Real Estate Act effective today: How it will impact your home-buying experience

May 1 marks a victory of sorts for homebuyers harassed for years because of property sale agreements lopsided in favour of developers, violation of building rules and delayed home delivery. The consumer-friendly Real Estate Regulatory Act (RERA), that kicks in today, promises to usher in transparency and accountability into the sector as it has some stringent provisions including three-year prison terms or heavy penalty for developers failing to comply with its provisions.

RERA also lays down that buyers must make payments on time including their share in the registration charges, municipal taxes, maintenance charges etc and even the interest prescribed. It mandates that every allottee will have to participate in the formation of an association of allottees and take physical possession of units within two months of the builder getting the occupancy certificate.

What can homebuyers expect?

Will the home buying experience for those wanting to purchase a house change in entirety starting today or will the transformation be gradual? A homebuyer (existing or new) may not witness any drastic changes on day one. But all buyers – those wanting to purchase an ongoing project or a yet-to-be registered project are assured of better protection under RERA as the Act has come into force from today.

“It will take another three months for the basic infrastructure such as a state regulatory website, a regulator etc to be in place. The transit period as laid down under the Act is also three months. But from today it is safe for homebuyers to invest either in an ongoing project or one for which registration is yet to take place as project delivery will be as per the RERA Act starting today,” says Manoj Gaur, vice president, CREDAI – National & MD, Gaursons Group.

“Most developers have already adopted RERA norms in their builder-buyer agreements. Since most states do not have registration software, there may be a lull in the market for some time. What is important is that RERA marks a new beginning and promises a better future for the real estate sector as a whole,” says Getamber Anand, chairman, CREDAI and promoter of ATS Infrastructure Limited.

Watch: How RERA is going to change your homebuying experience

Post implementation of the Act, all project approvals are in place and the builder buyer agreement signed with buyers includes the interest and the penalty clauses laid down in RERA. Also, since the statute now demands that the builder sells the unit on the basis of carpet area and specify common areas and the parking areas separately, these elements have been incorporated in the new agreement.

But Abhay Upadhyay, national convenor, Fight for RERA says that for homebuyers wanting to go ahead and book an apartment starting today “it is advisable to wait to see all the documents and details of the project being uploaded on the state regulatory body's website and then take a call. There is no hurry as prices are not going to shoot up anytime soon. We are hoping that the entire infrastructure will be in place within a month as setting up a regulatory body and notifying rules is a legal requirement under RERA that all states have to adhere to.”

Will prices come under pressure?

As for pricing, it may come under pressure as developers reorient their processes under the new RERA regime. Padding of project-related risk that was not addressed adequately prior to RERA may have a bearing on the project cost.

The impact on real estate prices may pan out in the next 6-12 months as a result of GST, RERA and also the unsold inventory available in the market. Enforcement by the regulatory authority will determine whether there will be adjustment requirement in pricing keeping in mind the demand and supply.

“It will also depend on how many new projects are finally registered, revoked by the authority or how many complaints are filed etc. During the interim period, due to fewer project launches, state revenues may also get impacted,” says Neeraj Bansal – Partner and Head – ASEAN Corridor and Real Estate Sector, KPMG India.

What happens to states that do not have a regulatory authority in place?

All real estate projects, including those that have not received occupancy certificate or completion certificate, will have to be registered with RERA from today. But since most do not have one yet, no new launches or new registrations will take place at least for two to three months, say experts.

In a case of ongoing projects (or projects that have received intimation of disapproval that is only an approval of civil plans) the promoter has a window of three months starting May 1to register the project. It must be noted in ongoing projects, which expect to receive occupation certificate or completion certificate by end of July 2017, will also have to be registered, says Bansal.

So far, only Madhya Pradesh has appointed a regulatory authority. States that have an interim regulatory authority in place include Kerala, Maharashtra (also in advanced stages of appointing a permanent authority), Punjab, Rajasthan, Mizoram, Haryana, NCT of Delhi, Andaman & Nicobar Islands and Chandigarh.

States in advanced stage of appointing a regulatory authority are Odisha, Bihar, Jharkhand, Assam, Tamil Nadu, Andhra Pradesh, Telangana, Tripura, Dadra and Nagar Haveli (Tie up with Maharashtra), Daman and Diu (Tie up with Maharashtra), Andaman and Nicobar Islands (Tie up with Tamil Nadu) and Lakshadweep (No real estate activity in the UT). Both Puducherry and Chandigarh had appointed an interim appellate tribunal under RERA.

States that have notified rules so far include Uttar Pradesh, Gujarat, Kerala, Odisha, Andhra Pradesh, Madhya Pradesh, Bihar and union territories of NCT of Delhi, Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu and Lakshadweep.

States that have prepared draft rules are Assam, Maharashtra, Tripura, Karnataka, Tamil Nadu, Punjab, Haryana, Himachal Pradesh, Mizoram, Jharkhand, Telangana, Chhattisgarh, Rajasthan, Uttarakhand, West Bengal and Union Territory of Puducherry.

How will developers get impacted?

Promoters of ongoing projects can continue marketing and selling such projects until for three months, without quoting the RERA registration number and website address of RERA. However, if they don’t obtain registration within such period, they would be in non-compliance with the Act’s provision and cannot continue marketing and selling.

Having said that, promoters of ongoing projects should undertake a review of their existing sales and marketing collaterals (online and offline) and ensure that they are in compliance with the provisions listed in the Act.

“During the RERA transition period, it is expected that there might be a vacuum for new projects as it would be difficult to advertise or sell for until the regulatory body is established by the state,” says Bansal.

Action agenda for promoters of ongoing projects

Builders have to submit project-related information such as sanctioned and proposed plans, pending approvals, estimated project cost (land and construction), and balance cost and receivables etc to RERA for obtaining registration.

It is advisable to scrutinise such information for accuracy and consistency before submitting it to RERA. This exercise should be treated as a self-affidavit which is being submitted in the court of law.

“RERA compliance is not just about filling a new form, but about restructuring internal processes, planning projects better and making the organisation RERA ready. A good developer will look at RERA regime as an opportunity to restructure business processes to be accountable, transparent and customer-friendly rather than a compliance burden,” says Bansal.

vandana.ramnani@nw18.com