Until now, real estate was regarded as an unregulated sector in India. There were many problems with regard to the sector. For instance, there would be no compensation given if there were any defect in the services. There was a need to inculcate discipline among builders. Hence, to regulate the real estate sector, the RERA (Real Estate Regulatory Authority) Bill was introduced in 2013 and the bill was approved in March 2016. RERA stands for Real Estate (Regulation and Development) Act.
RERA is a consumer protection law. It safeguards the consumer’s interests. It applies to all projects. Although it is a central law, its implementation will depend on state governments. Currently, Maharashtra government has approved RERA. It is the most evolved state in RERA.
Each phase of a project requires separate registration. A phase of a project can mean a tower or a wing. Even commercial and residential projects require separate registration. This is important because each phase is required to have 3 bank accounts. When a customer credits the amount to the builder, full amount is initially credited into the 1st account. Then 70% of the value in the account is transferred to the 2nd account. Remaining 30% can either be transferred to the 3rd account or it can remain in the 1st account itself. The account with 30% of the amount can be withdrawn for thepurpose of construction only.
There are exceptions for registration under the Act. If the land is less than 500 sq. ft., number of phases does not exceed 8, when the promoter has received completion certificate prior to the commencement of the Act and for purposes of repair or redevelopment which does not involve any form of marketing or selling, then a person need not register under RERA.
The Act applies to the real estate agent as well. Only registered projects can be sold. If the agent is not registered, he cannot facilitate the selling of registered project.
The adjudicating officer of the Real Estate Appellate Tribunal is appointed by RERA in consultation with the state. If a case registered in RERA is not resolved, it will be transferred to the High Court. But if a case is filed in the Consumer Court, it cannot be filed in RERA unless the case is withdrawn from Consumer Court and then filed in RERA.
RERA has a great impact on pricing. The cost of capital would go up for a short term. Also the sale on the basis of carpet area alone would necessitate change in pricing policies.
There is a positive impact of RERA in the real estate sector. It will provide protection for the consumers but it is hard on the developers. They will find it challenging to comply with the law. The industry will become much cleaner and transparent.