RERA – NO NEED TO GO RAH RAH ABOUT IT!

By Ruma Dubey

The week gone by will either become historic for the Indian realty sector or become a standing joke, all depending on how well the Real Estate Regulation Act (RERA) gets implemented. In our country, we are so habituated to people flouting rules and finding loopholes in every single law that the faith in seeing anything actually go by the books seems almost Utopian.

Undoubtedly, RERA is the best thig that could have happened for the Indian property buyers – it more pro-buyer than it has ever been. For once the interest of the buyer has been kept in mind and it is not merely from the builder/developer perspective.

First things first, a quick look at what exactly RERA is:

• RERA is a realty regulator, which aims to protect buyers interest when it comes to delays, price, quality of construction, title.
• Every promoter has to make an application to the Regulatory Authority for registration of the real estate project in the state.
• Each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator - only nine Indian states and six union territories so far have taken steps to implement the rules. Maharashtra has taken the lead and even set up its own website for RERA.
• The promoter of every real estate development firm has to maintain a separate escrow account for each of their projects where a minimum of 70% of the money from investors and buyers will have to be deposited – the money can only be used for the construction of the project and the cost borne towards the land.

Here, there is confusion as many say that builders can open a separate account with any bank, it is self maintained  and does not require the nod from any authority for withdrawals. If this is indeed the case then it defeats the basic purpose of RERA – which is diversion of funds by builders into other projects, leading to delays and fund paucity.

• RERA stipulates that developers will have to keep buyers upto date about their other ongoing projects.
• The paper work is long but necessary – builders have to submit the original approved plans for their ongoing projects, alterations that they made later. They also have to furnish details of revenue collected from allottees, utilization, and construction timeline. Before handing over the project, it needs to be certified by an Engineer/Architect/practicing Chartered Accountant.

In Maharashtra at least, the BMC has been doing all these things for years now and builders often complained that the process of getting approvals at every stage meant “greasing the palms” at every stage, which ultimately keeps the prices high and defeats norms at all stages. Thus the question which comes to mind is – how will RERA keep corruption at bay?

• Every state has to register real estate projects and real estate agents operating in their state under RERA and details of all registered projects are to be put up on a website for public access.
• Quality is also being taken care of – RERA has stipulated that buyers will be protected for five years from the date of possession on all construction faults arising in the flats. If any issue is highlighted by buyers in front of the regulator in this period including in quality of construction and the provision of services, the developer will have to rectify the same in a matter of 30 days.
• Another good move – without registration, developer cannot invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects. In fact all ads for the project will need to mandatorily carry the unique RERA registration number.
• After registering the project, developers will have to furnish details of their financial statements, legal title deed and supporting documents.
• If project handover gets delayed, developer will be required to return the entire money invested by the buyers along with the pre agreed interest rate mentioned in the contract based on the model contract given by RERA. And if the buyer chooses not to take the money back, the builder will have to pay monthly interest on each delay month to the buyer till they get delivery. Similar kind of a rule is already in place but rarely have we heard if builders paying the delay charges.
• Developers cannot ask more than 10% of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.
• RERA has the ultimate power to fine and imprison errant builders based on a case by case basis, with imprisonment period going up to 3 years.

There is no doubt, this is a very good move but it all depends on proper implementation. RERA is sure to affect scores of small-time builders and developers and many might actually do a “Mr.India” act. It will help clear the chaff from the grain; that seems a certainty.

Lets be real – RERA is a great ACT but it has opened up one more avenue when builders will be pay bribes. Corruption and realty go hand-in-hand; wonder how RERA can protect one from that!