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  • Writer's pictureRadix realtors

RERA Act & Its Significance to Home Buyers

Updated: Jan 15, 2022

The (RERA) Act, which was passed in 2016, is one of the most significant pieces of legislation passed by the Indian government. The primary goal of this act is to totally overhaul India's current real estate sector. The Act also fosters a completely open structure, with the goal of being primarily citizen-focused and achieving responsibility as well as perfect financial discipline. It also coincides with the ever-growing Indian economy, paving the way for homebuyers and all types of property investment.

Under Section 84 of the Real Estate (Regulation and Development) Act of 2016, state governments must create rules to carry out the Act's provisions within six months of its effective date. The Indian government's HUPA (Housing and Urban Poverty Alleviation) Ministry announced a set of general rules for the Real Estate (Regulation and Development) Act, 2016 on October 31, 2016.

These rules are applicable to all the Union Territories like Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli and Andaman & Nicobar Islands. The verdict, which is aimed at safeguarding homebuyers, offers significant relief to buyers, speeds up the resolution process, and makes it harder for state governments to compromise the law's objective. The major goal of RERA is to protect buyers from unfair builders' practices. RERA establishes certain standards for the construction and development of real estate that will improve the openness of real estate transactions.

The state of Karnataka has informed the Supreme Court that it has already adopted the model-builder and agent-buyer agreements that the federal government has mandated for all states.

Supreme Court Affirmation

The Supreme Court held that the Real Estate (Regulation and Development) Act, 2016 (RERA) provisions apply to ongoing projects for which completion certificates were not received at the time of the bill's enactment, thereby interpreting the law to be retroactive.

On May 1, 2016, the RERA Act went into effect. Only 52 of the 92 sections had been notified at the time. All of the remaining provisions went into effect on May 1, 2017.

The RERA Act & Regulations

State governments must create rules to carry out the requirements of the Real Estate (Regulation and Development) Act, 2016 within six months of the Act's commencement date, according to Section 84 of the Act.

The general rules of the Real Estate (Regulation and Development) Act, 2016, were announced by the center on October 31, 2016, through the HUPA (Housing and Urban Poverty Alleviation) Ministry.

All of these regulations apply to Union Territories such as Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli, and the Andaman and Nicobar Islands.

Security under the Regulation and Development Statute (RERA): Under the RERA act, a minimum of 70% of purchasers' and investors' money must be maintained in a separate account. This money will thereafter be used only for construction and land charges by the builders. Before the sale agreement is finalised, developers and builders cannot ask for more than 10% of the property's cost as an advance payment.

Builders are required to produce all original paperwork for any job they undertake. Builders are not allowed to make alterations to the plans without the buyer's permission.

Fairness: RERA has now mandated that developers offer properties based on carpet area rather than super built-up area. In the event that the project is delayed, customers have the option of receiving a full refund or opting to be invested and get a monthly return on their money.

Quality: Within five years after purchase, the builder must correct any issues that the buyer has. This problem must be resolved within 30 days of the complaint being filed.

Authorization: Without registering with the regulator, a regulator cannot advertise, sell, build, invest, or book a plot. Following registration, all investment advertisements must include a unique project-specific registration number given by RERA.

Benefits of RERA: RERA has a number of benefits for the buyer, the promoter, and the real estate agent. These include:

Standardisation of carpet area: Before RERA the manner by which a builder calculated the price of a project wasn’t defined. However, with RERA there is now a standard formula that is used to calculate carpet area. This way, promoters cannot provide inflated carpet areas to increase prices.

Reducing the risk of insolvency of the builder: Most promoters and developers tend to have multiple projects being developed at the same time. Earlier, developers were allowed to move funds raised from one project to that of another. This is not possible with RERA since 70% of the funds raised need to be deposited in a separate bank account. These funds can be withdrawn only after certification by an engineer, a chartered accountant, and an architect.

Advance payment: As per the rules, a builder cannot take more than 10% of the cost of the project from the buyer as advance or application fees. This saves the buyer from having to source funds fast and having to pay a large amount.

Rights to the buyer in case of any defects: Within 5 years of possession, if there is any structural defects or problems in quality, the builder has to rectify these damages within 30 days at no cost to the buyer.

Interest to be paid in case of default: Prior to RERA, if the promoter delayed possession of the property, the interest paid to the buyer was much lower than if the buyer delayed payments to the promoter. This has changed with RERA and both parties have to pay the same amount of interest.

Buyer’s rights in case of false promises: If there is a mismatch in terms of what was promised by the builder and what has been delivered, the buyer is entitled to a full refund of the amount that was paid as advance. At times, the builder may have to provide interest on the amount as well.

If defect in title: If at the time of possession, the buyer discovers that there is a defect in the title of the property, the buyer can claim compensation from the promotor. There is no limit to this amount.

Right to information: The buyer has the right to know all the information about the project. This includes plans related to layout, execution, and completion status.

Grievance Redressal: If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA. If they aren’t pleased with RERA’s decision, a complaint can also be filed with the Appellate Tribunal.

RERA Rules For Investors

· Registering project with RERA

· Quarterly updates on Construction progress

· Escrow Account

· Sale agreement standardization

· Maximum 10% of cost of project as advance payment

· Five years of defect liability period

· Carpet Area

· Title Representation

· False information to home buyers

· Failure to complete possession on time

· Approval for alteration in sanctioned plans

· Obligations of the promoter in case of transfer of real estate project to a 3rd party

· Agent registration is mandatory

· Grievance Redressal

The Impact of RERA Act

Due to the implementation of the Real Estate (Regulation and Development) Act of 2016, registration of a project unit's selling deed cannot be done in the sub-office registrar's without first acquiring Occupancy Certificates or Completion Certificates.

Fewer developments will be developed as developers and promoters take time to grasp the implications of the Real Estate (Regulation and Development) Act of 2016. Honest promoters, builders, and developers, on the other hand, will benefit from this situation because they will face less competition.

Dishonest builders will vanish as a result of the RERA Act's adoption, as they would be unable to keep up with the competition. The addition of 32 sections to the Real Estate (Regulation and Development) Act of 2016 will foster financial discipline in the real estate industry.

Following the Act's adoption, developers will be required to follow a number of procedures if they intend to make changes to a project after it has begun. In the short term, there may be chaos in the real estate market, but in the long run, it will enhance client confidence and encourage them to invest more.

The Karnataka Government RERA website: is a one-stop solution for all rear act and the process and procedure for the property that are within Karnataka.



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