Buying property in India – RERA Act
Over the past 20 years, India has seen exponential growth in the housing sector, especially in the urban to semi-urban areas.
Scores of new developments have been built across the country with creation of new cities and townships. The housing ranges from apartments to luxury villas and bungalows, offering inventories to people from various income groups both within in India and abroad.
It is needless, to mention that with the increase of commercial transactions, there are bound to be increase in disputes as well. Complaints generally arise due to delay in construction, use of sub – standard materials, dispute in terms of payments, non – compliance of statutory norms by the builder / developer and other breaches of the contractual terms.
For the lay consumer, taking on the developer / builder was not only time consuming, but it involved huge legal costs as well. Many a times, it was seen that the consumer would be left at the mercy of the builder without having any effective legal recourse.
With the growing number of complaints, the Government of India finally in 2016 enacted The Real Estate (Regulation & Development) Act, 2016 (the “RERA Act”) with the objective of “sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal…..”
In a nutshell, the RERA Act provided the lay consumers a platform where the builder / developer can be brought to justice in the event they fail to deliver on their promises as agreed with the consumer. Most of the states in India, have now implemented the RERA Act.
Salient features of the RERA Act
No unnecessary delay in completion of the construction / project
The RERA Act prohibits the developer / builder from delay in completion of the project. Delay in delivery (without approved extension) imposes interest and at times even attracts imprisonment for the developer.
Defect in construction shall be the responsibility of the developer / builder
The quality of the construction has long been an issue for the buyers. Under the new rules the developer / promoter is under an obligation to rectify any structural defect in the construction up to a period of 5 years from the time of completion of the project. All costs for rectification shall be borne by the builder / developer.
No division / diversion of funds between projects
The builder / developer cannot invest the monies received from a potential buyer in to a different project. In the past it was seen that many projects were abandoned mid – way as developers used to launch multiple projects at the same time and monies received for an on – going project was used to finance a new project prior to completion of the ongoing project. Under the new rules the developer / builder has to keep the monies of the potential buyer in an escrow account and withdraw the same on a stagewise basis.
Compulsory registration of builder / developer
Under RERA, builders / developers will have to register themselves with authorities, disclose every detail about the project and will be able to sell projects only after the necessary clearances have been attained. It is also pertinent to mention that the estate agents are also covered within the ambit of the RERA Act.
Speedy and efficacious resolution of disputes
Most of the states in India have now established the RERA tribunals and appellate tribunals for resolution of disputes arising under the RERA Act. The tribunals have the authority to direct the builder / developer to pay compensation to the buyer along with interest and penalty. The matters are resolved in an expedited manner.