The many benefits of the RERA Act

Buying a home is a big deal for everyone. It is a high value investment and the buyer has to think beyond just the property rate. Add to that the fact that the builders had the discretion to frame the builder-buyer agreement as they deemed fit. This practice promoted a lot of mal-practice which ultimately affected the buyer and did little to protect his interests while making a sizeable investment like purchasing a house. As such, the Government of India took matter in their own hands to stop these mal-practices and offer a sense of relief to the home buyer by introducing the RERA Act. But what is RERA and what are its benefits? Let’s find out.

What is RERA Act?

RERA stands for Real Estate Regulations Act. As it is evident from its name, RERA is an Act meant to standardise or normalise certain regulations related to the real estate industry. The RERA Act was introduced by the Government of India in the year 2016 with the aim of protecting the interests of home buyers. The sole purpose of launching the Act was to put an end to the unfair and illegal practices followed by real estate builders in which home owners were charged beyond just the property they were purchasing. As such, the Government has laid down certain specific rules and regulations that builders must follow while developing and selling real estate. The idea was to provide the home buyer with total transparency in terms of development of the property he is investing in as well as financial transactions between builders and buyers. Builders are expected to follow all the rules and regulations laid down under RERA Act failing which buyers are given the right to lodge a formal complaint against them. The Act is to be followed in every state in India and is applicable on both, residential as well as commercial properties.

RERA benefits

Now that we know what is RERA, let’s take a look at its many benefits.

Total transparency in dealings:

The RERA Act has made it mandatory for builders to ensure that there is total transparency in the information provided to the home buyer. Builders are obligated to inform the buyer about every single, major and minor aspect of the project they are building. They must provide a pamphlet and also update these details on their real estate websites. Buyers must be informed about the plan layout and execution. They should also be informed about the stage-wise completion of the project.

Builders cannot charge for excess area:

One of the key benefits of RERA is that builders cannot charge homebuyers for both, the built-up and the super built-up area. This simply means that buyers only have to pay for the carpet area of the home purchased by them i.e. the area between the walls. Builders cannot charge buyers for the super built-up area i.e. the area covered by external walls, which includes things such as the elevator, the stairs, the lobby, the balcony and other such common spaces. Moreover, developers must take consent from buyers in case they are making any changes in the project design or other structures.

Project delays are prohibited:

Earlier home buyers had to face the inconvenience of not getting possession of the property at the time promised by builders. This is not permitted any more. It is mandatory for builders to complete projects within the time frame promised and builders who default on this are required to pay an interest rate of 2% above the lending rate offered by the country’s largest nationalised bank, the State Bank of India. Moreover, builders could also face a possible jail term of 3 years for project delays.

The building should not have any defects:

To ensure there are no loose ends or chances of fleecing buyers owing to so many laws under RERA, the government added another clause to protect buyers from poorly constructed properties. As such, they laid emphasis on the quality of construction, which was a major concern for buyers. Under RERA, a building should be free of any kind of structural defect for a minimum period of 5 years of buyers’ gaining possession of the property. In case any defects are found, it is the responsibility of the builder to fix the defects without charging the buyer. Also, the defect should be fixed in a period of 30 days from intimation.

Builders cannot use your money for other projects:

Another major benefit of RERA is that developers must mandatorily deposit 70% of the sums received from buyers into a separate escrow account and the money can only be withdrawn in accordance with the construction stage as approved by builders’ chartered accountants and engineers. Also, builders cannot ask for more than 10% of the cost of the property as advance before a sale agreement is drafted.

Since the introduction of RERA most malpractices by builders have gone down rapidly. The introduction of the Act has proven to be a massive relief for buyers who are now getting exactly what they pay for. The RERA Act is doing just what it intended i.e. protecting the interest of buyers in several ways.