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Access to adequate housing is the basic need of every individual and it is mandatory for the enjoyment of many other rights. The Indian Judiciary had recognized the right of housing and interpreted this right in the context of right to life under article 21.
With the increased demand for housing, the real estate developers gained unfair advantage over the buyers, the buyers had hard time in dealing with the rules of real estate sector and there was lack of transparency.
This resulted in the enactment of the Real Estate Regulation Act (RERA), 2016 in order to protect the consumer rights by providing accountability and transparency as to make real estate transactions simple, since housing is a key input in economic, social, and civic development. The ultimate purpose of the act is to protect the interests of the household buyers and increase investment in real estate sector.
What are the features of RERA 2016?
- Establishment of Real Estate Authority to regulate and promote Real Estate Sector.
- Ensure the sale of plot, apartment or project in an efficient and transparent manner.
- Ensure to protect the interest of consumers in real estate sector.
- Establishing an adjudicating mechanism for speedy redresses and establishing Appellate Tribunal to hear appeals from Real Estate Regulation Authority.
- Regulate the transactions in Real Estate Sector.
- Registration of Residential real estate with RERA and the promoter cannot sell the project without registering it. The Real Estate Agent also needs to register with RERA.
- Promoter to upload the details of the project in the website of RERA including the layout plan and schedule for completion of the project.
- Amount collected from the buyers need to be maintained in a separate bank account and should be used only for that purpose.
- Right of the client to be represented by legal representatives or Chartered Accountant or Company Secretary.
- Imposes penalty and prescribes punishment on promoters and real estate agents.
Key aims of the Act:
The RERA Act 2016 intends primarily the following :
- Regulate and promote the real estate.
- Protect the interest of buyers.
- Ensure smooth flow of information between the purchaser and promoter.
- Ensure accountability of promoters towards the buyers.
- Ensure transparent and efficient sale in real estate sector.
- Ensure balance of responsibility between the parties.
- To establish mechanism for speedy dispute redressal.
Scope and Ambit of RERA 2016:
The act covers all the ongoing projects including the commercial and residential buildings. It covers all the parties in the Real Estate Sector , including the Real Estate brokers and agents. The main aim of the act is to provide ease and comfort for the homebuyers, hence the Appellate Tribunal is set up for addressing their grievances.
The act mandates the developers to register their projects with the tribunal before they start their project along with the details and proposed deadline of the project. If the deadline is not met, the builders have to face the penalties and criminal charges and also need to compensate the buyers for the same.
Before the enactment of RERA, the builders used to divert the funds of ongoing projects to start new projects because of which delay occurred in the completion of individual project. Now, the builders have to deposit 70℅ of the fund in a separate bank account so that the fund is not diverted and is used in the project for which it was sanctioned.
Judicial Mandate regarding RERA 2016:
In this recent case, the Supreme Court’s Two-Judge Bench addressed an essential aspect of the development agreements and emphasized the need to display the permit plan and layout plans on a developer’s site, other than those offered by the Authority’s Regulations.
The Bombay High Court, held that the promoters are obliged to disclose the development potential of the plot under the agreement and need to obtain consent of flat taker if any changes are to be made to the scheme so disclosed.
In a landmark judgment, the builders association challenged the constitutional validity of RERA. The court held that RERA has an adequate mechanism that balances rights and obligations of the real estate agent, allotter and the promoter.
Drawbacks of RERA 2016
Even though there are many advantages of the act, there are certain limitations which are as follows:
- Due to various factors the builders are faced with lack of cash, as a result they increase the price of the property to meet their needs, which leads to change in demand and supply conditions in the sector
- Compliance with all aspects will slow the project and as the property is not going to be pre-selling. Large builders will be able to develop two to three projects within two years due to the length of the venture, and small builders will be unable to earn money due to lack of techniques and resources.
- If the developer fails to fulfill any clause, he shall be liable for imprisonment up to 3 years or 10% of the total project value. This condition puts the customer in trouble and holds them until the matter is resolved. It creates stress in their lives and they face financial crisis.
The way ahead…
With the increase in the real estate sector, RERA acts as a significant step in right direction to bring awareness in terms of customers, promoters, builders etc. RERA is directed towards successful and effective implementation of real estate laws in the country by providing greater accountability of the real estate builders and agents towards customer as well as government.
Various policies need to be incorporated under the RERA that would bring economic and social transformation, which would render sustainable development of RERA along with customer friendly environment. This act not only benefits the buyer but also the builders due to its greater transparency.
The act would be of great success is implemented as it is, but due to the non- compliance of many of the rules, it becomes difficult to achieve the object of the act. Hence, the rules need to be framed in order to benefit the buyer and appropriate mechanism must be implemented for proper compliance of the act which is important to fulfill the purpose of the act.
-This article is brought to you in collaboration with Dharaniya Sri K.M from Sastra University, Tamil Nadu.