How can RERA protect homebuyers?

Major Benefits of choosing RERA

1. Standardized Carpet Area: 

Carpet Area has been a concern for most homebuyers as earlier to RERA it wasn’t standardized due to which different builders could claim different carpet areas for the same flat.

Maharashtra RERA chairman, Gautam Chatterjee, describes that “It is now mandatory for the developers of all ongoing projects, 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.” This provides clarity which was not their earlier.

According to the RERA, the definition of carpet area stands as follow ‘the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment’.

To explain, this means anything that comes inside the outer walls of an apartment, which excludes, balconies, verandah, open spaces, shafts, terrace, garden, common lobby area or any space that is there before you enter the actual house through the main door, cannot be included in carpet area.

This change had a clear and direct impact on property prices as most developers compute the price based on the carpet area as follow:

Cost of Property = Carpet Area x Rate per square ft

2. ROI on default of delivery

Default in payment in case of buyer and default in completion of the project in stipulated time by builder shall bear the same rate of interest for either party. The RERA Act clearly places emphasis on interest rate being same for both the parties. 

The percentage of interest and compensation amount must be mentioned in the agreement of sale and it could differ state-wise. The government of the state holds power to fix the rate of interest in that particular state.

Presently, as SBI’s MCLR is 8%, developers will have to pay 10% interest on the paid amount to the buyers. Similarly, buyers will also pay the same interest at 10% on delayed payment of their dues and not the stipulated penal rates of 12% to 18% as otherwise but this may vary from state to state.

Under Section 18 of the Act, there are two cases under which the builder is liable to return the money of the buyer.

Firstly, if the builder is unable to provide possession as per agreement or discontinuous his business (declared insolvency) then the builder is liable to pay interest including compensation. However, there is no separate compensation awarded to the buyer the interest component includes compensation. 

Furthermore, If the buyer opts for possession then if there is a delay in possession then the buyer will get the interest of that delay.

If the builder is unable to complete the project in projected time, the buyer has an option to:

1.Withdraw from the project, wherein they are entitled to receive a full refund along with the interest amount payable from the due date of delivery till the time when the entire amount is refunded.

2.Continue with the project till the completion, wherein the buyer is entitled to compensation along with interest payable from the due date of delivery till the time when the project is actually delivered.

3. Reduced risk of builder insolvency/ bankruptcy

As per Section 4(2)(l)(D), the promoters should deposit 70% of the money evaluated for a particular real estate project from the allottees in a separate bank account to cover the cost of construction and the land cost, and shall be used only for that purpose. It is mandated for every promoter to apply to the Real Estate Regulatory Authority (“Authority”) for registration of real estate projects and their registration can be revoked by the Authority if the promoter makes default in doing anything required by RERA (including time-bound completion of the project). If there is a default, Authority has the power to freeze the bank account of that project to ensure that the promoters do not fraud with the money which needs to be divided amongst the buyers. The Authority at its discretion can consult the government to take any action as it may deem fit including carrying out of the remaining development works by the competent authority or by the association of allottees. If a promoter or a real estate agent fails to pay any interest or penalty or compensation imposed on him, it shall be recoverable from such persons in the form of land revenue.

Grievance redressal under RERA

Any grievance regarding builders can be dealt with in the state authority set up under RERA. RERA emphasizes that complaints should be disposed within 60 days from the date of filing. This not only saves on the cost but also in the time involved in litigation.

As a homebuyer, if your builder is registered under RERA, you can lodge a complaint with the conciliation forum for a minimal fee. In a conciliation forum, you don’t have to worry about court trials and legal proceedings. Your complaints can include delay in possession, changes in construction plans, lack of promised facilities or change in construction plans. Without a conciliation forum, the RERA authority would receive your complaints and offer a solution.

If a builder wants to appeal to the Appellate Tribunal against the order of authority, then they will have to deposit a sum of at least 30% of the penalty or the total amount that needs to be paid to the allottees including interest and compensation, before their appeal is heard.

For further clarification or more information on how RERA could help you as a home buyer or builder feel free to get in touch with us.