What is RERA? Term and Condition Act, 2016
Real Estate (Regulation and Development) Act,2016
- The Real Estate (Regulation and Development) Act, 2016 received Presidential assent on 25th March 2016. The Act seeks to establish the Real Estate Regulatory Authority (RERA) for regulation and promotion of the real estate sector and to ensure the sale of plots, apartments or buildings, as the case may be, or sale of real estate projects, in an efficient and transparent manner.
- It also intends to protect the interest of consumers in the real estate sector and establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the RERA and the adjudicating officer and for matters connected therewith or incidental thereto.
Features of the Act
- Real Estate Regulator,
- Registration of Real Estate Projects and Agents,
- Standardisation of Definitions,
- Ring-fencing of project receivables,
- Project sanctity,
- Legal recourse,
1. Real Estate Regulator
- The Act mandates the setting up of Real Estate Regulatory Authorities (RERAs) and Real Estate Appellate Tribunals in all states and union territories (except J & K) within 1 year of its notification.
2. Registration of Real Estate Projects and Agents
- Mandatory registration of real estate projects with the RERA, through the web-based online system, is required where the total area of land proposed to be developed exceeds 500 square meters or where more than eight apartments are proposed to be developed inclusive of all phases (where phase-wise development is proposed).
- Similarly, the Act requires mandatory registration of Real Estate Agents to carry out real estate business. The Act also requires every phase of a project to be registered separately as a standalone project.
- Projects cannot be advertised, booked or sold in any form prior to registration and obtaining the necessary construction approvals. The RERA is required to either grant or rejects registration applications within 30 days.
- Publicly accessible disclosures of the project and promoter details, along with a self-declared timeline within which the promoter is required to complete the project, are compulsory. Quarterly project-related disclosures are also required. The disclosures are to be made available online.
4. Standardisation of Definitions
- The Act defines key terms such as ‘apartment’, ‘carpet area’, ‘interest rate’, ‘agreement to sale’ and ‘completion certificate’ etc. Which will help in homogenising sector practices and prevent abuse of consumers due to biased classifications such as ‘super built-up area’ etc.
5. Ring-fencing of project receivables
- Promoters must park 70% of all project receivables in a separate account. Drawdown from such account is permitted for land and construction costs only, in line with the percentage of project completion. Further, a promoter can accept only up to 10 per cent of the apartment cost prior to entering into a written agreement for sale with the consumer.
6. Project sanctity
- The promoter is not permitted to alter plans, structural designs and specifications of the land, apartment or building without the prior consent of two-thirds of the allottees. The promoter is also not permitted to transfer or assign the majority of its rights and liabilities in a project without such consent, along with the RERA’s prior written approval.
7. Legal recourse:
- The Act provides for time-bound resolution of complaints and disputes by the RERAs and the Real Estate Appellate Tribunals. The Act also provides for a refund of amounts paid by consumers (along with interest and compensation) for the promoter’s failure to give possession of the apartment in accordance with the agreement for sale, or any breach of such agreement.
- The Act imposes monetary penalties on the promoter of up to 5 per cent of the ‘estimated cost of the project’ (as determined by the RERA) for disclosure related defaults, and up to 10 per cent for other defaults, along with a maximum imprisonment of 3 years.
Consumers are liable to a fine of up to 10 per cent of the apartment cost or imprisonment of up to 1 year for non-compliance with orders of the real estate appellate tribunal.