7 Must-Know RERA Provisions Before You Buy Property in India
The real estate sector in India, for
decades, has been notorious for its lack of transparency, frequent project
delays, and unregulated practices. Buyers would often find themselves at the
mercy of builders and developers, with little recourse in case of delayed
projects or quality issues. In 2016, a landmark legislation was passed to
address these issues—the Real Estate (Regulation and Development) Act, or RERA. For many, this Act was a
much-needed solution to the frustrations they faced while buying property.
Since its introduction, RERA has
transformed how the real estate market operates, ensuring greater transparency,
accountability, and protection for homebuyers. But what exactly is RERA, how
does it work, and why should you, as a buyer or investor, care about it?
In this blog, we’ll dive deep into
everything you need to know about RERA—its objectives, key provisions, benefits
for buyers and developers, and how it has reshaped the Indian real estate
landscape.
Let’s get started!
1. What is RERA?
RERA
(Real Estate Regulatory Authority) is a legislative
initiative aimed at regulating the real estate sector in India. Enacted by the
Indian Parliament in 2016 and implemented in 2017, RERA’s primary goal is to
protect the interests of homebuyers and bring about more transparency and
accountability within the sector. The Act applies to both residential and
commercial properties and ensures that all real estate transactions adhere to a
common set of rules.
Before the enactment of RERA, many
developers operated with little regulation, often leading to delayed projects,
unfair practices, and non-compliance with promised standards. RERA introduced a
clear framework that binds builders, developers, and real estate agents to a
set of guidelines.
●
Fact Check: According to a report by JLL
India, about 40% of all real estate projects in major Indian cities were
delayed before RERA came into force, impacting buyers’ trust in the sector.
2. Why Was RERA
Introduced?
The real estate market in India had long
been characterized by chaos and a lack of regulation, which made homebuyers
feel vulnerable. Several factors necessitated the introduction of RERA:
a. Frequent Project Delays
Before RERA, project delays were a common
occurrence. Homebuyers would often face years of delay beyond the promised
possession date, with little to no explanation from developers.
b. Lack of Transparency
Buyers frequently found themselves
uninformed about the status of projects, leading to confusion and
dissatisfaction. Developers could change plans or increase costs without
informing the buyers.
c. Inadequate Legal Recourse for Buyers
There was little recourse for buyers in
case of non-compliance by developers. Builders often operated without fear of
legal action or significant financial consequences.
d. Unethical Practices
There was no standardized procedure for
handling real estate transactions, allowing unethical practices like pre-launch
offers and selling units without proper approvals.
RERA was introduced to bring about a fundamental shift in how real estate
was regulated in India. By placing both developers and buyers on an equal
footing, RERA aimed to restore trust in the sector and protect consumers’
rights.
3. Key Provisions of RERA
The Real Estate (Regulation and
Development) Act has several key provisions aimed at ensuring transparency,
accountability, and protection for homebuyers. Let’s explore the most important
ones:
a. Mandatory Registration of Projects
Under RERA, any real estate project,
whether residential or commercial, with a plot size of over 500 square meters
or involving more than 8 apartments must be registered with the state’s Real
Estate Regulatory Authority. Without this registration, the developer is not
allowed to market, advertise, or sell the property.
●
Pro Tip: Always check if a project is
RERA-registered before proceeding with a purchase. You can find this
information on the respective state RERA website.
b. Provision for Escrow Accounts
One of RERA’s most significant provisions
is the requirement for developers to maintain 70% of the project’s funds in a
separate escrow account. These funds
can only be used for construction-related expenses and land acquisition. This
ensures that the money raised for a project is not diverted to other ventures,
reducing the chances of project delays.
c. Timely Project Delivery
RERA mandates that developers must adhere
to the agreed-upon project completion timelines. In case of delays, buyers are
entitled to compensation, including a full refund if they wish to opt out of
the project. Additionally, developers must pay interest on the delayed period
at the same rate that buyers were charged for delayed payments.
d. Transparency in Project Plans
Developers are required to disclose
detailed project plans, including the number of units, layout, approvals, and
phases of development. Any changes to the project plan, once approved, cannot
be made without the consent of at least two-thirds of the buyers. This ensures
that buyers are kept in the loop and are not misled about what they are
purchasing.
e. Defect Liability Period
Under RERA, developers are responsible
for fixing any structural defects or poor workmanship within five years of handing over possession.
If any defect is found, the developer must rectify it within 30 days at no
extra cost to the buyer.
●
Fact Check: The defect liability clause
provides a critical safeguard for homebuyers who might otherwise struggle to
get builders to fix issues post-possession.
f. Regulation of Real Estate Agents
Not only developers, but real estate
agents are also covered under RERA. Agents must register with their respective
state RERA bodies to ensure that only authorized professionals are involved in
real estate transactions. This adds an additional layer of accountability and
protects buyers from fraudulent practices.
4. Benefits of RERA for
Homebuyers
For homebuyers in India, RERA has been a
game-changer. Let’s look at some of the significant benefits RERA brings to the
table:
a. Increased Transparency
Homebuyers now have access to more
information about the project, including approvals, timelines, and construction
progress. This transparency ensures that buyers are not left in the dark
regarding the status of their investments.
b. Buyer Protection
In case of project delays or changes in
plans, buyers now have legal protection and the right to claim compensation.
RERA also allows buyers to raise complaints directly with the regulatory body,
ensuring faster resolution.
c. Standardized Payments
Earlier, builders would charge buyers
based on ambiguous calculations like "super built-up area," which
often included common areas. Under RERA, payments are made on the carpet area, which refers to the net
usable area of the property, ensuring fairness in pricing.
●
Fact Check: The standardization of carpet area
has removed much of the confusion surrounding property prices and area
calculations, making the process more straightforward for buyers.
d. Reduced Risk of Default
Thanks to the escrow account provision,
the risk of funds being diverted to other projects has been minimized. This
ensures that the money you pay goes toward the timely completion of the
property you’re purchasing.
e. Timely Possession
With strict penalties for delays,
developers are now motivated to complete projects within the agreed timelines.
This reduces the likelihood of long waiting periods and gives buyers peace of
mind.
5. Impact of RERA on
Developers
While RERA primarily focuses on
protecting buyers, it has also brought several changes to how developers
operate.
a. Increased Accountability
Developers are now held accountable for
every promise they make, whether it’s regarding delivery timelines, amenities,
or approvals. This has forced many developers to professionalize their
operations, leading to improved service quality and reduced buyer grievances.
b. Streamlined Processes
Since developers must submit all
approvals and project plans before registration, the process has become more
streamlined and organized. This has led to fewer disputes between developers
and buyers and enhanced confidence in the market.
c. Reduced Speculation
Earlier, developers would often sell
properties before obtaining necessary approvals, leading to delays or project
cancellations. RERA mandates that all approvals be in place before a project is
marketed or sold, reducing speculative practices in the sector.
6. RERA Across Different
Indian States
It’s important to note that while RERA is
a central law, each state in India has its own Real Estate Regulatory
Authority, with slight variations in rules and regulations. States like
Maharashtra (MahaRERA), Karnataka, and Uttar Pradesh have made significant
progress in implementing RERA, while others are still catching up.
●
Pro Tip: Always check your state’s RERA
website for updates, project registrations, and the status of your chosen
property.
7. Challenges and
Limitations of RERA
While RERA has brought about substantial
improvements in the real estate sector, it’s not without its challenges. Some
of the limitations include:
a. Lack of Awareness
Despite being in place for several years,
many homebuyers are still unaware of their rights under RERA. Increased efforts
are needed to educate the public on how they can use RERA to protect their
interests.
b. Inconsistent Implementation
Not all states have fully embraced RERA,
leading to inconsistent enforcement. While states like Maharashtra have been
proactive, others lag behind in setting up functioning regulatory authorities
and addressing grievances promptly.
c. Exclusions from RERA
Not all projects fall under RERA’s purview. For example, projects under 500 square meters or with fewer than 8 units are exempt, which leaves a portion of the market unregulated.
Conclusion
RERA has undeniably been a game-changer
for the Indian real estate sector. It has empowered homebuyers, ensured
transparency, and brought much-needed regulation to an industry that was
previously plagued by uncertainty and unethical practices. For anyone looking
to invest in real estate today, understanding RERA is critical to making
informed decisions and safeguarding your investment.
As a buyer, you now have access to legal
protection, clear information, and faster resolutions to grievances. RERA has
truly shifted the balance of power, placing you in control. So, before you make
your next real estate investment, make sure you leverage the benefits of this
revolutionary Act to secure your dream home with confidence
