The Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as
RERA) which came into effect from May 1, 2017, has around 34,600 projects and 26,800 real estate agents being registered under the act, as of November 28, 2018.
Objective of RERA
With the advent of RERA, there began a norm for strict compliances that has to be adhered by each and every developer, builder and construction giant in different parts of the country. Most of the states have established their own RERA offices where they work under the established rules and regulations. Though the act is not retrospective in nature it mandates every project to be registered with the respective State RERA offices by the promoters of the company within 3 months of the commencement of the Act.
The RERA was enacted to protect the interest of the homebuyers and boost investment in the sector. The provisions like timely completion and delivery of projects to the buyers and making the information of the project plan, layout, government approvals, land title status, and sub-contractors available, consent of two-thirds of the allottees on any alteration or addition in the project, and other such provisions, would bring in more transparency and accountability in the real estate sector.
Problems solved by RERA
Before the commencement of RERA, there were no bindings and compulsions on the real estate developers and construction pioneers to deliver the property to its respective owners on time. An inconsiderable delay was usually witnessed which had a negative effect on the financial health of the homebuyer. On one hand the buyer had to pay the monthly rent where he was residing and on the other hand, he also paid monthly installments and abide by the terms and conditions of the Buyer Builder Agreement thereby overburdening him financially. Unfortunately, there was no one to question the developers and builders.
With the RERA coming into force, 56% of the homebuyers prefer to initiate litigation and dispute resolution under State RERA Regulations rather than going to consumer forums, state commissions or any other court for civil remedies . These homebuyers believe that the success ratio of RERA is much more as compared to the years of struggle of litigation before other forums and courts. Also, the success ratio of cases under RERA are more result oriented, expeditious with concrete judgment being passed against the errant developers and builders.
Impact of RERA
After the enforcement of RERA, the banks and other financial institutions don’t lend money to retail buyers under the real estate project, which is not registered or registration of the same has been cancelled by the respective State RERA office. Both the developers and the builders are expected to submit all the necessary documents and approvals to their requisite regulator in order to obtain registration under RERA.
In India, RERA has been enacted and implemented in 28 states as well as Union Territories and in November 2018, it was confirmed by the six north eastern states Nagaland, Arunachal Pradesh, Meghalaya, Manipur, Mizoram, and Sikkim have finally agreed to implement Real Estate Regulation Act. The only states to not have implemented RERA are Jammu and Kashmir where Jammu and Kashmir Real Estate (Regulation and Development) Bill, 2018 has been approved by the State Advisory Council under the chairmanship of the J & K Governor and is under the process of establishing the Real Estate Regulating Authority and the Real Estate Appellate Tribunal for efficient and effective regulation of the real estate sector and West Bengal which has notified its own real estate law – the Housing and Industrial Regulation Act, 2017 (HIRA) instead of RERA.
Penalties for non-compliance under RERA
The RERA Act gives explicit and mentions of specific penalties for offences by promoters, real estate agents, builders and other parties who are involved under the ambit of this act:-
- For non-registration of the project with the RERA Authority: 10% of the total estimated cost of the project.
- Where a project has not been registered and any order or direction for the same has been issued by the authorities: Upto 3 years of imprisonment with or without fine of 10% of the estimated cost of the project
- Where information or advertisement regarding the project is found to be false: 5% of the estimated cost of the project
- Where an order of the RERA has been contravened or has not been executed: Daily penalty for every day after passing of the order which has been contravened upto 5% of the estimated cost of the project
- Where an order of the Appellate Tribunal has been contravened: Upto 3 years imprisonment with or without fine of upto 5% of the estimated cost of the project
The legislative regime was not strong enough to render the developer and the builder guilty of misconduct and also for breaching the terms and conditions of the builder buyer agreement in the long run. Introduction and enforcement of RERA comes further to protect the interest of the homebuyers as well as save them from any kind of financial burdens.