What is RERA?
RERA or the Real Estate (Regulation and Development) Act, 2016, has finally come into force from May 1st and it will protect your interests as a home-buyer when it comes to delays, price, quality of construction, etc. In short, it will bring in transparency in an otherwise opaque real estate world. Well, let’s see some of the provisions below…
– Compulsory registration: All projects with plot size of minimum 500 sq. mt., or eight apartments, to be registered with Regulatory Authorities. No more slipping away and running off with the money.
– Delay in projects will be addressed. Developers are required to deposit 70% of the funds collected from buyers for a particular new project in a separate bank account, and 70% of unused funds in case of ongoing projects. This way your money won’t be diverted anywhere else.
– Advertising and selling: No advertising or booking by developers for apartments or buildings will be allowed, without first registering it with the regulatory authority.
– Penalty: Both developers and buyers are required to pay the same interest, i.e. 2%, over the SBI’s MCLR. If they cause delays, this will be for each delayed month.
– Liability: Developers will have a liability on the quality of construction and structural defects for five years.
– Changes: Any changes in project will require approval, not only from 2/3rd of the allottees, but also from RERA regulators.
What will be the impact of RERA?
– New launches likely to be slow, until the new provisions have been completely understood.
– New projects may see more focus, as older ones get sidelined. Fear of penalties, strict deadlines, as well as the need to raise money for individual projects, will see developers focusing on new projects (under RERA). This may happen in specific markets only. Mumbai, for instance, has made it mandatory for even ongoing projects to register under RERA.
– Watch out for smaller local developers, who depend more on advances from customers, as they may find it difficult to operate under the new era. Large developers have an edge.
– Developers may prefer to launch projects only nearing completion and not while the project is under construction.
– There may be an increase in costs of a project. Higher requirement of funding from developer & investors will increase the funding and registration costs, etc., which ultimately would be passed on to the customer, says a report by CARE Ratings.
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