The Real Estate Regulatory Authority (RERA) is enacted and shall be effective from 1st May 2016. RERA is applicable to Builders agents and customers are also involved, here we will look at the RERA from builder's perspective. The RERA is going to be a big head ache for those who have avoided keeping systems in their business. Budgeting, cash flow analysis and CRM teams with knowledge of RERA is going to give an edge in the industry.
REGISTRATION OF PROJECT
Mandatory
Registration of real estate projects if:
-
the total area of land proposed to be
developed exceeds 500 square meters (5381 Sq.Ft.) OR
-
where more
than eight apartments are proposed to be developed inclusive of all phases
Registration
of Phases
Every phase
of a project is to
be registered separately as a
standalone project.(if
the project is developed phase –wise)
Marketing
and Sales
Projects cannot be advertised, booked or sold in
any form prior to registration and obtaining the necessary construction
approvals.
Registration
timeline
The RERA
is required to either grant or reject registration applications within 30 days.
BUILDERS: ONLINE DISCLOSURES
On successful
registration a
Login id and password shall be provided.
Promotor shall
create his web page on such website after login.
Publicly
accessible
disclosures of following are compulsory:
- project and
-
promoter details,
-
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.
COLLECTION & UTILIZATION OF CUSTOMER MONEY
Parking
of funds:
Promoters must
park 70% of all project receivables in a separate bank account.
Withdrawal
of funds:
Drawdown from such account is permitted for land
and construction costs only, in line with the percentage of project completion (as certified by an
architect, an engineer and a chartered accountant).
Accepting
advances
Further, a promoter can accept only up to 10% of
the apartment cost prior to entering into a written agreement for sale with the
consumer.
WARANTIES & BAR ON ENCUMBRANCES
Ownership:
The promoter is required to declare that it
has legal title to the project land or authenticate validity of title, if such
land is owned by another person.
Insurance:
The promoter is also required to obtain
insurance for:
- title and buildings &
- construction insurance.
Construction
Guarantee:
The promoter is responsible for structural
defects or other deficiencies for a period of 5 years from possession.
Bar on Encumbrances:
The promoter is prohibited from creating any
charge or encumbrance on any apartment after executing an agreement for the
same.
Indemnity
to customer:
In the event such charge or encumbrance is
created, it will not affect the right and interest of the concerned consumer.
PROJECT & AGREEMENT SANCTITY
Plan
Alterations with 2/3rd
majority:
The promoter
is not permitted to alter plans, structural designs and specifications of the
land, apartment or building without prior consent of two-third of the
allottees.
Rights
/ liabilities in project
The promoter
is also not permitted to transfer or assign majority of its rights and
liabilities in a project without such consent, along with the RERA's prior
written approval
Model
agreement:
The Act
provides that a specified form of agreement for sale between promoters and
consumers may be prescribed, which will prevent inclusion of biased provisions
in it.
Consumers have also been granted the
right to seek relief for unilateral termination of such agreements by promoters
without cause.
EXISTING PROJECTS
Existing projects which have not received completion certificate before 1st May 2016, will be required to obtain registration with
the RERA by 1st August 2016.
PENALTIES
Disclosure
related Defaults:
The Act
imposes monetary penalties on the promoter of up to 5% of the 'estimated cost
of the project' (as determined by the RERA) for disclosure related defaults,
Other
Defaults:
Up to
10% for other defaults, along with a maximum imprisonment of 3 years.
Penalties
for customers
Consumers are liable to a fine of up to 10% of the
apartment cost or imprisonment up to 1 year for non-compliance with orders of
the real estate appellate tribunal.
COMPENSATION TO
ALLOTTEES
If the promoter fails to complete the
project or is unable to give the possession of apartment, plot or building then
- in case
the allottee wishes to withdraw from project then he should receive interest and
compensation as
given in the Act or
- in case
the allottee does not wish to withdraw from project then he should be paid interest
for every month of
delay at specified rate, till the handling of
the possession
Compensation
for failure to rectify defects within 30 days:
In case
of a structural defect, defect in workmanship, quality or provision of services
or other obligations of the promoter as per the sale agreement when brought to
the notice of the promoter by the allottee within 5 years of handling of the
possession should be rectified by the promoter within 30 days without any cost.
Failure to do the same by the promoter entitles the allottee to compensation.
CONCERN POINTS
Will the builders be liable if the delay
in possession is due to delay in Government approvals?
Understanding ownership pattern will be
critical to ascertain the rights and duties.
Making data and information online can be
a herculean task.