To regulate the real estate sector, the government has come up with the idea of Real Estate Regulatory Authority (RERA) which is expected to help buyers. RERA is supposed to ensure timely delivery of projects and protect the interest of the homebuyer. The builders will benefit from the RERA, as it proposes to impose a penalty on allotted projects for not paying dues on time. The builder can always approach the regulatory authority if there are any unexpected issues on the buyer’s side. With these new laws, developers feel that they are not at the benefiting end. The bill assures penalty of up to 10 percent of the total project cost or even imprisonment if builders do not honor their commitment or fail to register themselves with the regulator.
Rules and Responsibilities of Builders:
There are some important provisions in RERA that may prevent the builders from delaying the projects and stick to deadlines rather than making a default.
Written documents: All official property developments and expectations set will have legal proof. Besides all the required documents, the promoter will have to give a declaration, supported by an affidavit stating the time period within which the project or the specific phase will get completed.
Possession date needs to be fixed: Further, the ‘agreement of sale’ will have to specifically carry the date of possession and the rate of interest in the case of any default. However, the time period could differ from builder to builder.
Clear title of the land: A written affidavit needs to be provided by the promoter that the legal title to the land on which the development is proposed has legally valid documents if these lands are in name of any other person.
Free from encumbrances: It has been seen that several projects get delayed due to encumbrances which can restrict the promoter’s ability to transfer title to the property. A written affidavit should be provided by the promoter to prove that the land is free from any kind of encumbrances.
Categorizing revenues: How does a builder categorize prioritize when it comes to saving up on revenues for unforeseen circumstances like covering up the damaged property over a period of time? According to RERA, 70 percent of the amount received from the buyers shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of development and the land cost and shall be used only for that purpose. Any money withdrawn from that account will be based on the extent of property that has to be developed and should be legally approved by an architect, engineer and a chartered accountant.
Punishable offence: In case the rules are not followed, the builder may not only lose registration of the project but may also be punishable by imprisonment for a term which may extend up to three years or with fine which may extend up to a further ten percent of the estimated cost of the real estate project, or both.
5-year warranty: Builders will have to give a 5-year warranty against structural flaws as per RERA. Developers are now liable to any design or structural malfunction in the foundation which is for a period of 5 years or less.
Time limit of loans from banks: According to the new law, builders are required to save up 70% of the revenue that is collected from homeowners in a separate account, which leaves just the 30% of the sales proceeds that can be used for developmental purposes.
Necessary clearances: Developers will be able to sell projects only after the necessary clearances. According to RERA, builders and agents need to register themselves before the launch of the project.
Careful at the time of uploading any documents on the website: Developers can’t delete documents once uploaded on the website. Once the documents are uploaded by the promoter during registration or project, it cannot be deleted. RERA has come up with specific policies wherein the developer cannot make amendments in the already defined legal laws of the property. However, property developers can subsequently add additional pre-requisites that are in line with industry standards.