Builders fall in line ahead of RERA kick-off, offer homes as per new terms

The Real Estate Regulatory Act (RERA), which has some stringent provisions including three-year prison terms or heavy penalty for developers failing to comply with its provisions, will kick in on May 1.

During the run-up, over the last few months several developers have been advertising their projects as RERA-compliant or ensuring that the new agreements being entered into between builders and buyers incorporate norms laid down by the Act.

Developers who have recently launched projects claim they meet all norms laid down under the Act. “All approvals are in place and the agreement signed with buyers include the interest and the penalty clauses laid down in RERA. At the Credai level, too, the apex body of developers is holding training sessions for developers to educate them on the changes expected in the new business environment,” says Manoj Gaur, Managing Director of the group that has recently launched a project in Siddharth Vihar, Ghaziabad.

Navin Raheja of Raheja Developers says that while some states may not have approved the model agreement, “the company has gone a step ahead and adopted the model agreement framed by the Centre. This is a self-regulation based on the model guidelines”.

A look at some new agreements drawn up by builders reveal that there are disclosures for customers to take an informed decision about investing in a property. The agreement spells out the entire payment schedule.

“The agreement states that the development authority concerned has granted the commencement certificate to develop the project along with the approval date and the number. It declares that the promoter has registered the project under the provisions of RERA with the real estate regulatory authority,” says Akshat Pande, Partner, Alpha Partners.

He says the amount to be paid by the buyer is clearly stated in the agreement and is meant to be escalation-free. This means there will be no arbitrary escalation in prices by the promoter going forward.
It also clarifies that garage/closed parking shall be treated as a single indivisible unit for all purposes.

Earlier the developers would sell an apartment based on the super area due to which common areas and parking areas were never specified separately in the sale deed.

“The statute now demands that the builder sell the unit on the basis of carpet area and therefore there is a need to specify common areas and the parking areas separately,” says SK Pal, Managing Partner and advocate at Lead Counsels.

The new agreements also spell out the rights a customer has as per the agreement and after possession of the apartment. Now, a customer is entitled to specific performance by the builder as a buyer. What this means is that instead of claiming damages or compensation, the buyer has the right to make sure that the developer performs the obligations laid down in the contract,” says Alpha Partners’ Pande.

“A promoter cannot terminate an agreement on account of increase in cement prices or lack of adequate labour. Force majeure clause is applicable to conditions that are beyond human control, something that impacts a developer’s capacity to perform the contract,” explains Pande.
Both the builder and buyer have to pay an equal amount in penalty in case the former delays delivery of the unit and the latter defaults on payment.  But this cannot be implemented retrospectively in all cases, say some developers.

Abhay Upadhyay, National Convenor, Fight for RERA, says that many states have already appointed interim regulators and even notified RERA rules. Some states are in advanced stages of doing so. Till date, the Centre has notified 60 sections of RERA and rest 32 sections are statutorily required to be notified with effect from May 1, 2017 and it will be complied with as clearly indicated  by Ministry of Housing and Urban Poverty Alleviation (HUPA).

Once that happens, RERA will become the law of the land and all states will have to compulsorily fall in line, notify rules and appoint authorities immediately.