The Real Estate Regulatory Act (RERA) which is slated to be implemented nationwide on May 1, 2017, offers some respite to home buyers from being harassed by typical property-sale agreements which are generally drafted in favor of the builder.
Home buyers usually have to deal with their project builders violating construction regulations, delaying delivery far beyond the promised completion date, delaying projects and work due to pending permits/permissions, etc. – because the documents they’ve signed do not hold the builder accountable. The new RERA ensures that property-sale agreements are drafted with clauses which benefit the buyer.
The Act has strict provisions and penalties outlined, including massive fines and 3-year jail sentences for builders who do not comply with the provisions of the Act.
This has sparked some movement, with builders all over the country adopting compliance measures and signing RERA-compliant agreements with existing customers. Project management teams are being established, led by experts in the field, to ensure that projects are completed well before the date promised to customers.
New rules for real estate developers
Under the new RERA rules, builders/developers can only advertise and sell units of projects for which all approvals have been granted, all documentation has been arranged, and all construction/building certificates have been issued.
Total estimated time taken to complete the project, time estimated for each phase of development, and time until occupation must be communicated to the customer before sale.
Every project under development/construction must have its own Escrow account with at least 70% of the project funds deposited at all times.
Information regarding approvals, building/development/construction certificates, estimated time until project completion, project master plan, etc. have to be made available to the customer/public.
Developers on the move
Developers and builders are reportedly on the move since the announcement, hiring new project management teams to ensure that projects are completed in a timely and efficient manner, hiring sales professionals to communicate project details and RERA provisions to customers, etc. and even spending on compliance teams to ensure projects are in compliance with RERA and other legal provisions.
New sale documents are being supplemented by additional documents informing buyers of RERA and their rights as home buyers. RERA compliant builder-buyer agreements are also becoming the norm when purchasing new homes.
Fight For RERA
A consumer rights group called Fight For RERA is working hard to ensure that RERA provisions are as customer-friendly as possible, and that builders/developers adhere to these provisions. An excerpt from their written description reads “Real Estate is probably only industry where promised are either never delivered or if delivered then it is nowhere near what was promised. The price also keeps varying till the very end…This group is intended to fight collectively for enactment and proper implementation of Real Estate (Regulation and Development) Bill 2015, (RERA). We are fully aware that this bill may not be able to completely eradicate the malpractices currently prevailing in the Real Estate Industry but it surely will be a good beginning towards safeguarding buyers’ interest, bringing discipline and reining in unscrupulous builders.”
Abhay Upadhyay, national convener of the group says, “If there are developers claiming that they are incorporating RERA norms and that their builder-buyer agreement is RERA compliant, it is nothing but a marketing gimmick.” It is hoped that responding to the Act with scepticism will ensure adherence, and Fight For RERA has done a lot of work exposing scams and taking the collective complaints of duped home buyers to the steps of Parliament.
States diluting rules, haven’t notified despite approaching deadline
All the RERA rules, including general rules and agreement-for-sale rules to establish RERA and appellate tribunals by April 30, 2017.
As of now, only Maharashtra, Gujarat, Madhya Pradesh, Uttar Pradesh and 6 Union Territories have notified the final rules, but haven’t notified the agreement-for-sale rules. Reports indicate that some states are actively diluting the rules as well.
However, developers have updated their sale agreements to include a skeletal structure of the entire payment schedule, clearly demarcated external and internal development expenses, etc. Because there are ambiguities and loopholes even in these documents, RERA needs to be implemented ASAP.