RERA comes into effect: Here's what the new real estate law means for existing, new homebuyers
There has been a lot of ambiguity regarding the implementation of RERA as several states have diluted the rules and the presence of a regulator is still under question.
The much-awaited Real Estate (Regulation and Development) Act , 2016 has come into force from May 1, but only 13 states and Union Territories have so far notified the rules. Moreover, there has been a lot of ambiguity regarding the implementation of RERA as several states have diluted the rules and the presence of a regulator is still under question.
For instance, in Haryana, the proposed RERA draft excludes all real estate projects for which builders have applied for occupancy certificates or part-completion certificates, provided the same is granted by the competent authority within three months of application. Under the Gujarat RERA Act, only the projects launched after November 1, 2016, will come under the law. RERA is a central law, but its implementation will depend on state governments as real estate is a state subject.
Commenting on the development, Sam Chopra, founder and chairman of RE/MAX India, says, "Both state and central governments need to come out with clear rules and guidelines to avoid any ambiguity as the industry is in a state of confusion. If implemented right, RERA can bring back positive sentiments in the industry, and the much-needed transparency and professionalism."
Pankaj Kapoor, Managing Director of Liases Foras, agrees. "I think the central government will have to intervene as many states have notified a diluted form of RERA and it is not in the best interests of homebuyers."
Here is a low-down on what RERA means for existing and new buyers.For existing buyers
Under RERA, there are fines and penalties if a developer does not adhere to delivery guidelines, including existing projects. The Act ensures that you can secure interest as penalty from your builder at the prescribed rate. But the rate of interest may vary from state to state.
"If your builder has not completed the project, the first thing you should do is form a resident welfare association (RWA). If there is already one, you should immediately become its member. In case there is more than one welfare body, try to consolidate all and form one primary body so that you can have the advantage of collective bargaining," says Chopra of RE/MAX India.
Once the welfare body is formed, a case should be filed in a high court and also in a consumer court. If the fund has been utilised by a builder for other activities, one can also file a criminal case against the builder. According to Chopra, "Benefits of RERA will not start flowing immediately. Since there are hundreds of incomplete projects, RWAs who have filed their cases can get a first-mover advantage when it comes to resolution."
For new buyers
There are several other provisions under RERA, which are going to benefit new buyers. For example, under the Act, builders have to deposit 70 per cent of the collected amount in an escrow account to ensure that money is not diverted from one project to another.
Developers will be able to sell projects only after all necessary clearances. Under RERA, builders and agents will have to register themselves with the regulator and get all projects with more than eight apartments registered before launch.
Also, regulatory bodies and appellate tribunals will have to be set up in each state to solve builder-buyer disputes within 120 days. Besides, promoters will not be able to change a project's design without the buyers' consent, and the carpet area will carry a uniform definition - a common reason for builder-buyer disputes.
Before buying your new home, check out the Act passed by your state to ensure it has not notified the watered down version.
Impact on pricing
Property prices are determined by demand and supply in the market. Considering there has been an unsold inventory of around five years in the market, real estate prices are not going to rise immediately after the implementation of RERA. But people who had delayed their home-buying decisions due to lack of trust are now expected to return as the Act has brought the much-needed transparency into the market. Chopra says, "The RERA will help customers gain back the trust that was eluding the market. Prices are not expected to rise immediately, but demand is expected to pick up during the festive season with buyers returning to the market."