Understanding RERA Act: How It Protects Homebuyers in India

The Indian real estate sector is poised for transformative growth over the next decade, fuelled by demographic shifts, economic development, and changing consumer preferences. In fact, the sector is projected to grow at a compound annual growth rate (CAGR) of approximately 9.2% from 2023 to 2028, with expectations to reach a market size of USD 1 trillion by 2030 and potentially USD 1.3 trillion by 2034. One of the reasons for growth in the sector is also on account of the regulatory changes made by the Real Estate Regulatory Authority, more popularly known as RERA.

In this blog post, we will delve into the details of RERA and explore how it safeguards the rights of homebuyers in India. We will also discuss its impact on the home loan process. By understanding RERA's provisions, you can make informed decisions and navigate the real estate market with confidence.

What is the RERA ACT?

The Real Estate (Regulation and Development) Act, 2016, commonly referred to as the RERA Act, was enacted by the Indian Parliament for homebuyers’ protection. This legislation aims to enhance transparency, accountability, and efficiency in real estate transactions, ultimately protecting the interests of homebuyers and promoting fair practices among developers.

RERA mandates the establishment of a Real Estate Regulatory Authority in each state. These authorities are responsible for overseeing real estate projects, ensuring compliance with regulations, and safeguarding buyer interests. 

Key Provisions Under The RERA ACT

The Real Estate Regulation and Development Act, 2016 includes several key provisions aimed at regulating the real estate sector in India and protecting the interests of homebuyers. Here are the main provisions under:

1. Establishment of Regulatory Authorities

Each state is required to establish a Real Estate Regulatory Authority to oversee real estate projects and ensure compliance with the Act

2. Mandatory Project Registration

Developers must register their real estate projects with RERA before advertising or selling any units. This registration requires detailed disclosures, including land status, layout plans, and construction timelines.

3. Escrow Account Requirement

At least 70% of the funds collected from buyers must be deposited into an escrow account, which can only be used for construction purposes. This provision aims to prevent fund diversion by developers.

4. Advance Payment Limitations

Developers can only demand an advance payment of up to 10% of the property price before signing a sale agreement, ensuring that buyers are not overcharged upfront.

5. Transparency and Disclosure

Developers must provide comprehensive information about the project on the RERA website, including project details, approvals, and specifications. Any changes to the project must also be disclosed and require buyer consent.

6. Defect Liability

Developers are responsible for rectifying any structural defects within five years of possession. Buyers can report defects, and developers must address these complaints within a month.

7. Timely Completion and Possession

RERA mandates that developers adhere to the timelines specified at the time of registration. If there are delays, buyers are entitled to compensation.

8. Grievance Redressal Mechanism

The Act establishes a framework for resolving disputes through Real Estate Appellate Tribunals, providing a faster resolution process for issues between buyers and developers.

9. Promoter Obligations

Promoters are required to maintain records of all transactions and provide clear documentation regarding property titles and approvals. They must also ensure that two-thirds of allottees consent before transferring project rights to a third party

10. Penalties for Non-compliance

The Act includes provisions for penalties against promoters who fail to comply with its regulations, thereby ensuring accountability in the real estate sector. 

Benefits Under RERA 

Here are some of the ways in which RERA has benefitted and continues to benefit home buyers.

1. Protection of Homebuyers

RERA provides robust protection for homebuyers by ensuring that developers adhere to high standards of quality and transparency. Mandatory project registration means buyers can invest in projects that are regulated and compliant with the law.

2. Timely Delivery of Projects

The Act enforces strict timelines for project completion. Developers must adhere to these timelines, and any delays result in penalties, ensuring that buyers receive possession on schedule. This has significantly reduced delays in project completions across major cities.

3. Increased Transparency

RERA mandates comprehensive disclosure of project details, including approvals, timelines, and specifications. This transparency fosters trust between buyers and developers, reducing the likelihood of fraud and misleading practices.

4. Standardisation of Carpet Area

The Act standardises the definition of carpet area, ensuring that buyers pay only for the actual usable space in a property. This clarity helps in comparing properties more effectively and reduces disputes over area calculations.

5. Accountability of Developers

Developers are held accountable for their commitments under RERA. They must maintain separate escrow accounts for each project, ensuring that funds collected from buyers are used solely for construction purposes. This reduces the risk of financial mismanagement.

6. Effective Grievance Redressal Mechanism

RERA establishes a streamlined grievance redressal process through state-level regulatory authorities and appellate tribunals. This mechanism allows buyers to resolve disputes quickly and efficiently without lengthy legal battles. 

7. Quality Assurance

RERA enforces standards for construction quality, ensuring that developers deliver what they promise. Buyers can expect better quality homes due to these regulatory standards.

8. Enhanced Market Credibility

Projects registered under RERA are viewed as more credible, increasing buyer confidence in investing in real estate. This credibility also benefits developers who comply with regulations and deliver quality projects.

9. Financial Security

The requirement for escrow accounts provides financial security to buyers by safeguarding their investments against potential misappropriation by developers.

10. Reduction of Unfair Practices

RERA aims to eliminate unfair practices in real estate transactions, such as hidden charges or misleading advertisements. Developers can only advertise based on verified information, which protects buyers from false claims

How Should I Know My House is RERA Compliant?

To determine if your house is RERA compliant, you can follow these steps:

1. Verify Project Registration

Visit the official RERA website specific to your state. Most states have a dedicated portal where you can verify if the project is registered. You will need to enter details such as the project name or registration number to check its status. 

2. Review Project Details

Once you find the project on the RERA website, review the details provided, including layout plans, approvals, and builder information. This information should be publicly available and includes specifics about the project’s legal status and compliance with RERA regulations. 

3. Look for RERA Registration Number

Any legitimate advertisement for the project should prominently display the RERA registration number. This includes brochures, websites, and promotional materials. 

4. Assess Developer Compliance

Investigate the developer's past projects and their compliance history. A reputable builder should have a track record of timely project completions and adherence to quality standards as mandated by RERA.

5. Inquire About Financial Practices

Ensure that the developer is maintaining an escrow account where at least 70% of the funds collected from buyers are deposited. This protects your investment by ensuring that funds are used solely for the construction of your project. 

6. Check for Timely Updates

Developers are required to keep buyers informed about project progress and any changes to timelines or specifications. Regular updates should be provided through official channels or directly to buyers. 

7. Understand Your Rights

Familiarise yourself with your rights under RERA, including the builder's obligation to rectify any structural defects within a specified period after possession.

RERA Registration Fees and Charges

The RERA registration fees and charges vary significantly across different states in India. Here’s a summary of the fees associated with RERA registration for developers and real estate agents:

1. For Developers

Being registered under RERA ensures that developers operate within the legal framework governing real estate transactions. This compliance minimises the risk of legal disputes and enhances the developer’s reputation for adhering to industry regulations.

The registration fees for developers are generally calculated based on the size of the project (measured in square meters) and vary by state. 

2. For Real Estate Agents

RERA registration significantly boosts an agent's credibility among clients. It indicates compliance with established regulatory standards, fostering trust and confidence in their professionalism and ethical conduct.

Real estate agents also have specific registration fees that differ by state. Here is a structure that is applicable in a few select states. 

Note: For the latest updated rates, please visit the RERA website in your state

3. Additional Charges

• Renewal Fees: If a project registration expires and needs renewal, additional fees will apply based on state regulations.
• Penalty Fees: Developers may incur penalties for non-compliance or delays in project completion.
• Other Charges: These may include fees for obtaining necessary project-related documents or legal expenses.

Types of Projects Covered Under RERA

1. Residential Projects

• Apartment Complexes: Any project that involves the construction of residential apartments.
• Housing Societies: Developments that include multiple residential units in a single complex.
• Independent Houses and Villas: Projects that consist of standalone homes or villas for sale.

2. Commercial Projects

• Office Spaces: Buildings developed for commercial office use, including corporate offices and co-working spaces.
• Retail Spaces: Projects that involve the construction of shops, malls, or other retail establishments.
• Warehouses and Industrial Spaces: Facilities intended for storage or industrial use are also covered under RERA.

3. Plotted Developments

Any project involving the development of land into individual plots for sale is included. This applies to both residential and commercial plots.

4. Ongoing Projects

All ongoing projects where a completion certificate has not been issued as of the commencement of RERA (May 1, 2016) must register with RERA.

5. Developments Exceeding Specific Thresholds

Projects that exceed 500 square meters of land area or involve more than eight apartments must be registered. This applies to both new developments and ongoing projects.

Exemptions from RERA Registration

Certain types of projects are exempt from RERA registration:

• Small Projects: Developments on land areas not exceeding 500 square meters or involving fewer than eight apartments.
• Renovation or Repair Projects: Projects focused solely on renovation, repair, or redevelopment without new allotments do not require registration.
• Completed Projects: Any project that has received a completion certificate before the enactment of RERA is exempt.