In a step that will bring the Real Estate Act closer to implementation, the union government has notified the rules under the act. We examine its implications for homebuyers and developers.
The union government of India recently notified the rules under the Real Estate Regulation Act, which will be applicable to the five union territories. Now, all the states are expected to notify their own rules, in the near future. However, the question that remains is whether the rules will meet the expectations of homebuyers and the realty sector.
Although numerous promises have been made over the years, not much has moved forward, from ideation to actual implementation of policies, assert experts.
A fair Real Estate Regulatory Authority (RERA), should hold both, buyers and developers accountable and ensure transparency in the real estate development space. It will help developers to become more fiscally prudent and focus on delivery timelines. There is clearly a trust deficit between customers and developers and this trusts deficit will hopefully, be bridged very soon, thereby, benefitting the entire industry.
Key features of the rules notified under the Real Estate Regulation Act
- Developers have to open an escrow account for all sales proceeds and use this account for all payments for the particular project. 70% of the money collected, has to remain in the escrow account, to facilitate all project-related expenses and the rest of the money can be taken out by the developer to use as they deem fit.
- There is an interest penalty for delayed possession that is imposed on the developer.
- Projects can only be launched, upon receiving the relevant approvals from the concerned authorities. These approvals have to be put up on the RERA website, along with all the pertinent project details and the project has to be approved by the regulatory authority. Customers can log onto the RERA website, to see the project’s details.
- Properties will be sold strictly on the basis of carpet area.
- Any grievance/complaint has to be resolved by the state’s real estate regulatory authority, within 60 days.
Can the RERA fulfill homebuyers’ and builders’ expectations?
Experts feel that Transparency and trust factor will automatically increase, as it will become mandatory for developers to post all information pertaining to the project’s plan, layout, government approvals, land title status, sub-contractors to the project and schedule for completion, with the state real estate regulatory authorities. This law will act as a regulator, to govern both residential and commercial real estate transactions.
Tier-2 and tier-3 markets, where a lot of consumers have lost their money in the past, will again see a spurt in investments. Moreover, FII investment and FDI investment into real estate will also grow.
While the notification of the rules, is definitely a step in the right direction, the success of the Real Estate Act, will depend on its implementation.
However, we should always remember that this act is intended to safeguard the consumers and it should never be treated as a tool to only penalize people.
For RERA to succeed, its implementation should be in true spirit and should not become a tool for corruption, harassment and delays. It is for Government to ensure speed and correct implementation of the Act. Further, RERA is a blessing in disguise for entire realty sector as it will regularize the purchase process and improve transparency.