What is RERA?
RERA stands for Real Estate Regulations Act and was introduced in 2016 to protect the interests of the home buyers in India. The main aim of RERA is to provide relief to the buyers from the malpractices of unfair builders.
RERA specifies certain norms for building and development of real estate which will enhance the transparency in transactions in the real estate sector.
It has provided several rights to the home buyers and has also specified certain rules and regulations to be followed by all builders/ developers.
Moreover, the RERA Act also specifies the creation of a Real Estate Authority and Appellate Tribunal for each state. In case of any wrongdoing by the builder/developer – the home buyer can also file a complaint to this authority.
How does GlobalHome ensure RERA protection for buyers?
GlobalHome only lists RERA verified properties on its platform.
We have a team of property evaluators who verify the RERA registration of each and every property, and our data science methodology looks at 150 factors to assign a Property Score to rate the reliability of the properties.
Before finalizing the property booking, we will share the RERA registration proof and additional verification for the property, which includes the below:
- RERA registration certificate proof for the Builder and Project
- Project Construction Status with detailed insights on the stage.
- Video tour or On-site visit or tour of the property
- Builder contact info if you want to confirm property details
Read more about our data science methodology for buying properties in India.
How does RERA protect buyers?
Reduce the Risk of Builder Insolvency/ Bankruptcy
A developer usually has several projects which are being constructed simultaneously. Earlier Builders were free to divert the funds raised from Project A to fund the construction of Project B.
However, this would now not be possible as after the introduction of RERA, the builder is liable to deposit 70% of the amount realized in for the project in a separate bank account. He can withdraw from such account only on the basis of completion of project, which shall be certified by a civil engineer, architect and a chartered accountant in practice.
As the funds can now not be diverted to other projects and used for other purposes – this will ensure that the funds are used for the purpose only for which they are raised and not for other purposes.
Earlier, there have been certain cases wherein the builder raised the funds from home buyers for constructing their homes but used the funds for other purposes. They later became bankrupt and were not able to complete the construction of the property.
As the funds can only be used for the purpose for which they have been raised – this will ensure that the funds are not diverted elsewhere and that the money is used for the purpose for which it is raised thereby ensuring timely completion of the property.
Right of the Buyer in case of False promises:
In case there is a mismatch in the commitments made by the builder and the actual project, the buyer has the option to withdraw from the project, wherein he is entitled to full refund of the amount paid as advance or otherwise along with interest and claim compensation.
Right of the buyer in case of Defect after possession:
In case of any structural defect or any defect in workmanship, quality, provision or service is discovered within 5 years after the possession of the apartment, such defect will be rectified by the builder at no extra cost within 30 days.
If the builder fails to do so, the buyer shall be entitled to claim compensation for the same.
Rights of the buyer Delay in possession:
If the builder fails to complete the project on the due date of completion then the buyer has the option-
- To withdraw from the project, wherein he shall be entitled to full refund along with interest payable from the due date of completion till the amount is refunded.
- To continue with the project till the completion, wherein he will be entitled to compensation along with interest payable from the due date of completion of project till the project is actually completed.
For instance, say the project is due for completion on March 31st, 2021 but it couldn’t be completed on that day. So on April 1st, 2021 you have the option to withdraw from the project. If you decide to withdraw from the project then for the period from April 1st, 202 till the payment is made, you will be entitled to interest.
In case you choose not to withdraw from the project then say the actual completion of the project takes place on March 31st, 2022 then from March 31st, 2021 to March 31st, 2022 you will be entitled to interest every month.
Rights of the buyer in case of defect in Title:
If at any time after the possession of property you find that there is a defect in the title of property then you can claim compensation from the builder. It is not barred by limitation, which means there is no time limit within which you have to discover the defect.
Rate of interest on default:
In case of default in payment by the buyer or default in completion of the project by the builder, the rate of interest to be paid shall be the same for both parties.
Earlier what used to happen was that in case the builder delays the possession of property – the interest paid by builder to the home buyer was less whereas in case the buyer defaulted – the interest to be paid by the buyer to builder was higher.
There was no parity in the interest to be paid by both the parties. The RERA Act has now clearly specified that the interest rate shall be the same for both the parties.
Advance Payment Limit
The builder can take not more than 10% of the cost of the apartment, villa etc. as advance or application fees as the case may be, before entering into an agreement of sale.
Right to information:
The buyer shall be entitled to all the information related to the project, be it the plan layout, execution plan, stage wise completion status etc.
Establishment of Authority for Grievance Redressal:
Any grievance against the builder can be taken to the state authority set up under RERA, which shall have the power to redress all the grievances. In case you are dissatisfied with the order you can file an appeal with the Appellate Tribunal who will redress your case within 60 days, and in case of failure to do so, it shall record the reasons of such failure.
If the builder wants to appeal to the Appellate Tribunal against the order of the Authority, then he shall have to deposit at least 30% of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard.
Standardized carpet area
Previously, the carpet area on which the builder calculates the price of the property was not defined. Every builder/developer had his own method of calculation of the Carpet Area.
For the same flat, the builder would calculate the carpet area as 1500 sq ft and the other would calculate the carpet area of 1400 sq ft.
This used to happen as there was no standard formula for the computation of the Carpet Area. However, this has now been clearly defined by the RERA Act and the same formula would be applied by all builders/developers for calculation of the carpet area.
This has a direct impact on the Real Estate prices as most developers charge on the basis of carpet area. Earlier the builders use to inflate the Carpet Area as a result of which the cost of the property would also shoot up. However, now the method for calculation of Carpet Area has been clearly defined by RERA and therefore the developers would not be able to manipulate the calculation of carpet area in order to increase the prices.
You can read more in our blog about the difference between carpet area, super built up area, saleable area and how it is calculated.
Where is RERA applicable?
RERA covers all residential and commercial projects, including shops, offices and buildings.
RERA is only applicable on development of property and not on renting of property.
RERA is applicable to all Builders and Developers except the following:
- Where the area of land proposed to be developed does not exceed 500 sq meters or the no. of apartments proposed to be developed does not exceed 8
- Where the Promoter has received completion certificate before the introduction of RERA
- For the purpose of Renovation or Repair or Re-development which does not involve marketing, advertising, selling or new allotment of any apartment, plot or building.
GlobalHome is a US-based digital platform for discovering and buying NRI properties in India. We leverage data science and insights to pre-verify properties, and provide a digital platform for financing, booking online and end-to-end purchasing.
If you are currently or in future looking to purchase a property in India, Discover Featured Investment & Luxury Properties here