What is RERA and what role it plays in the Real Estate sector
The Real Estate (Regulation and Development) Act, 2016, also referred to as RERA is a historic legislation passed by the Indian Parliament to control the real estate sector, safeguard the interests of homebuyers and ensure greater transparency and accountability in real estate transactions. The Act makes it mandatory to form state-level authorities, ensures registration of projects and provides for resolution of disputes thus boosting the housing sector’s credibility.
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Regulation and transparency in the real estate
The primary objective of RERA is to regulate the real estate sector in a more efficient and transparent manner, while also protecting the interests of homebuyers. RERA makes it mandatory for developers to provide all information about their projects, including approvals, layout plans, timelines and legal status on the official RERA websites.
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Mandatory registration of projects and agents
RERA provides that all real estate projects exceeding certain limits and all real estate agents dealing in such projects shall be obliged to register with the concerned State Real Estate Regulatory Authority before advertising or selling any units in such projects. This is a mandatory requirement under RERA, which ensures that the projects are checked by the authorities and that there is no unauthorised development of projects.
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Financial discipline through escrow accounts
In order to ensure that the funds are not diverted, RERA mandates that 70% of the amount received from buyers shall be deposited in an escrow account and utilised only for the construction and land costs of the same project.
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Protection of homebuyers’ rights
RERA greatly enhances the protection of consumers’ rights by making developers liable for any delay, defect in the structure, or misrepresentation. Homebuyers have a right to be compensated for delayed possession, accurate information about carpet area, and reasonable agreements that do not contain one-sided clauses. This goes a long way in preventing exploitation and increasing trust between homebuyers and developers.
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Fast-track dispute resolution mechanism
The Act provides for a three-tier grievance redressal mechanism consisting of the Real Estate Regulatory Authority, an adjudicating officer and an appellate tribunal. The disputes between homebuyers and developers are expected to be resolved within a stipulated time frame, thus providing quicker justice and preventing prolonged court cases, which were common before the enactment of RERA.
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Penalties and compliance enforcement
RERA provides harsh penalties for non-compliance, such as heavy fines that are proportionate to the project cost and even imprisonment, for continued non-compliance. These deterrents are effective in preventing fraud, misrepresentation, or failure to register projects, ensuring that developers adhere to the highest standards of business ethics.
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Boost to investor confidence and sector growth
RERA increases transparency, accountability, and time-bound delivery of projects, thereby increasing investor confidence in the sector. The regulatory framework provides a boost to genuine developers, helping the Indian real estate sector achieve stability and growth.
RERA is a revolutionary piece of legislation in the Indian real estate sector. By making registration mandatory, ensuring financial security, providing consumer protection, imposing severe punishment and resolving disputes quickly, the Act has ensured a transparent and accountable real estate sector. Thus, the real estate sector as well as home buyers, stand to gain from RERA, making it a vital piece of legislation in the real estate sector in India.
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