What is the purpose of RERA Act?

Introduction –

The real estate sector is a critical driver of economic growth in India, contributing significantly to the country’s GDP. However, the sector has often been marred by fraudulent practices, delayed project delivery, and lack of transparency, resulting in a lack of trust among homebuyers. To address these issues and promote transparency and accountability in the real estate sector, the Government of India enacted the Real Estate (Regulation and Development) Act, 2016 (RERA).

The RERA Act aims to regulate the real estate sector and protect the interests of homebuyers by promoting transparency, accountability, and reliability in the sector. The Act requires developers to register their projects with the regulatory authority, disclose project details, deposit funds in separate accounts, and protect homebuyers’ interests through measures such as a grievance redressal mechanism and provision of compensation for delays or deficiencies in the project.

The RERA Act is a significant step towards regulating the real estate sector and improving the confidence of homebuyers in the sector. However, its implementation has been variable across different states, and there is a need to address some of its shortcomings, such as limited enforcement power and complexity of the Act, to ensure its effectiveness.

What is RERA Act ? –

The Real Estate (Regulation and Development) Act, 2016, or RERA, is a central law passed by the Indian Parliament with the aim of regulating the real estate sector in India and protecting the interests of homebuyers. The law came into effect on May 1, 2017, and requires that all new and ongoing real estate projects with a minimum area of 500 square meters or eight apartments be registered with the Real Estate Regulatory Authority (RERA).

The key features of RERA include mandatory registration of real estate projects with RERA, disclosure requirements by builders, deposit of 70% of the funds received from homebuyers in a separate escrow account, timely delivery of projects, and the establishment of Real Estate Appellate Tribunals (REATs) and Real Estate Regulatory Authority (RERA) in each state to address disputes between homebuyers and builders.

The benefits of RERA include protection of homebuyers, improved transparency, timely delivery of projects, and accountability of builders. The law aims to introduce transparency, accountability, and fairness into the real estate sector and give homebuyers the confidence to invest in real estate.

Background of RERA ACT ? –

Before the enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA), the Indian real estate sector was largely unregulated, leading to a lack of transparency, accountability, and reliability in the sector. Homebuyers faced several issues, such as fraudulent practices, delayed project delivery, and non-disclosure of project details, which eroded trust in the sector.

To address these issues, the Government of India proposed a draft of the RERA Act in 2013, which underwent several modifications based on feedback from stakeholders, including homebuyers, developers, and industry experts. The RERA Act was finally passed by the Parliament of India in March 2016, and it came into effect from May 2017.

The RERA Act was formulated to regulate the real estate sector and protect the interests of homebuyers by promoting transparency, accountability, and reliability in the sector. The Act establishes a regulatory authority in each state to oversee the real estate sector and lays down several provisions for developers to ensure the delivery of quality projects within the specified time frame. The Act also provides a grievance redressal mechanism for homebuyers and mandates the deposit of 70% of project funds in a separate account to prevent developers from diverting funds to other projects.

Law commission Report regarding RERA Act –

The Law Commission of India submitted its 254th Report in 2015, titled “Need for Transparency in Real Estate Sector,” which formed the basis for the Real Estate (Regulation and Development) Act, 2016 (RERA). The report was prepared after extensive research and consultation with stakeholders, including homebuyers, developers, and industry experts, and it identified several issues in the real estate sector, such as non-disclosure of project details, fraudulent practices, and lack of accountability.

The report recommended the establishment of a regulatory authority to oversee the real estate sector and protect the interests of homebuyers. It proposed that all real estate projects should be registered with the regulatory authority, and developers should provide detailed information about the project, including land title, project plan, and financial details. The report also recommended the establishment of a grievance redressal mechanism for homebuyers, and provisions for the timely delivery of projects, with penalties for non-compliance.

The recommendations of the Law Commission report were largely incorporated into the RERA Act, which was enacted in 2016. The Act is a comprehensive legislation that aims to promote transparency, accountability, and reliability in the real estate sector, and it has brought much-needed regulation to the sector. The Law Commission report played a crucial role in highlighting the issues in the real estate sector and providing recommendations for addressing them, leading to the enactment of the RERA Act.

What is the purpose of RERA Act? –

The Real Estate (Regulation and Development) Act, 2016, or RERA, was enacted by the Indian Parliament with the primary purpose of regulating the real estate sector in India and protecting the interests of homebuyers. The law aims to introduce transparency, accountability, and fairness into the sector and provide a level playing field for both buyers and builders.

The key objectives of RERA are:

  1. Regulating the Real Estate Sector: The Act aims to regulate the real estate sector by ensuring that all new and ongoing real estate projects with a minimum area of 500 square meters or eight apartments are registered with the Real Estate Regulatory Authority (RERA). This ensures that builders cannot sell or market their projects without obtaining the necessary approvals and clearances.
  2. Protecting the Interests of Homebuyers: RERA aims to protect the interests of homebuyers by ensuring that builders complete their projects on time and as per the specifications promised to the homebuyers. If there is any delay, the builder is liable to pay compensation to the homebuyer.
  3. Promoting Transparency and Accountability: RERA mandates the disclosure of all relevant information by builders, which ensures that homebuyers can make informed decisions. Builders are required to disclose details such as
    1. the layout plan, approvals, land title, schedule of execution, and status of various approvals, among others, on the RERA website.
    2. Ensuring Timely Delivery of Projects: The law mandates that the projects be completed on time, which helps in reducing delays and associated costs. This is achieved through the requirement for builders to deposit 70% of the funds received from homebuyers in a separate escrow account, which can only be used for the construction of the project.
    3. Reducing Disputes: RERA provides for the establishment of Real Estate Appellate Tribunals (REATs) and Real Estate Regulatory Authority (RERA) in each state to address disputes between homebuyers and builders. This ensures that homebuyers have a speedy and effective means of redressal for their grievances.

    In summary, the purpose of RERA is to create a regulatory framework that promotes transparency, accountability, and fairness in the real estate sector and protects the interests of homebuyers. The law seeks to achieve this by regulating the sector, promoting transparency and accountability, ensuring timely delivery of projects, and reducing disputes between homebuyers and builders.

Power of RERA Authority under State Government –

The Real Estate Regulatory Authority (RERA) is a state-level regulatory body established under the Real Estate (Regulation and Development) Act, 2016. The state governments are responsible for setting up RERAs in their respective states and providing them with the necessary powers to regulate the real estate sector.

The powers of the RERA authority under state government can be broadly classified into three categories:

  1. Regulatory Powers: RERA has the power to regulate the real estate sector by ensuring that all new and ongoing real estate projects with a minimum area of 500 square meters or eight apartments are registered with the authority. RERA also has the power to approve or reject the registration of projects based on the builder’s compliance with various rules and regulations. Additionally, RERA can revoke the registration of a project if a builder violates any of the provisions of the Act.
  2. Adjudicatory Powers: RERA has the power to adjudicate disputes between homebuyers and builders. The authority can hear complaints from homebuyers and issue orders against builders if they are found to have violated the provisions of the Act. RERA can also award compensation to homebuyers if the builder is found to have caused any harm or loss to them.
  3. Administrative Powers: RERA has the power to issue guidelines and regulations related to the real estate sector. The authority can also levy fees and penalties on builders for non-compliance with the provisions of the Act. Additionally, RERA has the power to conduct investigations into the affairs of builders if it suspects any violations of the Act.
  4. In summary, the RERA authority under state government has regulatory, adjudicatory, and administrative powers to ensure that the real estate sector is transparent, accountable, and fair to homebuyers. The authority can take action against builders who violate the provisions of the Act and protect the interests of homebuyers by ensuring that their grievances are addressed in a timely and effective manner.

Important Features of RERA Act –

The Real Estate (Regulation and Development) Act, 2016 (RERA) is a landmark legislation in India aimed at regulating the real estate sector and protecting the interests of homebuyers. Some of the important features of the RERA Act are:

  1. Establishment of a Real Estate Regulatory Authority (RERA) in each state: The Act mandates the establishment of a RERA in each state to regulate and promote the real estate sector.
  2. Mandatory registration of real estate projects: Developers are required to register their real estate projects with the respective RERA before advertising, marketing or selling them.
  3. Deposit of 70% of project funds in a separate bank account: The Act requires developers to deposit 70% of the funds collected from buyers in a separate bank account to ensure that the funds are used for the specific project and not diverted to other projects.
  4. Disclosure of project details: Developers are required to provide complete details of the project, including the land title, approvals, layout plan, schedule of completion, and details of the contractors, architects and structural engineers.
  5. Protection of buyers’ interests: The Act provides for the protection of buyers’ interests through measures such as the establishment of a grievance redressal mechanism, provision for compensation in case of delays or deficiencies in the project, and the establishment of a Real Estate Appellate Tribunal to adjudicate disputes.
  6. Transparency in real estate transactions: The Act promotes transparency in real estate transactions by requiring developers to disclose details such as carpet area, common areas, and the number of apartments sold in the project.
  7. Penalties for non-compliance: The Act provides for penalties and imprisonment for developers who violate the provisions of the Act, including failure to register projects or disclose project details, and for real estate agents who operate without registration.

Overview Analysis of RERA Act –

The Real Estate (Regulation and Development) Act, 2016 (RERA) is a significant piece of legislation aimed at regulating the real estate sector in India and protecting the interests of homebuyers. Here is a critical analysis of the RERA Act:

Positive aspects:

  1. Establishment of a regulatory authority: The establishment of a regulatory authority in each state is a positive step towards regulating the real estate sector, as it promotes transparency and accountability.
  2. Mandatory registration of projects: The requirement for developers to register their projects with RERA ensures that only genuine and reliable projects are launched in the market, and it protects homebuyers from fraudulent or unscrupulous developers.
  3. Deposits in separate bank accounts: The provision for developers to deposit 70% of project funds in a separate bank account is a significant step towards ensuring that the funds are used only for the specific project and not diverted elsewhere.
  4. Protection of buyers’ interests: The Act has a strong focus on protecting the interests of homebuyers through measures such as the establishment of a grievance redressal mechanism and the provision of compensation in case of delays or deficiencies in the project.

Negative aspects:

  1. Limited enforcement power: While RERA provides for the regulation of the real estate sector, its enforcement power is limited, and it is up to the state governments to enforce the provisions of the Act.
  2. Lack of uniformity: The Act has been implemented differently in various states, leading to a lack of uniformity in the real estate sector.
  3. Delay in grievance redressal: While the establishment of a grievance redressal mechanism is a positive aspect of the Act, the redressal process can be time-consuming, which could be detrimental to homebuyers.
  4. Complexity of the Act: The Act is complex, and its provisions may not be easily understood by all stakeholders in the real estate sector, which could lead to confusion and non-compliance.

Overall, while the RERA Act is a significant step towards regulating the real estate sector in India, there is a need for greater uniformity in its implementation across different states, greater enforcement power, and a simplified and accessible version of the Act to ensure that all stakeholders can comply with its provisions.

Conclusion –

In conclusion, the Real Estate (Regulation and Development) Act, 2016 (RERA) is a significant piece of legislation that has brought about much-needed regulation and transparency in the real estate sector in India. The Act has several positive aspects, such as the establishment of a regulatory authority, mandatory registration of projects, and protection of buyers’ interests.

However, there are also some negative aspects of the Act, such as limited enforcement power, lack of uniformity, delay in grievance redressal, and complexity of the Act. Addressing these issues is essential to ensure that the Act can achieve its intended objectives of regulating the real estate sector and protecting the interests of homebuyers.

Overall, the RERA Act is a step in the right direction for the real estate sector in India, and it is essential to ensure that it is effectively implemented to promote transparency, accountability, and reliability in the sector.

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