Understanding RERA – 14 rules real estate investors should know

POSTED BY Team Jagoinvestor ON August 12, 2019 COMMENTS (36)

For Long, the real estate sector was unregulated and in favor of builders and developers. From getting delayed possession to bearing a huge loss of project cancellation, all has to be borne by home buyers.

Even in worse case after living in a society for a long period of 10-15 years, homeowners need to vacant the society due to builder’s mistake of not getting approval from government for the said project.

And after all these, for any of these malpractices, if a home buyer files a complaint, it use to take years to get a verdict. However, now to bring transparency and accountability to this sector, Real Estate Regulatory Act, 2016 has come to force.

This aims to create a more equitable and fair transaction between sellers and buyers of properties. The Real Estate (Regulation and Development) Act is expected to ensure consumers will not be cheated or taken for a ride by the developers.

So, we will see in 14 points that how RERA will benefit us. But, before that let’s see all loopholes and malpractices builders and agents use to do in the real estate sector.

  • Delay in project completion
  • Use to cheat buyers with false information
  • Divert funds to another project or for other purpose
  • Get-away with sub-quality construction
  • Offer special pre-booking rates
  • Keeping Date of possession clause in agreement empty
  • Altering the project developments without consent

14 RERA rules investors should know

1. Registering project with RERA :

RERA makes it mandatory for all commercial and residential real estate projects where the land is over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority (RERA) for launching a project, in order to provide greater transparency in project-marketing and execution.

The builders or developers have to publish all the details such as sanctioned plan, layouts, the location of the project with clear demarcation of land, carpet area, number and area of garage, etc. So, with RERA builder have to get all the clearance before they could advertise or sell any property, it will help in malpractices to be curbed.

Hence, before entering into the contract, you can check online on the website of RERA about every detail of the project by visit the RERA site of the concerned state and go into the registration tab. I have attached a screenshot of RERA Maharashtra. To get an idea about how RERA MAHARASHTRA REGISTRATION site looks like.

Snapshot of RERA website for registration

If you are offered to buy a property of any unregistered project then you can notify the same to RERA to save others from any kind of fraud.

2. Quarterly updates on Construction progress : 

Now builders/developers have to upload project details including number and types of units sold out, government approval taken or approval pending list & completion scheduled every three months. Along with that if there is any litigation going on related to that property then all the documents of proceedings have to be uploaded by builder/developer. Hence now you can check online the progress of the project they are putting their money in.

3. Escrow Account:

The developer will have to transfer 70 percent of the money received from customers to an escrow account. This will ensure the builder does not spend the money on other projects since they can withdraw money from this account after approvals from engineers and chartered accountants they appoint and your money will be used only for the project you invested.

4. Sale agreement standardization –

Earlier sale agreement use to be in such format that the home buyers were penalized on any default but similar defaults by promoters would not attract any penalty. But, now as per RERA norms, a standard model sale agreement has to be entered between promoters and homebuyers to ensure equality and protect buyers from various penalties and charges.

The agreement of sale shall specify particular details of the project including the construction of buildings and apartments, along with specifications, internal development works and external development works, the date on which the possession of the apartment, plot or building is to be handed over, etc.

5. Maximum 10% of cost of project as advance payment :

The promoter can not accept a sum of more than 10% of the cost of project, plot, etc.. as an advance payment or an application fee from you without first entering into a written agreement for sale with such person and register it.

6. Five years of defect liability period :

Under RERA, in case of any structural defect or poor quality, it will be the responsibility of the developer to rectify such defects for a period of five years. So, if any defect is found in the quality used in the construction of property then you can make the developer/builder liable for all sub-quality issues and ask for repairing or compensating the same.

You can also watch the video on RERA –

7. Carpet Area :

The area of a property is often calculated in three different ways – carpet area, built-up area, and super built-up area. Hence, when it comes to buying a property, this can leads to a lot of disconnect between what home buyer pays and what he actually gets.

But, now it is mandatory for the developers to disclose the size of their apartments, on the basis of carpet area (i.e., the area within four walls). This includes usable spaces, like the kitchen and toilets.

8. Title Representation :

Promoters are required to disclose clear title over the property and project. If any defect is found in title of property then you can ask for the compensation and there is no limit for the amount of this compensation.

9. False information to home buyers :

If you made an advance payment for a project on the basis of any false information given to you via prospectus or in advertisement then you have the right to ask for a refund of your money. And if you want to continue with the project then the builder has to pay penalty and that can go up to 5% of the cost of property.

10. Failure to complete possession on time :

If the promoter fails to complete or is unable to give possession on time then, the promoter is liable to pay the entire amount given by you if you wish to leave the agreement. But, if you wish to stay in the agreement then the promoter will have to pay interest for every month of the delay till you receive the possession.

11. Approval for alteration in sanctioned plans :

If a builder wants to make alteration in plans and specifications of your individual flat then he can do that only with the approval of you. And if a builder wants to make alteration in the entire project’s layout & common areas of society  then he needs approval of the 2/3rd number of total buyers.

12. Obligations of the promoter in case of transfer of real estate project to a 3rd party :

The promoter will not be allowed to transfer the majority rights and liabilities in respect of a real estate project to a 3rd party without the prior written consent from two-third allottees (buyers), except the promoter, and without the prior written approval of the RERA authority.

13. Agent registration is mandatory :

Now, every real estate agent has to register himself under RERA before selling or advertising any property and he has to abide by all rules of regulation like, maintaining books & records, not be involved in unfair trade practices or make any false statement oral or written.

14. Grievance Redressal: :

If any buyer, promoter or agent has any complaints with respect to the project, they can file a complaint with RERA. State real state regulatory department will try to resolve the dispute within 60 days. If you aren’t satisfied with RERA’s decision, a complaint can also be filed with the Appellate Tribunal within the next 60 days. Even after that if he is not pleased the complaint can be filled to high court and supreme court.

Benefits of RERA act 2016 :

This act is not benefiting only buyers but also agents and builders. RERA infuses credibility by making the sector mature & transparent and helping to Channelize investment into the sector. It will increase the confidence of financial institutions & foreign investors in the real estate sector.

Offense-wise penalties for developers :

The following are the penalties and compensation that can be levied on promoters.

For non-registration of a project Penalty of up to 10% of the estimated cost of the project.
For violation of other provisions of the Act Penalty of up to 5% of the estimated cost of the project.
For non-compliance of the orders of the Authority Penalty for every day of default, which may cumulatively extend up to 5% of the estimated cost of the project.
For non-compliance of the orders of the Appellate Tribunal Penalty for every day of default, which may cumulatively extend up to 10% of the estimated cost of the project or with imprisonment for a term which may extend up to three years or both.

Offense-wise penalties for Real Estate Agent :

The following are the penalties and compensation that can be levied on the real estate agent.

For non-registration under project, he is selling Rs. 10,000 per day of defaults which may extend up to 5% of the cost of the property.
For contravention of the orders or direction of the RERA Penalty on a daily basis which may cumulatively extend up to 5% of the estimated cost of the property whose sale or purchase was facilitated.
For contravention of the orders or direction of appellate tribunal Imprisonment up to 1 year with or without fine which may extend up to 10% of the estimated cost of project or both.

Offense-wise penalties for Allottees(Homebuyers) of RERA registered project:

The following are the penalties and compensation that can be levied on allottees.

Contravention of any order of the RERA Penalty for the period during which defaults continues which may cumulatively extend up to 5% of the apartment or building cost.
Contravention of the orders or direction of appellate tribunal Imprisonment up to 1 year with or without fine for every day during which such defaults continues, which may cumulatively extend up to 5% of the apartments or building cost or both.

*Apartment means block, chamber, dwelling unit, flat, office, showroom, shop, warehouse, premises, etc.

How to file a complaint :

After the implementation of RERA, we are optimistic that the new law will protect our interest. However, the most important question is, how to file a complaint or a case, under the new RERA rules.

So, for this, every state has described specific forms and procedures which are to be followed. The application can also be filed online, as per the format available. For filing a complaint, the complainant has to provide following details-

  • Particulars of the applicant and the respondent
  • Registration number and address of the project
  • A concise statement of facts and grounds of claim

The form has to be filled and submitted with Real Estate Regulatory Authority or the adjudicating officer.

Conclusion:

RERA is a huge step forward against thief developers. Till now, there wasn’t any regulator and neither were the rules in place. Delay in delivery of projects, bad material used for construction, changing of sanctioned plans every now and then was the major reason why RERA ACT,2016 came into existence.

However, even after RERA, there are many loopholes in this sector. For eg. It might happen that you wrongly signed some document which gives consent to any changes in agreement or project. Because RERA is just a mechanism which is in place to serve justice to all the parties. So, it is always your responsibility to be alert and get into any contract after due diligence.

I hope this article has helped you in understating RERA act 2016. Feel free to ask any doubts in the comment section.

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36 replies on this article “Understanding RERA – 14 rules real estate investors should know”

  1. Tushar Khopade says:

    i have purchased flat in 2015 in pune talegaon, in agreement builder has promised to give possession in dec 2017 but yet i have not received possession, also they are demanding society maintenance per 4 rs sqr ft but is in agreement it is 3 rs sqr ft. so my questions as belows,
    1) can i cancel my agreement due to builder false given possession on time, if yes then how much amount i will refund?/if no then what is the step of action i have to do?
    please revert asap

    1. Jagoinvestor says:

      Cancellation policies must be mentioned in the agreement only. Have you checked that?

      Manish

  2. Rajesh Bhatia says:

    Dear Sir

    I booked flat in Sohna and paid one lakh along with application form signed by myself which has forfeit clause of initial 10% payment if custom cancel the booking.

    Before any CRM welcome email from builder I decided to cancel and immediately informed builder on email and requested to refund but builder refused and forefeit my one lakh.

    Pls note this is very initial stage and no agreement was signed. Pls guide how I can get my refund.

    Best regards
    Rajesh

    1. Jagoinvestor says:

      I dont think there will be any law governing it .. It gets very tough to recover back in these cases. Even if you register a police complaint how will you prove what you are saying.. was there any refund rules agreed?

  3. Rajkumar Phugat says:

    Hi, I booked a flat with M/s Migsun in 2017, i paid 10% amount and rest amount financed by ICICI Bank, till date bank paid all demanded amount by builder. As per builder buyer agreement possession date was Dec 2019. I received a pre possession letter from builder on 4th Sep 2020, stating that please pay your all dues and we will issue possession after 90 days. Also attached one more sheet of late payment fee of Rs 80734, after discussion they agreed to reduce this and late charges Rs 44567/- . I am paying all my EMI’s to bank on proper time. As i booked my flay as bare unit so interior cost and extra payment from loan also paid. Till date i paid preEMI cost Rs 310000. I paid all my dues on 1st Oct 2020 except late charges. Also builder is giving possession late on one year. Please suggest what should i do for these late charges.

    1. Jagoinvestor says:

      Sadly this has become a norm now .. Complain to the RERA and consumer court

  4. VINOD YEOLE says:

    I HAVE FILED A COMPLAINT AGAINST DEVELOPER IN STATE CONSUMER DISPUTERS COMMISSION FOR THE NON PAYMENT / REFUND OF BOOKING AMOUNT FOR THE FLAT IN THE PARTICULAR PROJECT. I HAVE SEEN ON RERA WEBSITE HE HAS NOT MENTIONED THE DETAILS ABOUT THE SAID COMPLAINT IN “LITIGATION” SECTION. I WANT TO KNOW THAT CAN I FILE THE COMPLAINT AGAINST DEVELOPER IN RERA FOR NON DISCLOSING ABOUT THE SAID COMPLAINT WHICH IS PENDING BEFORE THE STATE CONSUMER COMMISSION? IF YES WHERE & HOW?

    THANKING YOU.

    1. Jagoinvestor says:

      Yes, better complain about this to RERA itself on their website.

  5. Bhavleen Singh says:

    Is the developer obliged to give the possession of the flat immediately on full payment for the flat?

    1. Jagoinvestor says:

      No, only as per agreement

  6. santosh says:

    can you tell me i want buy one villa in goa but he is not register in rera but he have oc. so can i buy this.

    1. Jagoinvestor says:

      Yes, if OC is there you can go ahead .. why not check the documents with the lawyer ?

  7. kiran says:

    Greetings!

    I have booked a flat in pune by checking RERA website and it shows NO legal problems.
    All the documents have been uploaded ExceptJDA (JOINT DEVELOPMENT AGREEMENT) and i am going hand him cheque when itis completed and registered.
    My question is can i blindly book a RERAregistrd flat ???

    please help!

    1. Jagoinvestor says:

      No you cant.. RERA is just a primary level clearance and mainly to make sure the minimum required documents are there.

      Issues can surely happen even after that. RISK is always there!

      Manish

  8. guru says:

    Dear Sir/ Ma’am,

    One real estate developer in Bengaluru has not developed a residential layout even after 7 years of purchase of the plot. Do the buyers like me have any right as per RERA Act 2016 ? or is RERA applicable only for projects where house construction is involved? Please guide us. People like me have invested dreaming of constructing a own house there. But because the builder has diverted this money, he is not developing this layout and our dream of construction of own house is shattered. Please help us whether can a complaint be filed under RERA.

    1. Jagoinvestor says:

      Even a plot project must be with RERA, but I think this is an old project, so cant comment on that. Why don’t you go with the usual old route of complaining to consumer court!

      Manish

  9. Mahesh Jethmalani says:

    Our project was started before RERA came into effect and builder has not registered it under RERA and finished selling flats. He says it is not covered under RERA. How complaints for his malpractices can be made and where. The project is in Vadodara Gujarat.

    1. Jagoinvestor says:

      If its not registered in RERA, then you cant do much other than taking the regular route of filing FIR , consumer court etc!

  10. Manohar Badlaney says:

    We entered into agreement for development of chs building in 2010. In this registered agreement we are offered some
    additional areas , corpus fund and monthly rent for alternative accomodation till building is ready for occupation. We were promised completion period of 3 yrs from date. Now ,9 yrs have passed ,we are informed by the developer that he is not in a position to start the project. He further said that there is AOP . ( association of purchasers) ,who would bring required funds to complete the project in order to safeguard their investment. Problem is that developer is asking for reduction in areas offered in agreement , what is option , please advise. In order to safeguard our interest,can we ask for 100 percent cost of the project to be deposited in Escrow a/c before we give our consent.

  11. One question,.. I heard promoters can take extension for a project which is completed on time.. In this case if he keep takes extension what will be benefit for a homeowner.. Or is there any penalty charged to promoters and is there any benefit to buyers.. Pls advice

  12. Leena says:

    Hi, we a group of around 100 members have filed a joint complaint under RERA against a very well known builder in Mumbai. When the case went for hearing, the judge said that group filing is not allowed and each member has to file the case/complaint separately. Do we have any such do’s and dont’s listed in any repository some where ? Need your help.

    1. Sharada says:

      we have invested in an apartment costing Inr. 1.4 Cr from very well known high profile builder and developer in Bangalore and have invested almost 75% of project value and we have completed 36 months of investing, builder has not got agreement for sale or Construction agreement signed by us so far and when we had booked by paying booking amount of Rs. 5Lac initially they promised flat possession jun-jul 2020 and now they are asking us to sign agreement, as per agreement draft shared by them its says possession will be given end Oct 2020 with 6 months grace period in favour of builder, we cannot wait for so long as our investment / finances were originally planned for occupying flat by Jun-Jul 2020, can we ask builder to refund since he is not honouring his committed date and in the absence of NO legal papers are signed by us so far with builder though we have promptly paid all payment schedules till now but when we got to understand possession is getting delayed we stopped processing further payments hence they are putting pressure to pay instalments due along with 24% interest / penalty, etc. Can we exit at this stage? will we get all our investment refunded? can we claim any interest for blocking our money for past 36 months? please advice roadmap.

      1. Jagoinvestor says:

        Hi Sharada

        I think you are in a tough situation. I don’t think there is a chance to get back your money easily. Builders are notorious in these kind of cases.

        They are almost always going to win this kind of war because the law is with them and the paper work or the documents which you might have signed are worded in a way that it will benefit them most of the times.

        Its just 6 months delay in your case. There are cases where its been 6 yrs delay and people have not got their money.

        So I guess if you feel you will get the possession after 6 months of delay, its better to just give in and take it.

        Manish

  13. Suhas Patil says:

    Thanks for helpful information. However, we could not find details about forming a co op society. What is the exact rule. I also need your guidance as to our society in Thane is built in 1995 but builder has not yet formed a society even after our rigorous follow ups. Dist. Registrar rejected our application put under non-coperation in 2012 saying that 60% of the flats are not sold. We filed the case in High Court, but it is yet to be heard at final stage since last 7 years. Can clauses of RERA act applies to our building of 1995? Pls advise.

    1. Vandana Manwani says:

      Hi Suhas,

      For this kind of complications can be sorted only with the help of a professional lawyer.

      Thanks

  14. Ganesh K says:

    If a redevelopment project with Project registration number is inordinately delayed then can I file complaint under RERA rules ?

    1. Vandana Manwani says:

      Hi Ganesh K

      Thanks for your comment.

      Yes, if that project is having a RERA registered number that means it is registered under RERA than you can file a complaint against it.

      Vandana

  15. T P Viswanathan says:

    One vital information is missing. What protection does a member of the CO-op society going in for redevelopment if he falls a victim of manipulation by Devrloper? What is the recourse open for him under RERA? Will he at all get any RERA protection!

    1. Vandana Manwani says:

      Hi T P Viswanathan

      Thanks for your comment.

      Whenever a project is in development it has to be first registered with RERA. After 6 months or some time of its completion, a co-operative society is formulated.

      So, RERA says that every project has to be under RERA and co-operative society is formed later to end biased decision making.
      Therefore in case of redevelopment all the rules of RERA will be in force.

      Vandana

  16. Ranganathan says:

    MahaRera Form B to be uploaded in promoters’ regn page has provision for 4(i) or 4(ii) at their discretion The wording in Form B refers to 70% (4-i) / 30% (4_ii) is such that it does not require any explanation in instanes where promoters had collected 90% or even more esp. in stalled projects with hardly 50% eork progress even as per regn data. And on top of it , completion date due years ago gets extended by years at regn. time, with addl extn. by one year.
    This lacuna is not addressed.

    1. Vandana Manwani says:

      Hi Ranganathan

      Thanks for your comment.
      The Form B is a declaration form for promoters wherein point 4 is for reserve account which says that whatever amount is collected by prompters from allottees, they will transfer 70% of it to reserve/escrow account maintained in a schedule bank and withdrawal from that account will be just for the purpose of concerned project.

      I have attached the link to the form for your reference.

      Thank you.

      Vandana

  17. Paras Jain says:

    Good

  18. Girish KB says:

    Thanks for the information on RERA. Please help on my query –
    I entered into an agreement with the developer in 2015 i.e pre RERA but the project is now registered under RERA. Does RERA rules / regulations binding for both developer and allotee ? Thank you Jagoinvestor in advance

    1. Vandana Manwani says:

      Hi Girish KB

      Thanks for your comment.

      RERA rules and regulations will apply to Every project which is now registered under RERA.

      Vandana

  19. Dinesh Kumar Bhagat says:

    Promoters and Developers create the body for marketing termed as special purpose vehicles to cheat the buyers and took 20% as booking violating the RERA term of 10% Authorities and RERA officials club their hands with such entities, buyers are still duped.

    1. Vandana Manwani says:

      Hi Dinesh Kumar Bhagat

      You are right, even after RERA there are loopholes in this sector. So, the only way to be safeguarded from these kind of frauds is to make sure the rules and regulations of law.
      If a buyer knows that he is required just to pay 10% of advance so no promoter or builder can fool him.

      Thank you,

      Vandana

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