RERA: What realty buyers should watch out for

One feels that 2016 and 2017 would be remembered as watershed years for the Indian real estate sector, primarily due to the significant policies that have been rolled out by the Central and State Governments in a bid to bring about much-needed method and iron out the deficiencies that have been plaguing the sector, particularly in the residential space. A few events need special mention:

Demonetisation: Rampant practice of cash in real estate transactions got hit real hard

The affordable housing space being accorded infrastructure status in the Union Budget 2017-18

Benami Transactions (Prohibition) Amended Act, 2016

Implementation of RERA (Real Estate Regulatory Authority) Act, 2016 with all notifications coming into effect from May 1, 2017

Implementing GST (Goods and Services Tax) under the philosophy of “One Nation One Tax” w.e.f. July 1, 2017

RERA - A Game Changer: There was a long felt need to bring accountability, transparency and redressing disputes in a speedy manner in the sector and implementation of RERA Act does just that. The legislation not only protects the interests of buyers but also empowers them through several provisions enshrined in the act that would prevent mis-selling, delay in project completion, over commit and under-deliver, fund diversion and other fraudulent activities prevalent in the residential real estate sector.

Buyers, be aware for your own benefit: While the provisions of RERA might sound technical in nature and one may seek professional help/advice to understand the nuances of the act, buyers need to be aware of some of the key provisions which would help him/her to make an informed decision before making a home buying decision.

All ongoing projects included: All projects (residential and commercial. Land area of more than 500 sq metres, or more than eight units) that are ongoing with effect from the date of commencement of the act and for which the completion certificate has not been issued come under the ambit of RERA.

Implications: The following projects would not be covered under RERA. Smaller projects-land area less than 500 sq metres in size and has less than eight units.

Projects that have received completion certificate before commencement of the act

Projects consisting of renovation/repair/redevelopment which does not consist of new allotment of any apartment/plot

The information available in the public domain for above projects may not be as much as that would be available under RERA registered ones (as we will see in later points). Hence, for such a buyer/existing allottee, he/she needs to do a proper research/diligence either on own or through professional help before deciding to buy a unit or venture ahead under such projects.

The buyers/existing allottees in such projects need to ensure that the agreement between them and developer is clear, unambiguous and iron-clad which helps in avoiding disputes at a later date.

Use a plethora of information on the project under RERA: Registration of the project with the regulatory authority is compulsory under RERA and all project related information needs to be submitted to the authority. The project cannot be advertised/sold before registration. A project promoted in phases would be considered as a standalone one for each phase requiring separate RERA registration.

Implication: The project’s layout, development plan, related approvals, the name of contractors, structural engineers, real estate agents, a draft of the builder-buyer agreement and other relevant details need to be submitted at the time of registration and be made available on the website which needs to be updated regularly by the developer.

The buyer needs to be mindful of this wealth of project related information which is freely available. He/she must go through the same on own or take professional help which helps him/her to get a detailed overview of the project that helps in making an informed buying decision

Impact of RERA

There might be continued sluggishness in sales for next two to three-quarters as the builders come to the terms of the RERA guidelines.

The new launches might get delayed and the ongoing projects might take some time to comply with the provisions.

Also, the cost of funds for developers and builders might hike temporarily for developers and this may impact small-time developers, who have limited access to funding from banks and other financial institutions.

RERA also has many benefits. The sector itself would get institutionalised and the unorganized players would either exit out or get merged with larger ones.

Funding in real estate would be formalised with banks and financial institutions playing a greater role as there is greater transparency and accountability at the project level and developer level.

The buyer would be the ultimate beneficiary as there is a lot more transparency and accountability in the sector albeit comes at a slight cost but is the worth a while as the largest investment in the life of an average individual gets safeguarded by buyer-friendly guidelines.

(The writer is Vice President and Head for Corporate Planning and Strategy at Aspire Home Finance Corporation)