The RERA, 2016 [Real Estate (Regulation and Development) Act] is a historic piece of legislation adopted in India to solve long-standing issues in the real estate market. In this article, we deal with the provisions, benefits, and impact of RERA on the real estate market, with a focus on consumer protection. Moreover, the article will explain the significant case laws that have shaped the Act's interpretation and execution.
Contents
1. Real Estate Industry in India
2. Need for RERA
3. Salient Features of RERA:
4. Impact of RERA
5. Case Laws
6. End Note
2. Need for RERA
3. Salient Features of RERA:
4. Impact of RERA
5. Case Laws
6. End Note
Real Estate Industry in India
India's real estate business has grown significantly, contributing to the country's economic prosperity. It has, however, been beset by several concerns, including project delays, a lack of openness, unethical tactics, and customer exploitation.
Need for RERA
To address these concerns and restore consumer confidence in the real estate market, the Indian government introduced RERA. The Act aimed to regulate the real estate sector, increase transparency, protect consumer interests, and promote orderly growth and development.
Salient Features of RERA
Establishment of Regulatory Authorities
Under RERA, each state and union territory in India is required to establish a Real Estate Regulatory Authority (RERA) to administer and enforce the provisions of the Act.
Mandatory Registration
All real estate projects that exceed a certain threshold size or number of units (as prescribed by the state) must be registered with the respective state RERA. This ensures that developers adhere to the prescribed norms and safeguards consumer interests.
Promoter's Obligations
RERA imposes several obligations on promoters, including the disclosure of project details, financial statements, timeline adherence, and responsibility for the quality of construction.
Consumer Rights
RERA ensures the protection of consumer rights by requiring developers to disclose project details, including sanctioned plans, layout plans, and timeline for completion. It also empowers buyers by providing them with the right to claim compensation for project delays and defects.
Escrow Account and Financial Discipline
Developers are required to deposit 70% of the funds received from buyers in a separate bank account, known as the escrow account. This provision aims to ensure financial discipline and prevent the diversion of funds to other projects.
Impact of RERAUnder RERA, each state and union territory in India is required to establish a Real Estate Regulatory Authority (RERA) to administer and enforce the provisions of the Act.
Mandatory Registration
All real estate projects that exceed a certain threshold size or number of units (as prescribed by the state) must be registered with the respective state RERA. This ensures that developers adhere to the prescribed norms and safeguards consumer interests.
Promoter's Obligations
RERA imposes several obligations on promoters, including the disclosure of project details, financial statements, timeline adherence, and responsibility for the quality of construction.
Consumer Rights
RERA ensures the protection of consumer rights by requiring developers to disclose project details, including sanctioned plans, layout plans, and timeline for completion. It also empowers buyers by providing them with the right to claim compensation for project delays and defects.
Escrow Account and Financial Discipline
Developers are required to deposit 70% of the funds received from buyers in a separate bank account, known as the escrow account. This provision aims to ensure financial discipline and prevent the diversion of funds to other projects.
The enactment of RERA has brought significant changes to India's real estate sector, benefiting both developers and buyers. Some key impacts include:
Transparency and Accountability
RERA has enhanced transparency in the real estate sector by making it mandatory for developers to register projects and disclose key information. This has reduced information asymmetry and improved accountability among developers.
Timely Completion of Projects
RERA's focus on project completion timelines has helped mitigate project delays, minimizing financial and emotional hardships faced by homebuyers. Developers must now adhere to fixed timelines, or they may face penalties or even project revocation.
Enhanced Consumer Protection
RERA provides multiple safeguards for homebuyers, including the right to compensation for late delivery, defective construction, or violation of agreement terms. Consumer complaints now receive prompt attention from RERA authorities, ensuring timely resolution.
Case Laws
M/S Imperia Structures Ltd. v. Anil Patni:
In this case, the Punjab Real Estate Regulatory Authority (RERA) held the promoter liable for delayed possession and ordered compensation to the homebuyer. The case highlighted the importance of adhering to project timelines and the empowerment of consumers to seek remedies under RERA.
Kashi Vishwanath Apartment Vyapar Mandal v. U.P. Real Estate Regulatory Authority:
The Supreme Court upheld the constitutional validity of RERA and emphasized the Act's purpose of protecting homebuyers' interests. This landmark case underlined the importance of RERA in providing an effective legal framework to address grievances in the real estate sector.
In this case, the Punjab Real Estate Regulatory Authority (RERA) held the promoter liable for delayed possession and ordered compensation to the homebuyer. The case highlighted the importance of adhering to project timelines and the empowerment of consumers to seek remedies under RERA.
Kashi Vishwanath Apartment Vyapar Mandal v. U.P. Real Estate Regulatory Authority:
The Supreme Court upheld the constitutional validity of RERA and emphasized the Act's purpose of protecting homebuyers' interests. This landmark case underlined the importance of RERA in providing an effective legal framework to address grievances in the real estate sector.
End Note
The Real Estate (Regulation and Development) Act, 2016 has been a significant step towards transforming the real estate sector in India. By protecting consumer interests, ensuring transparency and accountability, and streamlining project completions, RERA has positively impacted both developers and homebuyers. The Act has witnessed successful implementation, as evident from key case laws that reinforce the importance of adhering to RERA's provisions. Moving forward, continued efforts must be made to strengthen the Act's enforcement mechanisms and synergize its objectives with emerging market dynamics.