The Real Estate Regulation and Development Act (RERA) was formed in 2016 to introduce transparency and accountability in the real estate sector. The Act was welcomed by both the Builders and buyers alike. It ushered in an era of fair practices in the real estate protecting buyers’ interests against malpractices by builders, or a gap between promise and delivery, penalizing the defaulters.
A prospective buyer, on deciding to buy a home, scouts the market for home loan interest rates and checks his home loan eligibility. Using an online home loan emi calculator will assist him to arrive at the net monthly payment due if he wants to avail of the home loan. After doing these calculations, he buys the property—the delivery of which depends on the builder’s integrity. The builders were known to be indulging in malpractices, not honoring their commitment, making false promises at the sales pitch. The buyer was left at the mercy of luck. Not anymore. The main objective of RERA was to boost investor confidence and standardize the mechanism to regulate the factors evoking skepticism in investors, for instance, property pricing, project delays, cost of construction, and quality of projects. RERA has brought significant advantages to boost the real estate sector through affordable housing.
Benefits of RERA
Safeguarding the interest of buyers
Under-construction projects have been preferred for first-time homebuyers due to the staggered payment schedule, and this was one area that was prone to risk as these projects seldom got completed on time. Interested homebuyers were investing in under-construction projects, with a lot of apprehension due to the excessive delays. RERA comes into the picture to safeguard the interests of these homebuyers. In India, a comparatively large chunk of the population searches for a home loan to buy their homes. In such a scenario, when home loan emi also starts, it means an additional burden without possessing the flat purchased. With RERA coming into the picture, the demand for affordable homes has increased, resulting in lower home loan interest rates.
Standardization of Pricing and ensuring end-use of buyers’ money
Further, RERA necessitates that the flat is priced for carpet area and not the super-built up or built-up area that was the earlier practice. Earlier, there was no standardization in the calculation of carpet area by the builders, which has been plugged now. Builders need to base the pricing on the carpet area as defined by RERA. This has ensured better pricing for the buyers. Now, the builder is mandated by RERA to keep a minimum of 70 percent of buyers’ money into an ESCROW account. The RERA account is project-specific, and the funds therein can be utilized only after getting prior approval from chartered accountants and engineers.
Right to information about project and property
One of the most significant advantages of RERA is that the builders are required to share all crucial details about the project with the buyers. This will enable them to make an informed decision.
Builders made accountable for gaps in promise and delivery
Any default or delay in construction within five years from the date of possession has to be made good by the builder, under RERA. The RERA Act makes it mandatory for the builders to give a date of residence of the property, which is sacrosanct. Any deviation from the delivery date is liable to penalize the regulators.
These advantages, coupled with all-time low home loan interest rates, go a long way in giving prospective homebuyers the confidence to convert their dream of owning a home into a reality. All that one needs is to know his home loan eligibility and decide on a property to invest in. RERA has laid the foundation stone of fair practices in the real estate industry.