RERA is defined as Real Estate Regulation Act, which stands for transparency in the real estate industry. It was brought to action to provide relief to the buyers from the unfair builders. RERA was firstly introduced on 1 May 2016 and it was fully effective on 1 May 2017.
Importance of RERA
RERA is very important to provide relief to the buyers from the negligence of builders. RERA determines certain standard norms for the building and development of real estate which will enhance the transparency in transactions in the real estate sector.
Benefits of RERA
1. Standardized Carpet Area:
Earlier, the carpet area is not defined on which the builder calculates the price of the property. They had their own method of calculation of the Carpet Area. Because there was no standard formula for the computation of the carpet area. However, this was clearly defined by the RERA Act and the same formula would be applied by all builders/developers for the calculation of the Carpet Area.
DEFINITION OF CARPET AREA
“carpet area” means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
This has a direct impact on the Real Estate prices as most builders charge according to the carpet area. Builders compute the prices of the properties as follows.
Cost of Property = Carpet Area x Rate per sq ft
2. Rate of interest on default:
According to RERA, In the case of default payment by the buyer or default in completion of the project by the builder, both parties have to pay the same rate of interest.
Earlier what used to happen was that in case the buyer delayed in payment then the interest paid by the buyer to the builder was high and if the builder delays the possession of the property the interest paid by the builder to the home buyer was less. But now the RERA Act has now clearly specified that the interest shall be the same for both the parties
3. Reduces the Risk of Builder Insolvency/ Bankruptcy:-
A Builder/Developer has several projects which are being constructed simultaneously. Earlier Builders were allowed to redirect the assets raised from Project A to support the development of Project B.
In any case, this would now not be imaginable as after the presentation of RERA, the developer is responsible to store 70% of the sum acknowledged for the task in a different financial balance. He can pull out from such a record just based on the finish of the venture, which will be certified by an architect, civil engineer and a chartered accountant.
As the assets can now not be redirected to different tasks and utilized for different purposes – this will guarantee that the assets are utilized for the reason just for which they are raised and not so much for different purposes.
Prior, there have been sure cases wherein the builder raised the assets from home buyers for developing their homes however involved the assets for different purposes. They later became bankrupt and couldn’t finish the development of the property.
As the assets must be utilized for the reason for which they have been raised – this will guarantee that the assets are not redirected somewhere else and that the cash is utilized for the reason for which it is raised accordingly guaranteeing a convenient finish of the property.
4. Rights of the buyer Delay in possession:
If the builder fails to complete the project on the due date of completion then the buyer has the option-
To pull out from the project, wherein he will be equipped for a full refund along with interest payable from the due date of realization till the amount is refunded.
To go on with the project till the completion, wherein he will be qualified for compensation alongside interest payable from the due date of completion of the project till the undertaking is really finished.
For example, say the project was expected for completion on 31-3-2017 yet it couldn’t be finished on that day. So on 1-4-2017, you have the choice to pull out of the project. On the off chance that you choose to pull out from the project, for the period from 1-4-2017 to work the instalment is made, you will be qualified for interest.
5. Right of the Buyer in case of False promises:
In case the commitments made by the builder and the actual project mismatch, then the buyer has the option to withdraw from the project, wherein he is qualified for a full refund of the amount paid as advance or otherwise along with interest and claim compensation.
6. Advance Payment:
The builder can take only 10% of the cost of the apartment, villa etc. as advance payment or application fees as the case may be, before entering into an agreement of sale.
7. Right of the buyer in case of Defect after possession:
In case of any quality defect or any structural defect, defect in workmanship, provision or service is discovered within 5 years after the possession of the apartment, such defect will be corrected by the builder at no extra cost within 30 days.
If the builder fails to do so, the buyer shall be qualified to claim compensation for the same.