UTs include Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Dio and Lakshadweep. Delhi NCR has also been notified of RERA coming into effect today.
States that have prepared draft rules are Assam, Maharashtra, Tripura, Karnataka, Tamil Nadu, Punjab, Haryana, Himachal Pradesh, Mizoram, Jharkhand, Telangana, Chhattisgarh, Rajasthan, Uttarakhand, West Bengal and Union territory of Puducherry.