KEY PROVISIONS OF THE REAL ESTATE REGULATORY ACT AND THEIR IMPACT ON THE INDUSTRY
Introduction
The Real Estate Regulatory Act (RERA) was introduced in India in 2016 to regulate the real estate sector and protect the interests of homebuyers. This landmark legislation has brought about significant changes in the industry, enhancing transparency, accountability, and efficiency. In this article, we will discuss the key provisions of RERA and their impact on the real estate industry.
- Establishment of Regulatory Authorities
One of the primary provisions of RERA is the establishment of state-level Real Estate Regulatory Authorities (RERAs). These authorities are responsible for ensuring the implementation of the Act and resolving disputes between buyers and developers. RERAs act as a centralized platform for grievance redressal, streamlining the process and promoting transparency in real estate transactions.
Impact: The establishment of RERAs has boosted buyer confidence as they now have a dedicated authority to address their grievances. This has led to increased trust in the real estate market, resulting in a positive impact on sales and investments.
- Mandatory Registration of Projects and Agents
Under RERA, it is mandatory for real estate developers to register their projects with the respective state RERA before advertising or selling any units. Similarly, real estate agents must also be registered with the authority to facilitate property transactions. This provision aims to eliminate fraudulent activities by unscrupulous developers and agents, ensuring that only genuine and approved projects are available in the market.
Impact: Mandatory registration has weeded out non-compliant developers and agents, promoting fair practices in the real estate industry. Homebuyers can now verify the credibility of projects and agents, reducing the risk of fraud and providing them with a sense of security.
- Deposit of Funds in Escrow Accounts
RERA mandates that developers deposit a specified percentage of funds received from buyers into a separate escrow account. This provision ensures that developers utilize the funds for the specific project they are collected for, reducing the diversion of funds to other projects. It enhances financial discipline, prevents delays, and promotes timely completion of projects.
Impact: The deposit of funds in escrow accounts has curbed the practice of developers using funds from one project to finance others, which often led to delays and stalled construction. This has instilled confidence among buyers regarding the timely completion of projects and has reduced the number of project delays.
- Standardized Carpet Area Calculation
RERA introduced a standardized method for calculating the carpet area of residential units. Carpet area refers to the usable area within the walls of the apartment and excludes common spaces. By adopting a uniform method, RERA has eliminated discrepancies and misleading practices in area calculations, enabling buyers to make informed decisions based on accurate information.
Impact: The standardized carpet area calculation has brought transparency and clarity to property transactions. Homebuyers can now accurately compare the size and cost of different projects, making the market more competitive and customer-oriented.
- Disclosure of Project Details and Documentation
Developers are required to disclose comprehensive information about their projects, including the layout plan, development stages, approvals, timeline, and completion status. They must also provide details of the land title, encumbrances, and the status of statutory approvals. This provision empowers buyers with vital information to make informed decisions and protects them from hidden surprises.
Impact: Increased transparency through mandatory project disclosures has enhanced buyer confidence and reduced the risk of fraudulent practices. Buyers can assess the viability of a project before investing, leading to improved trust in the real estate sector.
Conclusion
The Real Estate Regulatory Act has significantly transformed the real estate industry in India. With provisions such as the establishment of RERAs, mandatory registration of projects and agents, deposit of funds in escrow accounts, standardized area calculation, and project disclosures, RERA has brought transparency, accountability, and consumer protection to the forefront. These provisions have not only safeguarded the interests of homebuyers but have also positively impacted the industry by promoting fair practices, reducing fraud, and boosting buyer confidence. As RERA continues to evolve and become more robust, it is expected to further streamline the real estate market and contribute to its sustainable growth.
