Building Trust: How RERA is Revolutionising Real Estate Practices in India
RERA, which stands for Real Estate Regulation and Development Act, is a piece of legislation passed by the Parliament of India in 2016. The main objective of this act is to regulate and ensure transparency in the Indian real estate sector, to protect home owners best interests, and to promote investment. While the advent of any new legislation is bound to bring in some level of confusion, it must be said that the benefits of rolling out RERA far outweigh any complications.
Before RERA, exploitation of allottees was rampant in the industry, with no framework for monitoring financial regulation and control amongst the promoters. However, the establishment of RERA has led to increased transparency and accountability on the part of developers and promoters, resulting in increased confidence amongst homeowners and investors in the Indian real estate market.
Let’s study some of the provisions of RERA that have resulted in empowering and protecting homeowners and investors.
- Upholding Transparency: Quarterly Reporting and Legal Consequences
After the legalisation of RERA, promoters are no longer allowed to advertise, market, book, sell, or even offer to sell any property that has not been registered under RERA by the state-level authority that has been established for each state. Further, these government bodies are also authorised to ensure that the project meets all compliances with respect to registration and validity.
It is now imperative for a promoter to obtain documents such as a commencement certificate, sanctioned plans, pro forma of allotment letter, agreement for sale, etc. before a project might be registered under RERA.
Apart from this, RERA has also necessitated that promoters conform to quarterly regulations such as upgradation of any price changes, stage and percentage of project completion, any ongoing or previous litigation, volume of sold and unsold units, etc. Failure to comply with these regulations is liable to legal disciplinary action.
- Consumer Confidence Restored: Open Access to Project Information & Timely Delivery
As mentioned above, RERA has also led to a tremendous increase in transparency by making all the information related to projects widely available in the public domain. This has worked to make the developers and promoters accountable to the consumers by making sure their practices align with the best customer-centric practices while ensuring they are informed timely about the progress of the project’s construction.
In addition to this, RERA also ensures timely completion of the projects, failure of which makes the promoters liable to pay compensation or refund allottees, which has reaffirmed the faith of homeowners and investors in the industry as well as the legal framework.
- Investor Protection: Financial Safeguards & Constraints on Unilateral Alterations
Another way in which the confidence of the homeowners and investors has been bolstered is by the adjudication under RERA, according to which it is mandatory to allocate 70% of the proceeds received from the allottees into a separate escrow account, which must be used strictly for the construction of the project. This has been instrumental in ensuring that the funds promised by the allottees aren’t misused and utilised for sanctioned purposes only. Further, due to RERA, developers are no longer allowed to undertake any sanctioned changes in the approved floor plans, specifications, nature of fixings and fixtures, etc. without the prior consent of allottees, further strengthening the belief in the Indian real estate sector.
- Enhancing Investor Voice: RERA’s Measures for Allottee Involvement
In an effort to further empower the allottees, RERA also limits promoters from transferring any major rights or liabilities to other parties without the consent of the authorised state RERA body and prior written endorsement by at least two-thirds of the allottees. This makes sure that the allottees are deeply involved in any decision that might have a significant impact on the project they have invested in.
As is evident from the various provisions mandated by RERA, the housing market in India has never been more transparent and customer-centric, with promoter accountability being central to the act. This has ushered in an era where investors and end-buyers are both supremely confident in the real estate sector. Even financial institutions, like banks today, are more likely to provide aid to finance construction projects, boosting the real estate ecosystem.
