The Real Estate Regulatory Act (RERA), which is touted as the most revolutionary reform in the Indian real estate sector, came into force on May 1, 2017. In this article, we try to unravel how 11 months into operation, RERA has changed the ground reality for buying homes in the country.

Real estate sector in the Indian landscape went through a transitional period in the year 2017, with the introduction of various governmental reforms. The Benami Property Act, Demonetization and the Goods and ServicesTax along with RERA marked as important milestones for this sector. However, it is the RERA which was introduced with the purpose to protect the interests of home buyers, that we are here to talk about.

As per the Union Economic Survey (2017-18), real estate is the only service sector showing signs of stress due to low sales, growing by only 4.4% in 2015-16 (down from 7.5% in 2013-14). A whopping 60% of the black money in the country was being pumped into immovable assets in the form of both residential and commercial properties, stated news reports. Buyers for long had also been complaining that real estate transactions were lopsided and heavily in favour of the developers. The sector was blamed to have many discrepancies favouring funding from unsolicited sources. RERA was introduced with the aim to create a more equitable and fair transaction between the seller and the buyer of properties along with bringing in better accountability and transparency.

RERA is the first and only regulator for the Indian real estate market. The Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules that will govern the functioning of the sector in the state. One needs to understand that RERA is the law that enables governance of the sector while it is the Ministry of Housing and Urban Affairs of the Indian Government that looks after the proper functioning of this law.

The Act provided buyers and sellers with certain rights and duties.

RERA addressed delay in possession by applying huge penalties, which was a major pain point of the sector. The Act made it necessary for the promoters to give a written affidavit stating the period of completion of the project along with a clear title of the land and that the land is free from all encumbrances. In case the builder defaults and delays the possession of the property as per the 'agreement of sale', the buyer has the right to claim refund of the amount paid along with interest. Even in the case when the promoter's registration is cancelled, the buyer will have the right to a refund.

In case the buyer does not want to withdraw from the project and does not want a refund, the promoter has to pay interest for every month of delay, until the handing over of the possession. Even though this could be an existing practice but when taken together with the option for a refund amount under the protection of a regulator, the delay process could be curtailed to a large extent.

In most cases where the buyer delayed possession after implementation of RERA, the promoters had to refund full amount or forgo certain part of the payment.

Many believe that the most positive aspect of this Act is that it provides a unified legal regime for the purchase of flats; apartments, etc., and seeks to standardize the practice across the country. The area of a property was often calculated in three different ways - carpet area, built-up area and super built-up area. Hence, when it comes to buying a property, this can lead to disconnect, between what you pay and what you actually get.

According to the RERA, carpet area is now defined as 'the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or veranda area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment'.

This serves as an easy parameter for making the right judgement and avoiding confusion about the area which needs to be paid for.

Not having any regulation provides more liberty for wrong-doing. The Act not only makes provision to punish the buyer for not making payments on time but it also makes provision to punish the developer for not sticking to any terms agreed upon. Moreover, in case of any structural defects arising within five years of handing over the possession of project to buyers, developers will be liable to rectify such defects without further charge.

A complaint under the RERA, is required to be in the form prescribed under the respective states' rules. The complaint can be filed with respect to a project registered under RERA, within the prescribed time limit, for violation or contravention of provisions of the act or the rules or regulations framed under RERA. All these characteristics of RERA helped build confidence in investors and made them feel protected and in a more regulated environment.

Initial hiccups are observed whenever a new regulation is implemented. The implementation of RERA also had a negative impact in terms of initial registration backlog, increased project cost, rise in the cost of capital and increase in project launch time.

Conclusion

While RERA does not completely eliminate the possibility of mishaps in real estate transactions, it makes a good effort at trying to make the process as transparent as possible.