If you thought that buying a home from developers, especially in India, is fraught with risks and one should be prepared for unpleasant surprises even after getting the possession of one’s flat, then you were not wrong. After all, what has been happening till now hasn’t been a good experience for a majority of homebuyers. However, better days seem to be ahead for both the realty sector as well as homebuyers. For, the Real Estate (Regulation and Development) Act, 2016 (RERA), which becomes effective from today, ie. May 1, is not only going to change one’s home-buying experience, but is also most likely to alter the way the real estate sector functions in India.
Industry experts believe that having the potential to clean up real estate at all levels, RERA holds the key to the future growth of the sector. “The primary aim of the Act is to bring transparency and accountability from all stakeholders,” says Amit Chawla, Associate Director, Valuation & Advisory Services, Colliers International India.
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Whatever be the end result, the biggest beneficiary of RERA are expected to be homebuyers. Here we are taking a quick look at how the Act is likely to benefit homebuyers going ahead:
1. No More Project Delays: Till now the prime concern of a buyer while investing in an under-construction project has been delay in delivery of the project. In fact, even after getting it in writing from the builder, no one was sure when one will able to get the possession of one’s flat. Housing projects getting delayed by at least 4 to 5 years had become a norm. However, by imposing heavy penalties on such developers, RERA is likely to stop this practice.
2. Boost Transparency: The purpose of the Act is to make realty deals more equitable between the homebuyer and the developer, and the process more transparent. This will be done by making it mandatory for the builder to disclose details like approvals received, layout plans, court cases against them, among others. Developers will also be required to give a timeline for handover of the project and penalties will be imposed on them in case of any delay. This will help buyers to know whether they are putting their money in an approved project or not, and when will they get the delivery of their flat. Thus, the Act will bring in transparency that will boost the confidence of the prospective buyers and also have positive impact on sales.
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3. Accurate Project Details: Many developers promote their project defining numerous amenities that will be part of the project. However, many features are not offered at the time of possession. “The Act will help buyers to get well-defined product typology and interior specifications. Therefore, buyers will be able to make informed decision on a well laid-down information,” says Chawla.
4. Escrow Account Provision: RERA mandates that 70% of the money received from buyers be deposited in an escrow account and used only for the purpose of the development of a project. If the amount collected is lower than the cost of construction, the entire amount must be kept in the account. Thus, with the mandatory escrow account, the cashflow movements will be well regulated, thus ensuring the buyer’s money is well-guarded and utilised for the project development.
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5. Specifying Carpet Area: Currently homes are usually being sold based on built-up and super built-up areas, and not carpet area which is what the buyers actually get. In fact, lots of buyers are not even aware of the concept of carpet area. However, now with RERA coming into force, developers will have to sell flats based on carpet area and not super built-up area.
6. Better Project Quality: Till now the modus operandi of unscrupulous developers has been to book profits on the back of sub-standard construction materials and not delivering amenities as promised. However, in view of the various penalties proposed by RERA and with developers competing on product quality, timelines and product specifications, homebuyers are all set to benefit from better product quality.
7. No More Unwanted Surprises: It has been a common complain of buyers that most of things which were initially promised to them by the concerned developers at the time of booking the flat were finally not delivered to them. Or, they were delivered something else. But now, after the arrival of RERA, developers won’t be able to make any changes to a project without the written consent from the buyers. Thus, a buyer won’t be in for a rude shock when he is finally given the possession of his flat.
8. Better governance: Under the Act, it is compulsory for every state to create a Real Estate Regulatory Authority. Now developers will also have to compulsorily register themselves as well as their projects with the authority. Unless they do so, they won’t be able to either advertise or sell their project. This will ensure better governance of the sector and also help buyers.
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9. Protection From Realty Agents: Homebuyers who use the services of realty agents and agencies will now be protected as the Act renders brokers and agents punishable if they do not abide with the regulator’s strictures ruling. Buyers will also have access to quick legal redressal in case of faulty business practices. “Thus, brokers who used to make money out of the ignorance of buyers will now be eradicated from the market,” says Anuj Puri, Chairman–JLL Residential.
10. Redressal of Disputes: In case of any dispute and non-delivery, RERA entails a clear process of redressal, thus ensuring buyer’s interest and money is well-safeguarded. Homebuyers can approach this authority to settle disputes with errant builders.