Real Estate (Regulation and Development) Act 2016, came into force from 1 May 2016.
The short summary of the Act is to protect the buyers. Any commercial or residential real estate project over 500 square meters or 8 apartments should register with RERA (Real Estate Regulatory Authority), proposed to be set up in a year. Any new project has to be registered with the Authority before advertising, offering, selling or booking either by the promoters or through agents. Further, the sale has to be based on carpet area which is now clearly defined. 70% of the realization from the allottees has to be deposited in a separate bank account to be exclusively used for the concerned project. The details and the status of the project will be updated by the promoter on the Authority’s website for information of the public.
Delay or default in handing over the possession, the promoter is liable to:
- pay interest, the same that the allottee is paying for the EMI (the Rules announced indicates SBI’s prime lending rate +2%)
- return the amount paid by the allottee
- compensation as provided in the Act
- these reliefs are without prejudice to other remedies available to the allottees. Many consumers have opined whether they might get to lose the appreciation in the property value.
As we were composing this note, the Government announced the draft Rules, which seems to have diluted some of the provisions, one of it is payment of 10% of estimated cost of the project for compounding of imprisonment of promoter for non-registration of the project or violation of the Appellate Tribunal’s order.
We hope the Government also address some of the other major issues faced in this industry, such as:
- establishing a conclusive title system for land
- arresting the circulation of black-money
- Given the numerous clearance required for a project, if can there be a single window clearance or a very robust approval process
- clear land parcels efficiently so that there is no large gap between demand and supply.
This slide deck has notes on the salient features of the Act.