HomePropertyWhat is RERA and how it works?

What is RERA and how it works?

Do you want to know what is rera and how it works? If your answer is yes then this blog provides you all information regarding this.

Everyone’s dream is to own a home. However, not everyone can afford a home because real estate prices remain high as compared to income levels.

To make matters worse, each developer/builder previously had his own set of standards, and there were no standard standards. Every builder followed their own set of procedures and structured the builder-buyer agreement in a way that favored the builder.

The average person who put his life savings into real estate had extremely limited rights. To protect and safeguard the rights of home buyers and ensure that they are not exploited by developers/builders, the government enacted the RERA Act.

What is RERA, and how does it work?

The Real Estate Regulations Act, or RERA, was enacted in 2016 to protect the rights of homebuyers. The major goal of RERA is to protect buyers from unfair builders’ practices.

RERA establishes certain standards for the construction and development of real estate that will improve the openness of real estate transactions.

It has given home buyers several rights and has set forth certain laws and regulations that must be observed by all builders and developers.

In addition, the RERA Act mandates the establishment of a Real Estate Authority and an Appellate Tribunal in each state. In the event that the builder/developer commits any infraction, the property buyer can register a complaint with this body.

The RERA Act has ten major advantages.

1. Carpet area that is Uniform:

Previously, the carpet area used by the builder to determine the property’s price had not been established. Each builder/developer had their own way of calculating Carpet Area.

The carpet space for the same unit would be calculated as 1500 sq ft by one builder and 1400 sq ft by the other builder.

Because there was no standard formula for calculating the Carpet Area, this used to happen. The RERA Act, on the other hand, has explicitly specified this, and all builders/developers will use the same formula to calculate carpet area.

The following is the legal definition of carpet area:

“Carpet area” refers to an apartment’s net useable floor area, excluding regions covered by exterior walls, areas under services shafts, exclusive balcony or verandah area, and exclusive open terrace area, including the area covered by the apartment’s internal partition walls.

This would introduce standardization in the computation of Carpet Area because the definition of Carpet Area has been precisely stated.

Because most developers charge on the basis of carpet area, this has a direct impact on real estate pricing. The following is how a property’s price is calculated by builders:

Property Cost = Carpet Area x Rate per Square Foot

Previously, builders would overstate the Carpet Area, causing the price of the property to rise as well. However, given that RERA has clearly established the technique for calculating Carpet Area, developers will not be able to manipulate the calculation of Carpet Area in order to raise prices.

2. Interest rate on default:

In the event that the buyer defaults on payment or the builder fails to complete the project, both parties will be charged the same rate of interest.

Previously, if the builder delayed possession of the property, the interest paid by the builder to the house buyer was lower, and if the buyer defaulted, the interest paid by the buyer to the builder was higher.

There was no interest payment equivalence between the two parties. The RERA Act now clearly states that the interest rate for both parties must be the same.

3. Decreases the likelihood of a builder’s insolvency or bankruptcy.

A developer frequently has numerous projects under construction at the same time. Previously, builders were able to move cash generated from Project A to Project B’s building.

This is no longer allowed since, with the implementation of RERA, the builder is required to deposit 70% of the project’s revenue in a separate bank account. He can only withdraw money from such an account once the project is completed and certified by a civil engineer, architect, and a practising chartered accountant.

Because the funds can no longer be diverted to other projects or utilized for other purposes, the funds will be used for the purpose for which they were raised and nothing else.

There have been instances in the past where a builder gathered funds from home buyers for the purpose of constructing their homes but then utilized the proceeds for other purposes. They later went bankrupt and were unable to complete the property’s construction.

Because the funds can only be used for the purpose for which they were raised, they will not be diverted elsewhere and will be used for the purpose for which they were raised, guaranteeing that the property is completed on schedule.

4. The Buyer’s Right in the Case of False Promises:

If the builder’s obligations do not match the actual project, the buyer has the option to withdraw from the project, in which case he is entitled to a full refund of any money paid as an advance or otherwise, plus interest and compensation.

5. Payment in Advance:

Before engaging in a sale agreement, the builder may accept no more than 10% of the cost of the apartment, villa, or other property as an advance or application fee, as the case may be.

6. Buyer’s Right in the event of a Defect After Possession:

If a structural problem or a defect in craftsmanship, quality, provision, or service is identified within 5 years of the apartment’s possession, the builder will correct the defect at no additional cost within 30 days.

In the event that the builder fails to do so, the buyer is entitled to compensation.

7. Buyer’s Rights Delay in Possession:

If the builder fails to complete the project by the deadline, the buyer has the following options:

To withdraw from the project, in which case he will be entitled to a full refund plus interest from the required date of completion until the money is refunded.

To continue with the project until it is done, in which case he will be entitled to compensation as well as interest from the project’s due date until it is really completed.

Assume the project was meant to be completed on 31-3-2017, but it was unable to be completed on that day. As a result, on 1-4-2017, you have the choice to drop out of the project. If you opt to drop out of the project, you will be entitled to interest from January 1, 2017, until the payment is made.

If you decide not to withdraw from the project, and the project is completed on 31-3-2019, you will be entitled to interest every month from 31-3-2017 to 31-3-2019.

8. Buyer’s Rights in the Event of a Title Defect:

If you discover a fault in the title of the property after you have taken ownership of it, you can sue the builder for compensation. It isn’t time-barred, which means you don’t have to find the flaw within a certain amount of time.

9. Informational Right:

The buyer will have access to all project-related information, including the plan layout, execution plan, and stage-by-stage completion status, among other things.

10. Establishment of a Grievance Redress Authority:

Any complaint against the builder can be brought to the state body established under RERA, which will have the jurisdiction to resolve all complaints. If you are unhappy with the order, you may submit an appeal with the Appellate Tribunal, which will resolve your case within 60 days or, if that is not possible, will record the reasons for the failure.

If the builder wishes to appeal the Authority’s order to the Appellate Tribunal, he must deposit at least 30% of the penalty, or such higher percentage as the Appellate Tribunal may determine, or the total amount to be paid to the allottee, including interest and compensation imposed on him, if any, or both, as the case may be before the appeal is heard.

RERA’s Applicability

Except for the following, RERA applies to all builders and developers:

1. Where the total area of land to be developed does not exceed 500 square meters, or the total number of units to be developed does not exceed eight.

2. Where the Promoter got a completion certificate prior to the RERA’s implementation.

3. For the purpose of renovation, repair, or redevelopment that does not include the marketing, advertising, or sale of any apartment, plot, or building.

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