What is RERA Act - Benefit of RERA Act to Home Buyers | Kotak Mahindra Bank - Home Loan Stories

Real estate is a major industry where even a small inconsistency often costs customers lakhs. To avoid such issues and to bring transparency in the real estate sector, RERA or Real Estate Regulatory Authority was formed and made effective from 1st May 2016, as per the Real Estate (Regulation and Development) Act, 2016. It's a government regulatory body that operates to avoid any fraud or discrepancies in the real estate sector.

 

If you plan to purchase a property, you must know what RERA is all about and how it can help you. Here is a brief guide on RERA and how it benefits homebuyers.

 

What is RERA?

RERA is a regulatory body formed by an Act of Parliament to streamline the process of the real estate sector. It was introduced to identify and eradicate problems related to real estate and to reduce project delays. Currently, all builders and developers must register under RERA before starting any project. RERA aims to -

  • Create a fair and equitable ecosystem for the sellers and the buyers
  • Bring better accountability and transparency to make purchasing real estate simpler

 

How will RERA benefit homebuyers?

 

  • As per RERA, if there is a delay in projects, the promoter would have to return the amount to the buyer. If the buyer does not wish to withdraw the advance amount paid for the house, the builder is liable to pay interest for the delay period.
  • Registration of all projects is mandatory. If the builder/promoter does not get the necessary approvals, they cannot sell, advertise or book projects. Also, if the builder fails to register a project, they could be asked to pay 10% of the property cost as a penalty.
  • Property should be sold by the carpet area. If the seller fails to do so, the project could be considered illegal. The carpet areas have to be calculated as per the standard carpet area calculation defined by RERA.
  • RERA allows relevant authorities to set up machinery for grievance redressal through real estate appellate tribunals. Every state will have a separate state RERA that could be contacted for the redressal of grievances by the buyers.
  • The builders should transfer 70% of the buyers' money, collected for the project construction in a separate escrow account. The developers cannot use that money for another project, keeping the current project at stake and consequently delaying it.
  • The builder will be liable for any defect or shortcomings in the project construction. If the buyer has any complaints regarding the project construction, they can complain in writing, and the builder is supposed to address it within a stipulated time.

 

The unorganized nature of the real estate sector makes it more essential to have an authoritative body to reduce the lack of transparency and accountability from promoters and builders. RERA aims to address the issues of delay in projects saving the buyers from unnecessary hassles. It brings uniformity in state enactments, safeguarding the interest of real estate buyers.

 

With RERA, it is safer to buy a house. You can easily apply for home loan and buy your dream house. However, do not forget to check your eligibility and keep the documents required for home loan handy.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.