All you need to know about Real Estate Act (RERA)

Why did the RERA become necessary and important?

For long, home buyers complained that real estate transactions were lopsided and heavily in favour of the developers. RERA and the government’s model code, aim to create a more equitable and fair transaction between the seller and the buyer of properties, especially in the primary market. RERA, it is hoped, will make real estate purchase simpler, by bringing in better accountability and transparency, provided that states do not dilute the provisions and the spirit of the central act. The RERA will give the Indian real estate industry its first regulator. The Real Estate Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules that will govern the functioning of the regulator

What is the RERA

How will RERA impact home buyers

Some of the important compliances are:

• Informing allottees about any minor addition or alteration.
• Consent of 2/3rd allottees about any other addition or alteration.
• No launch or advertisement before registration with RERA
• Consent of 2/3rd allottees for transferring majority rights to 3rd party.
• Sharing information project plan, layout, government approvals, land title status, sub-contractors.
• Increased assertion on the timely completion of projects and delivery to the consumer.
• An increase in the quality of construction due to a defect liability period of five years.
• Formation of RWA within specified time or 3 months after majority of units have been sold.

The most positive aspect of this Act is that it provides a unified legal regime for the purchase of flats; apartments, etc., and seeks to standardise the practice across the country. Below are certain key highlights of the Act:

Establishment of the regulatory authority: The absence of a proper regulator (like the Securities Exchange Board of India for the capital markets) in the real estate sector, was long felt. The Act establishes Real Estate Regulatory Authority in each state and union territory. Its functions include protection of the interests of the stakeholders, accumulating data at a designated repository and creating a robust grievance redressal system. To prevent time lags, the authority has been mandated to dispose applications within a maximum period of 60 days; and the same may be extended only if a reason is recorded for the delay. Further, the Real Estate Appellate Authority (REAT) shall be the appropriate forum for appeals.

Compulsory registration: According to the central act, every real estate project (where the total area to be developed exceeds 500 sq mtrs or more than 8 apartments is proposed to be developed in any phase), must be registered with its respective state’s RERA. Existing projects where the completion certificate (CC) or occupancy certificate (OC) has not been issued, are also required to comply with the registration requirements under the Act. While applying for registration, promoters are required to provide detailed information on the project e.g. land status, details of the promoter, approvals, schedule of completion, etc. Only when registration is completed and other approvals (construction related) are in place, can the project be marketed.

Reserve account: One of the primary reasons for delay of projects was that funds collected from one project, would invariably be diverted to fund new, different projects. To prevent such a diversion, promoters are now required to park 70% of all project receivables into a separate reserve account. The proceeds of such account can only be used towards land and construction expenses and will be required to be certified by a professional.

Continual disclosures by promoters: After the implementation of the Act, home buyers will be able to monitor the progress of the project on the RERA website since promoters will be required to make periodic submissions to the regulator regarding the progress of the project.

Title representation: Promoters are now required to make a positive warranty on his right title and interest on the land, which can be used later against him by the home buyer, should any title defect be discovered. Additionally, they are required to obtain insurance against the title and construction of the projects, proceeds of which shall go to the allottee upon execution of the agreement of sale.

Standardisation of sale agreement: The Act prescribes a standard model sale agreement to be entered into between promoters and homebuyers. Typically, promoters insert punitive clauses against home buyers which penalised them for any default while similar defaults by the promoter attracted negligible or no penalty. Such penal clauses could well be a thing of the past and home buyers can look forward to more balanced agreements in the future.

Penalty: To ensure that violation of the Act is not taken lightly, stiff monetary penalty (up to 10% of the project cost) and imprisonment has been prescribed against violators

RERA definition of carpet area 

The area of a property is often calculated in three different ways – carpet area, built-up area and super built-up area. Hence, when it comes to buying a property, this can leads to a lot of disconnect, between what you pay and what you actually get. Gautam Chatterjee, Maharashtra RERA chairman, explains that “It is now mandatory for the developers of all ongoing projects, to disclose the size of their apartments, on the basis on carpet area (i.e., the area within four walls). This includes usable spaces, like kitchen and toilets. This imparts clarity, which was not the case earlier.” According to the RERA, carpet area is defined as ‘the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment’. Rahul Shah, CEO of Sumer Group, points out that “As per the RERA guidelines, a builder must disclose the exact carpet area, so that a customer knows what he is paying for. However, the act does not make it mandatory for the builders, to sell a flat on the basis of carpet area.”

Impact of RERA on real estate industry

• Initial backlog.
• Increased project cost
• Tight liquidity.
• Rise in cost of capital.
• Consolidation.
• Increase in project launch time

Initially, a lot of work is to be done to get the existing and new project registered. Details such as status of each project executed in last 5 years, promoter details, detailed execution plans, etc., needs to be prepared. With the advent of RERA, specialised forums such as the State Real Estate Regulatory Authority and the Real Estate Appellate Tribunal, will be established for the resolution of disputes pertaining to home buying and the aggrieved party will have no recourse to other consumer forums and civil courts, on such matters. While the RERA sets the groundwork for fast-tracking dispute resolution, the litmus test for its success, will depend on the timely setting up of these new dispute resolution bodies and how these disputes are resolved expeditiously with a degree of finality

RERA in states

As on July 31, 2017, 23 states and union territories (UTs) have either established their permanent or interim regulatory authorities. Under the RERA, every state and UT must have its own regulator. Developers will not be able to market their ongoing or upcoming projects, till they register either with the permanent or interim regulator in states. For ongoing projects, where completion or occupancy certificate has not been given, the deadline for registration ended on July 31, 2017. Only four states – Gujarat, Maharashtra, Madhya Pradesh and Punjab – have established their permanent Real Estate Regulatory Authority, while 19 states/UTs have established interim authorities, an official with the Housing and Urban Affairs Ministry said. Only 23 States/UTs have notified the rules under the Act, while six states have drafted the rules but have not yet notified. A total of nine states/UTs have appointed interim Appellate Tribunals under the Real Estate Act, while only seven states have started the online registration under the Act

Maharashtra RERA

The Maharashtra Real Estate Regulatory Authority (MahaRERA) came into existence on May 1, 2017. Deemed as one of the most active real estate regulatory authorities in India, the Maharashtra Real Estate Regulatory Authority (MahaRERA) has over 25,000 registered projects and 23,000 registered property agents, as of February 27, 2020. The Authority has also got over 10,000 complaints, out of which 71% have been disposed of.

Maharashtra becomes the first state to initiate conciliation mechanism

Aggrieved home buyers in Maharashtra, may be able to look forward to an early and amicable resolution of their disputes with their developers, with Maharashtra becoming the first state in India to initiate the conciliation mechanism under Section 32 (g) of the RERA, by way of Alternative Dispute Resolution (ADR). The conciliation process will go online from February 1, 2018 and hearings before the conciliation benches are expected to commence from the first week of March 2018. Any aggrieved allottee or promoter (as defined under RERA) can invoke the conciliation mechanism set up by MahaRERA. For this purpose, a dedicated website has been created and one can have access to it even via the MahaRERA website.

Uttar Pradesh RERA

Uttar Pradesh includes important real estate micro-markets like Noida, Greater Noida, Ghaziabad, etc. There are two centres for the Uttar Pradesh RERA, one in Lucknow and another in the NCR. The Uttar Pradesh RERA Rules were notified in 2016 and the state’s RERA website was launched on July 26, 2017.

In a first-of-its-kind order by RERA across states, the UP RERA, deregistered Unnati Fortune Holdings Ltd project Aranya Phase 3, 4 and 5 in Sector 119 in May 2019, it said in a statement. “The process after deregistration will commence in consultation with the state government,” it said, adding that the decision was taken after the promoter could not provide a satisfactory response to the deregistration notices before it. “UP RERA has found that in the project there have been severe financial irregularities, diversion and siphoning off funds and double allotment,” the authority said.

The UP RERA is also taking remarkable steps to ensure compliance. Under Section 63 of the RERA, the regulatory body has penalised 11 developer firms. The overall penalty amount comes to Rs 2.5 crores. As per the Act, penalty for non-compliance of orders can go up to 5% of the cost of the project. The errant firms, which include Newtech Promoters & Developers Pvt Ltd, Supertech Ltd., Lucknow Development Authority, Tulsiani Construction and Developers Pvt Ltd and Antriksh Realtek Pvt Ltd, have 30 days to deposit the amount. In case of failure to comply with the Authority’s decision, the district magistrates have been instructed to issue recovery certificates.

UP RERA postpones Lok Adalat

This year, on April 10, 2021 the UP RERA had planned to organise an online lok adalat for Lucknow and Greater Noida, to address the grievances of home buyers. Cases, where complaints filed under Section 31 of the RERA, wherein mutual agreement is possible or where the aggrieved party has consented for reconciliation, were to be picked up during the lok adalat. This also includes existing and pending cases that were filed in the office of the RERA secretary. However, in view of the rising Coronavirus cases, the online lok adalat has been postponed till further notice. 

Karnataka RERA

The Karnataka RERA Rules, 2016, was approved by the cabinet on July 5, 2017. According to the Karnataka RERA Rules, every promoter, ongoing project and real estate agent has to register with the Karnataka RERA before it can reach out to the common public. According to the Karnataka RERA website, around 3,803 projects, 2,101 real estate agents and 3,775 complaints have been registered, till February 2020.

Tamil Nadu RERA

The Tamil Nadu RERA Rules were notified on June 22, 2017. TNRERA has jurisdiction over Tamil Nadu as well as Andaman and Nicobar Islands. Exclusion/inclusion of projects for registration depends on whether they lie within the Chennai Metropolitan Area (CMA) or outside the CMA, among other factors.

Haryana RERA

The Haryana Real Estate (Regulation and Development) Rules, 2017, came into force on July 28, 2017, while the Haryana RERA portal (www.haryanarera.gov.in) was launched on October 4, 2018. The RERA Haryana has separate jurisdiction in Panchkula and Gurugram.

Rajasthan RERA

The Rajasthan RERA Rules have been notified and the website was launched on June 1, 2017. The government of Rajasthan constituted the Rajasthan Real Estate Regulatory Authority (Raj RERA) on March 6, 2019, with Nihal Chand Goel as it chairman.

Delhi RERA

The official portal of RERA Delhi (https://rera.delhi.gov.in) was launched on June 24, 2019, by Lt Governor Anil Baijal. “Launched official portal of RERA, Delhi (https://rera.delhi.gov.in). The website will help promote transparency & accountability in real estate sector. Advised to provide an interactive forum for knowledge sharing with other RERAs. I congratulate the RERA team for the initiative,” the L-G tweeted after the launch. The Delhi RERA Rules have been notified. The vice-chairman of the Delhi Development Authority (DDA) was initially designated as the regulatory authority for the National Capital Territory of Delhi, under the RERA. In November 2018, Delhi got a full-time real estate regulator under the RERA, with Lt Governor Anil Baijal appointing retired IAS officer Vijay S Madan to the post. According to an RTI reply, by May 2019, as many as 72 complaints were received against builders in Delhi, under the central real estate law, . According to the Delhi Real Estate Regulatory Authority (RERA), out of 72 complaints, 24 have been resolved till last week. Only 16 real estate projects have so far been registered under RERA in the national capital, it said.

Telangana RERA

The Telangana government notified its RERA rules on July 31, 2017. The state’s rules will be called the Telangana State Real Estate (Regulation and Development) Rules, 2017. They are applicable to all real estate projects, whose building permissions are approved on or after January 1, 2017, by the competent authorities. A host of services are provided for homebuyers, developers as well as real estate agents. Also known as the TSRERA, the authority is looking at encouraging ease of doing business in the state. However, it is yet to appoint its permanent chief.

Andhra Pradesh RERA

The Andhra Pradesh government notified the Andhra Pradesh Real Estate (Regulation and Development) Rules on March 27, 2017. The Real Estate (Regulation and Development) Act came into force in AP from May 1, 2017. The government has also launched an online website, for registration of projects and agents and for filing of complaints under the AP RERA.

West Bengal RERA

The West Bengal Housing Industry Regulation Bill 2017 was passed by the state assembly, on August 16, 2017. Once notified by the West Bengal government, all housing projects above 500 sq metres or eight apartments, need to be registered with the state regulator, the Housing Industry Regulatory Authority (HIRA). The bill proposes to bring the HIRA in place, over the next 60 days. In the wake of West Bengal notifying its own real estate act, union housing and urban affairs minister Hardeep Singh Puri, on September 18, 2018, made it clear that there is no ambiguity when it comes to the implementation of the central law and states have to conform to it. Puri said that a letter has been written to the state government on the issue. Sources said that the centre has asked the West Bengal government to repeal its real state act, as there is already a central law on the same subject.

Gujarat RERA

The Gujarat government notified the general rules for Gujarat Real Estate (Regulation and Development) rules in May 2017 and ever since, the Gujarat RERA has been in force. One can visit the the GujRERA website at www.gujrera.gujarat.gov.in

Punjab RERA

The Punjab government notified the Real Estate (Regulation and Development) Rules, 2017 on June 8, 2017. The Punjab RERA was established on August 10, 2017. Punjab’s Mohali has the largest number of RERA-registered projects so far.

Bihar RERA

The Bihar government came up with its own law and notified the Bihar Real Estate (Regulation and Development) Rules, 2017, on April 28, 2017. As of May 13, 2020, the Bihar RERA has 833 approved projects.

Chhattisgarh RERA

Chhattisgarh was among the first states to implement the Real Estate (Regulation and Development) Act, 2016 (RERA), when it enforced the Chhattisgarh Real Estate (Regulation and Development) Rules, 2017, in November 2017. As of May 2020, the Chhattisgarh RERA had 1,124 approved projects and 473 approved agents. In a first, the real estate authority in Chhattisgarh, on May 12, 2020, started to hear cases through video-conferencing, in the wake of the Coronavirus pandemic.

Kerala RERA

After a long delay in notifying the rules, the Kerala Real Estate Regulation and Development Rules were notified in 2018. Previously, the Kerala RERA rules were repealed by the state government, as it seemed to favour the builder fraternity. However, the dedicated portal was re-launched in early 2020 and is now fully operational.

Odisha RERA

The state government had notified the ruses under the Real Estate (Regulation and Development) Act in February 2017 and set up the Odisha Real Estate Regulatory Authority (Odisha RERA) in October of the same year.

Madhya Pradesh RERA

One of the states in India, which has been very active in terms of implementing the rules and regulations of the Real Estate Act is Madhya Pradesh, which has over 2,640 registered projects and 244 projects for which the registration is under progress. There are as many as 1,897 promoters and 677 real estate agents registered with the Madhya Pradesh Real Estate Regulatory Authority (MP RERA), as of June 4, 2020.

Ladakh RERA

On October 8, 2020, Ladakh became the 34th state/union territory to notify its rules under the Real Estate (Regulation and Development) Act. Hailing the move, Durga Shanker Mishra, secretary, Ministry of Housing and Urban Affairs (MoHUA) said that the Ladakh RERA would open up new avenues for development of the UT and foster efficient and transparent transactions. The move will also ensure timely delivery of projects and quality of construction.

Jammu and Kashmir RERA

The union territory of Jammu & Kashmir notified the rules under the Real Estate (Regulation and Development) Act 2016 on August 1, 2020. It is the 33rd region to notify its rules. Authorities are hopeful that the Jammu and Kashmir RERA will usher in a new wave of development and transparency in the local real estate market. Real estate developers in Jammu and Kashmir have already been asked to file the application in Form A in written.

What is interesting is the fact that on October 26, 2020 the centre paved the way for all Indians to buy property in J&K. The Ministry of Housing Affairs removed all legal difficulties by amending or repealing existing land laws under the provisions of the Jammu and Kashmir Reorganisation (Adaption of Central Laws). In short, Indians will not need a permanent resident or domicile certificate to buy non-agricultural land in Jammu, Kashmir.

The MHA notification read, “With immediate effect, the Acts mentioned in the Schedule to this Order shall, until repealed or amended by a competent Legislature or other competent authority, have the effect, subject to the adaptations and modifications directed by the said Schedule, or if it is so directed, shall stand repealed.” 

Which projects come under RERA

• Commercial and residential projects including plotted development.
• Projects measuring more than 500 sq mts or 8 units.
• Projects without Completion Certificate, before commencement of the Act.
• The project is only for the purpose of renovation / repair / re-development which does not involve re-allotment and marketing, advertising, selling or new allotment of any apartments, plot or building in the real estate project, will not come under RERA.
• Each phase is to be treated as standalone real estate project requiring fresh registration.

How can a builder be RERA compliant 

• Project registration.
• Advertisement.
• Withdrawal – POC method.
• Website updation/ Disclosures.
• Carpet area.
• Alteration in project – approval of 2/3 allottees.
• Project accounts – Audit.
• 70% of the funds collected from allottees needs to be deposited in the project account. Withdrawals to cover construction and land cost.
• Withdrawals to be in proportion to the percentage completion method.
• Withdrawal to be certified by an engineer, architect, and CA.
• Provision for RERA to freeze project bank accounts upon non-compliance.
• Interest on delay will be same for customer and promoter.

What information does a builder need to provide under RERA

• Number, type and carpet area of apartments.
• Consent from affected allottees for any major addition or alteration.
• Quarterly updating of RERA website with details such as unsold inventory and pending approvals.
• Project completion time frame.
• No false statements or commitments in advertisement.
• No arbitrary cancellation of units by promoter.

How to register projects under RERA

• Authenticated copy of all approvals, commencement certificate, sanctioned plan, layout plan, specification, plan of development work, proposed facilities, Proforma allotment letter, agreement for sale and conveyance deed to be given when
• Applying for project registration with RERA.
• Mandatory registration of new and existing projects with RERA before launch.
• Registration of agents/brokers with RERA.
• Dispute resolution within 6 months at RERA and RERA appellate tribunals.
• Separate registration of different phases of a single projects.
• Developers to share details of projects launched in last 5 years with status and reason for delay with RERA.
• Timely updating of RERA website.
• Maximum 1 year extension in case of delay due to no fault of developer.
• Annual audit of project accounts by a CA.
• Conveyance deed for common area in favour of RWA.
• Construction and land title insurance.
• Project completion time period.

How will RERA impact insurance cost for construction and land title

• Land and approval costs to be meted out of internal accruals as prelaunch concept may end. It may lead to a shift in equity financing from debt financing prevailing currently. The cost of capital may go up as developers may now have to fund the land and approval cost through equity.
• With frequent delay in obtaining approvals, debt funding may not be an ideal route for developers. With entry in the sector made difficult, the sector may witness consolidation.
• Strong financial and execution capability is required to launch a project. The development model/agreement may gain prominence.
• The project launch time may increase since a lot of time will be involved in finalizing finer details before launching a project.
• Details such as complete drawings, utilities layout, etc., needs to be finalized before project starts.

How will RERA impact real estate agents

Under the Real Estate (Regulation and Development) Act (RERA), real estate agents will need to register themselves, to be able to facilitate a transaction. The broker segment in India, is estimated to be a USD 4 billion industry, with an estimated 5,00,000 to 9,00,000 brokers. However, it has traditionally been unorganised and unregulated. “It will bring a lot of accountability in the industry and the ones who believe in professional and transparent business, will reap all the benefits. Now, the agents will have a much larger and responsible role to perform, as they will have to disclose all the appropriate information to the customer and even help them chose a RERA-compliant developer,” says Sam Chopra, founder and chairman of RE/MAX India. With RERA in force, brokers cannot promise any amenities or services that are not mentioned in the documents. Moreover, they will have to provide all information and documents to the home buyers, at the time of booking. Consequently, RERA is likely to filter out the inexperienced, unprofessional, fly-by-night operators, as brokers not following the guidelines will face hefty penalty or jail or both.

How can brokers become RERA compliant

1. Section 3: Promoter cannot advertise, book, sell or offer for sale, without registration with RERA
2. Section 9:

• No agent can sell any project without obtaining RERA registration.
• Agents’ RERA number needs to be documented in every sale facilitated by him.
• Registration needs to be renewed.
• Registration can be revoked or blocked if any breach is made to conditions of registration for a specified time.

1. Section 10:

• No agent can sell a project not registered.
• Maintain books and records.
• Not be involved in unfair trade practices.
• Make an incorrect statement – oral, written, visual.
• Represent that services are of a particular standard.
• Represent that the promoter or himself has approval or affiliation which such promoter or himself does not have.
• Permit publication of advertisement in the newspaper or otherwise of services not intended to be offered.

• Agent needs to facilitate possession of all documents to the allottee at the time of booking.

How to file a complaint under RERA?

Digbijoy Bhowmik, head of policy, RICS, explains, “Complaints can be filed under Section 31 of the Real Estate (Regulation and Development) Act, 2016, either with the Real Estate Regulatory Authority or the adjudicating officer. Such complaints may be against promoters, allottees and/or real estate agents. Most state government rules, made appurtenant to the RERA, have laid out the procedure and form, in which such applications can be made. In the case of Chandigarh UT or Uttar Pradesh, for instance, these are placed as Form ‘M’ or Form ‘N’ (common with most other states and union territories).” A complaint under the RERA, is required to be in the form prescribed under the respective states’ rules. The complaint can be filed with respect to a project registered under RERA, within the prescribed time limit, for violation or contravention of provisions of the act or the rules or regulations framed under RERA. “For cases pending before the NCDRC or other consumer fora, the complainants/ allottees can withdraw the case and approach the authority under the RERA. Other offences (except complaints under Section 12, 14, 18 and 19) can be filed before the RERA authority,” explains Ajay Monga, partner at SNG & Partners law firm.

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