A game changer

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The Real Estate (Regulation & Development) Act of 2016 or RERA, is a real game changer, correcting the ‘skewed-towards-builder’ real estate dynamics. The consumer, in this case, the home-buyer, will truly benefit from RERA, exults Advocate Shirish V. Deshpande.

Real Estate (Regulation & Development) Act – 2016, RERA for short, is one of the rarest of the rare Acts passed by the Indian Parliament. It is going to prove a game-changer for promoters/builders, as well as for home buyers.

It is not that the states did not have any legislation to regulate the housing construction and sale/purchase of flats and apartments till now. In Maharashtra, we had and still have the Maharashtra Apartment Ownership Act, and also Maharashtra Ownership Flats Act (MOFA). Many others states too have similar Acts like MOFA. However, despite such Acts in place, the instances of cheating and fleecing of home-buyers were rampant. The malpractices, fraudulent practices and unfair and deceptive practices in the real sector, multiplied many times, instead of getting diminished due to the state legislation. In short, the pieces of legislation utterly failed in protecting the interest of home buyers, and in fact protected the unscrupulous promoters/builders. As such, there was a felt need for a legislation which will make the promoters/builders accountable to the consumers who hand over their life-time earnings to them in good faith. RERA has done exactly that. RERA has created an Authority which is empowered to take on the unscrupulous promoters/builders and protect gullible home-buyers.

Promoting accountability
RERA has made every promoter/developer/builder, developing the property of not less than 500 sq. meters area or having no less than eight apartments, answerable to the consumers in no uncertain terms. The RERA Act has imposed certain restrictions on the promoters/builders which will go a long way in protecting the interest of home buyers. Some of these restrictions are as follows:

  • No promoter can advertise, market, book, sell or offer for sale any plot, apartment or building without registering his real estate project with the Real Estate Regulatory Authority (RERA).
  • No real estate project can be registered by the promoter unless he has the building plan approvals and commencement certificate from the competent authority.
  • While applying for the registration of the real estate project, the promoter has to declare the promised date of possession of apartments/flats to the home buyers, and give full details of the said project, including the number of flats, floors and buildings the project will have.
  • In the event of the failure to give possession within the promised period, the registration shall lapse and the same can be renewed only for a further period of one year after satisfactorily explaining the reasons for such delay to RERA.
  • The promoter has to also declare his past projects’ performance, including the delays and litigations.
  • The promoter has to give declaration that he has a legal title to the land on which the project is to be developed.
  • The promoter has to deposit 70% of the amount received from the home buyers in a separate account, to be maintained in a scheduled bank.
  • The promoter can withdraw this amount only commensurate with the progress of the work on site, and that too on production of the certificate to that effect from his architect, engineer and the chartered accountant.
  • The promoter cannot change/modify the building plans once registered with RERA, unless 70% of the allottees (home-buyers) approve the same.
    What is more important, all the above information which the promoter is required to submit to the RERA for the purpose of registration, will be available on the RERA website for any prospective buyer to view. Thus, consumers can now visit the RERA website and first find out the details of the real estate project registered with RERA, see the track record of the promoter, see the amenities actually agreed to be given to the allottees and only then book the flat/apartment.
  • Yet another interesting feature of this RERA website is that the information given by the promoter is not going to be a one-time static information. The promoter is required to update this information including the progress of the work on site, every three months. Thus, the home-buyers, from any part of the world, can visit the web page of the real estate project in which he has booked his flat, and keep himself updated with the progress of the construction work.
    Another beauty of the newly enacted RERA is that it covers even the on-going projects which do not have the Completion Certificate as on 1st May, 2017, when RERA came into operation fully. Besides covering the on-going real estate projects, the RERA also takes into its ambit any Government or Public Development Authority like MHADA or CIDCO, which undertake housing construction activity. Thus, RERA makes both private and public sector promoters/builders equally accountable to the consumers.

    No longer the builder’s game
    RERA has changed many rules of the game in the real estate sector. Till the enactment of RERA, it was always the builder’s game. It was like “Heads I win, Tails you lose”. To give a simple example; the promoter hitherto was entitled to levy any rate of interest in case there was a delay in the payment of even one single installment. Invariably, the Agreement for Sale, which used to be one-sided, used to provide penal interest of anything from 18 to 24 % p.a. in case of delay in payment of the installment. But what if there was a delay in giving possession of the flat? Then the promoter was required to pay only 9% interest, if the home-buyer wants to withdraw from the project. And for getting this rightful amount too, he had to approach the consumer court or a civil court. RERA has radically changed this dirty game. Now the interest rate that the promoter will pay to the home-buyer and the home-buyer will pay to the promoter in the event of delay shall be the same, as prescribed by the state government. Thus, the arbitrary and unreasonable interest rate of 18 to 24 % to be paid by the home-buyers to the promoters in case of delay on their part has come to a happy end. RERA has put a cap on it.

    What is most interesting and still not widely known is that in case of delay in giving the possession of the flats to the home-buyers, there is no need for the home-buyers to go to the Consumer Court or even to RERA with a complaint. All that the home-buyer has to do is to raise a demand in writing to the promoter for the delay beyond the promised date of possession, and the promoter has to pay the home-buyer interest on the amount so far paid by him, every month, till the date of actual possession. It will be as automatic as how the promoter used to recover interest from the home-buyer for delayed payment, without approaching any court of law.

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    RERA has also imposed time limits on the promoters for formation of the society of the allottees. The moment more than 50 % of the flats are booked, the promoter is obliged to initiate steps for formation of the Society. Further, the promoter is also required to execute conveyance in favour of such society within a period of three months from the date of Occupancy Certificate. It needs to be noted that the obligations imposed on the promoters, if not fully discharged, then the allottees can approach RERA with their complaints. RERA mandates disposal of such complaints within 60 days. Even the appeals against the decisions of the RERA or of the adjudicating officers are expected to be disposed of by the RERA Appellate Tribunal within 60 days. It remains to be seen if the redressal grievance machinery of RERA meets this requirement or allows the professional lawyers to take them for a long ride, as it has happened in consumer courts.

    It also needs to be mentioned that notwithstanding numerous welcome and stringent provisions in the RERA to curb the mischief and malpractices of the promoters/builders, there is definitely some room for further improvement in the RERA Act itself. In many states, the builders’ lobby has succeeded in getting the state rules substantially diluted. This needs to be strongly opposed in the respective states. Mumbai Grahak Panchayat (MGP) has not only succeeded in getting the pro-builder Maharashtra Housing Act, 2014 repealed and getting RERA for Maharashtra, but has further succeeded substantially in opposing dilution of the RERA Act through the state rules. (See table the sbove)
    In ultimate analysis, one can certainly say that RERA has proved to be a game-changer. It has empowered the home-buyers. Now it is for these home-buyers to be alert and make use of the vital information of the real estate projects that will be easily accessible to them, and make the right choice of their dream home.

    Shirish Deshpande is the Chairman of Mumbai Grahak Panchayat (MGP), the largest consumer organisation in Asia. He is also a leading consumer Advocate in India, with several landmark judgments under Consumer Protection Act to his credit. His authority on Consumer Laws earned him a prestigious assignment of European Union to draft the Consumer Protection Law for Fiji. He was also instrumental in initiating review and revision of UN Guidelines for Consumer Protection (UNGCP). His crusade against the pro-builder Maharashtra Housing Act – 2014 resulted in repeal of the same and applying RERA for home-buyers in Maharashtra.


    Shirish-V.-Deshpande

    Shirish Deshpande

    Shirish Deshpande is the Chairman of Mumbai Grahak Panchayat (MGP), the largest consumer organisation in Asia. He is also a leading consumer Advocate in India, with several landmark judgments under Consumer Protection Act to his credit. His authority on Consumer Laws earned him a prestigious assignment of European Union to draft the Consumer Protection Law for Fiji. He was also instrumental in initiating review and revision of UN Guidelines for Consumer Protection (UNGCP). His crusade against the pro-builder Maharashtra Housing Act – 2014 resulted in repeal of the same and applying RERA for home-buyers in Maharashtra.

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