What is the Real Estate Regulation Act (RERA)? How does it Help Buyers?May 20, 2022 2022-05-20 12:52
What is the Real Estate Regulation Act (RERA)? How does it Help Buyers?
The Real Estate Regulation Act (RERA), introduced in 2016, has revolutionized India’s real estate sector. It aims to protect home buyers from the malpractices of unfair developers and increase investments across real estate. It also intends to increase transparency across real estate transactions and make the real estate sector more reliable and credible.
While RERA offers rights to buyers and developers, the act benefits buyers a lot, in particular. How? Let’s check them out through this blog.
7 Significant Advantages of RERA for Buyers
The introduction of RERA has brought in stricter norms, rules, and regulations in the real estate sector. It penalizes developers for non-compliance and protects buyers from false and luring promises that were common before the act. Accordingly, RERA has proved a massive relief for buyers. Let’s look at a few advantages of RERA that protect every buyer’s interest.
- Uniform Carpet Area Calculation
Earlier, the technique of calculating the carpet area of an apartment was not defined. It gave room for many developers to play around with the carpet area. As a result, they used to calculate it as per their convenience. So, for instance, if one developer calculates the area of an apartment as 600 square feet, another may measure it as only 550 square feet.
However, RERA standardized these calculations. Now, every builder has to calculate the area as per RERA norms. It has helped reduce confusion about area calculations among buyers.
- Appropriate Use of Funds
Before RERA, builders were free to divert funds received for a particular project to divert it to another. As a result, projects were delayed, with the buyer having no idea about what was happening with his disbursed amount. However, RERA prohibits this.
According to the act, the builder is liable to deposit 70 percent of the amount realized for a particular project in a separate bank account. He can withdraw funds from such an account only based on project completion certified by an architect, CA, or a civil engineer.
In many other cases, the builders used to use the funds received for purposes other than construction. Many went bankrupt due to such practices, leaving the project incomplete.
- 10 Percent Advance Payment
Developers cannot take more than 10 percent of the apartment cost as an advance or application fee before entering an agreement of sale. So, builders cannot ask for any amount they feel appropriate. This helps buyers plan for the advance payment.
- Buyer Rights for Possession Delays
Delays were a very common thing in the past. Developers used to have their unique reasons for delaying a project. Since there weren’t any regulations penalizing developers for delays, buyers didn’t have an option but to live with them. In many cases, buyers used to pay rent as well as the home loan EMIs, making survival for them very difficult.
But RERA has changed things. The act strictly watches developers and their commitments. It has also given rights to buyers if a builder does not deliver a project on the committed date.
Buyers have the right to withdraw from a project, where they will be entitled to receive a full refund, along with interest payable from the completion due date until they receive the complete amount.
For example, you can choose to withdraw from the project if the builder committed March 31, 2022, as the possession date but couldn’t complete the project on that day. If you withdraw from April 1, 2022, until you receive all the money you’ve paid, you will be entitled to receiving interest from the developer.
If you opt to continue, you will be entitled to receive compensation with interest payable from the project completion due date until the actual completion of the project. So, in the above case, you will receive interest from April 1, 2022, to the date of project completion.
- Same Default Interest Rate
As per RERA, the default interest rate for both parties will remain the same. Earlier, buyers had to pay a higher default interest rate to the developer than that paid by builders to buyers in case of delays. RERA has eliminated that difference in the interest rate.
- Compensation for Defect
If the buyer finds a structural defect or raises an issue about the quality of service within five years of the apartment’s possession, the builder is supposed to rectify the fault within 30 days at no extra cost. If the builder does not do it, the buyer is entitled to compensation.
- Buyer Rights for Title Defects
After the property’s possession, if a buyer finds a defect in the property’s title, they can claim compensation from the developer. This one does not have a time limit attached to it. It means you can claim compensation any time after you find a defect in the title.
Other RERA benefits for buyers include fast-tracking of grievance redressal, increased transparency, and the right to information about everything related to the project.
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