By Sanjay K. Chadha, Managing Partner, BSK Legal & Advocate, Supreme Court of India
In the last five years of its coming into force, the Real Estate (Regulation and Development Authority) Act, 2016, has indeed brought a paradigm shift in the real estate sector of India. The introduction of the RERA Act 2016 not only empowered the buyers but also shaped the total regulation of the activities of all stakeholders in real estate. For builders, it has helped them in cementing and enhancing their credibility in front of the potential and existing property buyers and for buyers, an altogether different organised regime is created, which was missing before.
In this article, I have tried to narrate 10 major changes which have changed the condition and direction of the biggest unorganised sector of the Indian economy.
1. Transparency – Since the last five years, a new regime of transparency has come into effect in the real estate sector. After the RERA Act got implemented, all the builders are obliged to hand over necessary documents related to the details of the project and the area or plot where the person is investing his money, the documents include – brochure, a copy of the registration, and a copy of the drawing of the flat. In order to bring more transparency, the builder has to open a separate bank account for the project under consideration. This account must be totally separate from the personal account of the builder. The builder has to deposit 70% of the total raised money in this separate account, which will be used only for the purpose of the project. Further, compulsory WEB-SITE showing time-bound developments in the project is another mediation provided by the Act for providing transparency.
2. Efficiency – The projects are undertaken in a more and more efficient manner. Under the new regime created by RERA in addition to timely completion of projects all the builders are obliged to handover necessary documents related to the details of the project and the area or plot including the copy of registration, copy of the drawing of the flat, the registration of documents in favour of the buyer.
3. Accountability in the real estate sector – Whatever is promised has to be delivered is the motto of this law. The responsibilities and duties of all stakeholders are very nicely defined in the RERA and in case of any violation is found the act provides for strict action.
4. A robust grievance redressal system – RERA has been paving the way for establishing regulators at the centre and at all state levels and created a robust grievance redressal system.No one buy houses to fight cases. Homes are for living and usually bought once in a lifetime, with the savings of a lifetime. The principle of natural justice is followed in its full sprite for this robust ‘justice delivery system’.
5. Quality – When the RERA Act was implemented, it became compulsory to use the promised product and if any issue appears, materials of similar quality are to be used. In case, worse quality products are used, the builder is liable to pay compensation on that ground. If anyone has suffered any loss due to usage of such material even, later on, the victim can claim compensation from the builders.
6. No change in the plan or layout – It was a general practice in the past that after changing the carpet area the builders use to charge huge money from the buyers. It is no more possible now. Under the RERA Act made it compulsory to mention the exact carpet area and in case any change is required to make in the area, it has to be approved by 2/3rd of the buyers, on the other hand, if the area is reduced the buyer will be liable to pay as per the size only.
7. Advertisement – RERA clearly bans any kind of false promise or advertisement. Even if the builder has not mentioned something in the agreement but has mentioned it in the advertisement, they are liable for that. As a practice before the Act came into existence, we have seen many a time misleading and false advertisements were published, but buyers had no such remedy.
8. Proper documentation of transfer in favour of the buyer – The RERA Act made it compulsory that any project which is being transferred to any other person, requires to get notified to the allottees, investors, buyer, and the authority. The name and the ownership are compulsorily be changed in the documents. Everything must be done in a prescribed way. Until the total procedure is completed, the previous owner shall not be released from the responsibility. This was a big lacuna in many of the property deals.
9. Work in a time-bound manner – The Act imposed certain rules regarding the delay in possession. If the possession is delayed for an unreasonable period, the buyer gets certain options like – alternate shelter till the project is completed, money back policy along with interest, or alternate residence of the same standard that has been promised by the builder. In the alternate residence, if any extra cost is required, the builder shall bear it.
10. Post possession liabilities – Before RERA was implemented, the builders used to go totally non-responsive towards any issue occurring to the project but RERA has taken it seriously and any damage occurring within 6 months of possession (legal/physical whichever is earlier), due to the manufacturing fault, shall be taken care of by the builder.
By enforcing transparency and putting rules in place, RERA has undoubtedly enhanced transparency, efficiency, accuracy and accountability in the real estate sector. A robust grievance redressal system prepared under the RERA Act has undoubtedly helped all stack-holders and has radically transformed industry which was totally unorganised. As a matter of fact, it has been maintained that RERA is a work-in-progress, each passing year better than the previous. There are still miles to go, but we can foresee a well regulated real estate market.