Impact of the RERA Act on Property Buying & Selling Process

For years, the real estate sector was unregulated, leaving homebuyers at the mercy of developers and builders. Delays in possession, rising overhead costs, and project cancellations were common issues that homebuyers faced. In some cases, people were even forced to vacate their apartments due to the builder's lack of government approval for the project. Complaints filed by homebuyers often took years to settle, leaving them in a state of distress.

The Real Estate Regulatory Act (RERA), which came into effect in 2016, was introduced by the government to put an end to these malpractices and ensure fair dealings between builders and buyers. The Act aims to create an unbiased transaction system, where consumers are not cheated by the builders anymore. This move has brought transparency to the real estate sector, making it more organized and structured.

The Act has given homebuyers the confidence to invest in the real estate sector, knowing that their interests are protected by law. The act has created a level playing field for buyers and developers, where both parties can benefit from a fair and transparent transaction. Overall, the Act has had a positive impact on the real estate sector in India, bringing in more accountability and transparency, and making it a more attractive investment option for homebuyers.

What is the Real Estate Regulatory Act?

The Act was introduced in India in 2016 to regulate the real estate sector and address the issues faced by homebuyers. For many years, homebuyers have been complaining about the unfair practices of developers, builders, and agents, such as delayed possession, rising overhead costs, and project cancellations. To end these malpractices and to create an unbiased transaction between buyers and sellers, the government introduced the RERA Act. 

The Act aimed to put an end to the loopholes and malpractices used by developers, builders, and agents, and to create a fair and transparent system where buyers are not cheated. The Act introduced several key features, few are below:

Features of the RERA Act

1.     Firstly, it aims to protect the interest of allottees by ensuring that developers adhere to strict timelines for project completion and possession. Developers are required to register their projects with the regulator, provide all necessary details, and comply with all applicable laws.

2.    Secondly, RERA aims to maintain transparency and reduce the chances of fraud by mandating that developers disclose all information related to the project, including project plans, layout, completion schedule, and status of approvals. This information must be made available to homebuyers and the regulator.

3.    Thirdly, RERA aims to bring about greater standardization and professionalism in the real estate sector by ensuring that developers adhere to uniform practices across the country. The Act also aims to enhance the flow of correct information between homebuyers and sellers and to impose greater responsibilities on both parties.

4.    Finally, RERA aims to enhance the reliability of the real estate sector and increase investor confidence by imposing strict penalties on developers who violate the Act. The regulator has the power to impose fines, cancel project registrations, and initiate criminal proceedings against errant developers.

Impact of the RERA Act on Property Buying

The Act has had a significant impact on the real estate industry in India. The introduction of the Act has brought about a much-needed change in the real estate sector, making it more transparent and accountable. Below are The significant ways it changed property buying in India:

All projects have to be registered with RERA

In India, the Real Estate Regulatory Authority (RERA) Act mandates that all real estate projects must be registered with the regulatory authority before being advertised, marketed, or sold. This requirement has been introduced to promote transparency, accountability, and fairness in the real estate sector and protect the interests of homebuyers. Under the Act, developers are required to provide detailed information about the project, including its layout, specifications, schedule of completion, and other relevant details. This ensures homebuyers have access to all the necessary information before investing in a property, reducing the risk of fraud and misrepresentation.

The registration process is straightforward and requires developers to submit the necessary documents and pay the registration fee. Once registered, developers must comply with all the regulations and guidelines laid down by the regulatory authority. Failure to do so can result in penalties and legal action.

Impact on Carpet Area CalculationBeforeo the introduction of RERA, there was no standard method for calculating carpet area, leading to discrepancies and disputes between buyers and developers. Under the Act, developers are required to disclose the exact carpet area of the property to prospective buyers, along with the other details of the project. Moreover, the Act has mandated a standard method for calculating carpet area, which has significantly reduced the discrepancies and variations in the area calculation. The Act defines carpet area as the net usable floor area of an apartment, which does not include the area covered by walls, balconies, and common areas.

The introduction of a standard method for calculating carpet area has also made it easier for buyers to compare properties across different projects and developers. Earlier, buyers had to rely on the developer's calculation, which was often inflated or inaccurate. Another key benefit of RERA is the provision for penalties and fines for developers who provide false or inaccurate information.

Impact on defects in the property

Another important provision of the Act is that builders are now liable for any structural or workmanship defects in the property for five years from the date of possession.

This provision has significantly impacted the responsibilities of builders, who are now more cautious and accountable for the quality of the properties they construct. Builders are now required to ensure that the properties are constructed in a manner that is free from any defects or deficiencies and to rectify any such issues within the five-year warranty period.

Impact on Late Possession

Further, now builders are liable to pay compensation to buyers if they fail to give complete possession of the property on time. This provision has led to a significant reduction in project delays and cancellations, as builders are now required to complete the project within the agreed timeframe or pay the penalty to the buyer.

Impact on Agents and Brokers

Earlier, there were no regulations in place to monitor the activities of these intermediaries, which often led to buyers being misled or cheated. With the Act, the agents and brokers are now required to provide all necessary information related to the property to the buyers and sellers, without any hidden terms or conditions. Moreover, RERA has made it mandatory for agents and brokers to maintain a separate bank account for each project. This provision prevents the agents and brokers from misusing the funds received from the buyers.

RERA has also imposed strict penalties on agents and brokers who violate the regulations, which include suspension or cancellation of their registration, along with fines and imprisonment. These penalties serve as a deterrent to those who may have indulged in unethical practices in the past.

Impact on home buyers

This Act ensures that buyers have access to all relevant information, enabling them to make informed decisions. Moreover, the Act mandates that developers can only advertise and market projects after obtaining registration from the regulatory authority. This has led to a reduction in misleading advertisements and false promises, which were previously rampant in the real estate industry. Another critical aspect of RERA is the establishment of a regulatory authority to oversee the sector. This authority is responsible for ensuring compliance with the Act and resolving disputes between developers and buyers.

Conclusion

The introduction of RERA has helped establish efficient forums for grievance redress, reducing the litigation rate in the sector. With the Act's implementation, developers are now held liable for any defects or delays, leading to an increase in the reliability of the sector and greater confidence among investors. The Act has also had a positive impact on buyers, ensuring that they are protected from fraudulent practices and have access to accurate information. Overall, the RERA Act has ushered in a new era of fair and unbiased transactions, benefiting all stakeholders in the real estate industry.