India has long recognized that one of the industries that contributes most to the country’s GDP is still the real estate sector. However, it has drawn a lot of criticism for its unregulated methods, delayed projects, and lack of transparency. The Indian government created revolutionary legislation known as the Real Estate (Regulation and Development) Act, 2016 (RERA) to address the issues that the country’s real estate industry has been suffering. Its goals were to promote responsibility in the industry and protect homebuyers’ rights. Among other things, the blog discusses the fundamentals of RERA and how it affects the Indian real estate market. To put it briefly, it contrasts them with international rules.

Introduction to RERA

The Indian Parliament passed the RERA law in 2016, and it went into force on May 1st, 2017. It seeks to provide a regulatory framework that increases responsibility, openness, and efficiency in all real estate transactions. This statute contains a grievance redressal process that protects homebuyers’ interests against developer and agency wrongdoing.

Key Features of RERA

1. Registration of Realty Projects:

All the residential as well as the commercial real estate projects that involve more than 500 square meters plot size or more than eight apartments have to get registered with state RERA authority in advance before launching or advertising it. This is to ensure reaching only on approved projects to buyers.

2. Mandatory disclosure by Builders:

Builders have to disclose the following about the detailed project plan and layout:.

• Status of clearances and approvals.
• Details about the promoter and track record.
• Quarterly updates on the project’s progress.

3. Protection for Buyers Interests:

• Advance Payments: The developers shall not accept any advance exceeding 10% of the total cost without such an agreement being duly signed.
• Project Delays: In case, the developer is unable to complete the project in time, the full refund along with interest or other compensation, as RERA provides may be claimed.
• Defect Liability: The developers would be liable for correcting defects in structure and defective workmanship that may appear within five years of the date of completion of the project.

4. Escrow Mechanism for Funds of a Project:

To avoid diversion of the collected amounts from buyers for any particular project, RERA requires depositing 70% of the collected amounts into a wholly separate, specifically maintained escrow account. Such funds are strictly only usable for the specific project and the cost incurred in connection with the same.

5. Grievance Redressal Mechanism:

RERA has distinct appellate tribunals to handle complaints. Both purchasers and developers may file an RERA appeal at this appellate tribunal to obtain a resolution as soon as feasible.

6. Real Estate Agents:

In order for accountability to become a legislative requirement, agents must register under RERA. In addition to being required to follow professional ethics, registered agents are also obliged to give buyers accurate information.

Impact of RERA on the Indian Real Estate Sector

RERA has altered the real estate scenario in India to a large extent:

1. Increased transparency

It has boosted transparency since the project details were disclosed, which has given confidence to buyers to make their decisions.

2. On-Time Project Completion

Stiffer penalties have stilled delays since they are now against penal liability imposed on developers failing to do projects in time.

3. Confidence Gain amongst Consumers

Issues like advanced payment, delays in projects, and quality defects get addressed; hence, RERA has enhanced confidence between the buyer and the developer.

4. Professionalism in Agents Dealing with Real Estate

In reality, the registration and regulation of estate agents have scaled-down fraudulent practices that result in an unfair deal for the buyers.

5. Market Consolidation

The small non-complying developers have squeezed out of the market, making the sector increasingly organized and reliable.

Challenges and Limitations of RERA

Despite all its benefits, RERA comes with some challenges:

1. State Level Implementation

Real estate is a state subject in India, and RERA has varied authorities in place under different states. The success of RERA rests solely on the implementations made by the respective states that add to enforcement.

2. Pendency

There are a few states that have tremendous case pendencies in their RERA tribunals, which lead to delayed justice for buyers.

3. Limited Coverage

There are a few projects, such as those having an area less than 500 square meters or eight apartments, which fall outside the purview of RERA.

4. Consumer Awareness

There is still a significant number of buyers who are not aware of the rights under RERA, thereby limiting the full effect of the RERA Act.

Global Perspective: Laws of Real Estate in Other Countries

There are very few countries around the globe that have proper systems to regulate real estate:

• United States: The federal and state laws of the United States are relatively very strong, and these laws are primarily based upon consumer protection, disclosure, and fair housing. Department of Housing and Urban Development is an agency that significantly contributes in this regard.
• United Kingdom: The UK has more rigorous legislation, such as The Housing Act And Land Registration Act; hence there is transparency in the dealings of properties and legal redress if a dispute arises.
• Australia: The Real Estate Institute of Australia and the state-level bodies control the industry by focusing on ethical conduct and openness and safeguarding the interest of the buyer.

One area in India where RERA has been the most relevant has been in terms of best international practices thrust towards transparency and a consumer-protecting regime. Its scope and enforcement mechanisms, however, are uniquely adapted to the conditions of the Indian market.

Conclusion

RERA has thus been one of the considerable milestones in bringing reforms to the Indian real estate sector. Accountability towards a greater extent and safeguarding the buyer interest is one of the positions this law will visibly bring about in the sector. Even though challenges remain, long-term impact upon the sector is undeniable. The continued role of RERA, in changing the Indian realty landscape, may be crucial as more states strengthen their mechanisms of implementation and buyers become increasingly aware of their rights. At a time when demand for housing and infrastructure is on the rise, how the outcome of RERA unfolds will significantly determine the future course of the industry.

This blog is authored by Shreelata Patro, Legal Intern at Lets Learn Law.