Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced with an objective to protect the home buyers and to also boost the real estate investments. The bill was passed in the Parliament on March 10, 2016 by the Upper House. The bill came into effect with all other provisions from May 1, 2017.
Key objectives of RERA:
• To protect the interest of home buyers and ensure accountability.
• To bring transparency in the home buying process and introduce fair practices in real estate projects
• To reduce frauds and delay in execution of housing projects
• To reduce irregularity of information between the buyers and the builders
• To bring builder-buyer agreement under the legal and regulatory scanner
• To boost investor’s interest in real estate segment.
Short & Long Term Impact of RERA on Individual Home Loan Buyers
Security – RERA assures security to the home buyers in both short and long term. Under the act, a minimum of 70% of the buyers’ and investors’ funds are kept in a separate account and the money is withdrawn and allotted to the builders as per construction costs and land-related expenses. According to the norms, the builder cannot ask for more than 10% of the property’s cost before the sale agreement is signed.
Fairness – Earlier, builders use to charge extra money from the buyers for super built-up area, but as RERA has instructed, real estate developers now sell property based on the carpet area and not super built-up area. In case of delayed possession, buyers are entitled to get back the invested funds.
Transparency – Builders are supposed to present the original documents and are not allowed to make any changes to the agreement or project without the consent of the buyer. This has led to positive short and long term impact of RERA on individual home loan buyers.
Authorization – Any builder or developer cannot advertise, sell, or construct without registering with the regulatory body. On registration, the builder will be provided a unique number for each project and all the advertisements will be made in accordance to the unique registration number provided by RERA.
Fewer projects launched as the promoters and builders have to spend more time understanding the impact of the Real Estate (Regulation and Development) Act, 2016. On the other hand, genuine builders and developers benefitted from the scheme due to lesser competition.
Dishonest or fraud builders will be vanished from the market as they will fail to meet the RERA guidelines.
The 32 revised sections will encourage financial discipline in the real estate sector.
Developers have to go through certain formalities before making changes to the project agreement after the implementation of the RERA Act. This might bring chaos in the real estate industry, but ultimately will have constructive short and long term impact of RERA on individual home loan buyers, investors, and builders.