Real Estate (Regulation and Development) Act (RERA) was implemented over six years ago to regulate the real estate industry, make transactions fair and transparent, and protect property consumers. While RERA has established a robust framework for safeguarding the rights of homebuyers, there are key aspects that remain ambiguous. One such aspect is the structural defect liability of the promoter.
What is RERA?
RERA, 2016, is a key regulation aimed at regulating the real estate industry. It aims to make transactions fair and transparent while also empowering and protecting property consumers. RERA was passed under the Concurrent List of the Indian Constitution‘s Entries 6 and 7 (which deal with contracts and the transfer of property). RERA went into effect in May 2017 after being passed in March 2016.
Main Provisions of RERA
Under RERA, every real estate project that is going to be constructed over 500 square meters or that includes more than 8 flats must register with the state’s RERA. Developers must retain 70% of the money they receive from buyers in an escrow account, which is a temporary pass-through account kept by a third party, to cover the project’s building costs. The developer is responsible for fixing structural flaws for a period of five years.
Limit on Advance Payments
Without first entering into an agreement for sale, a promoter may not accept as an advance payment or application fee from a person more than 10% of the price of the plot, apartment, or building. The carpet area will be charged for, not the super-built-up area.
Penalties for non-compliance
Penalties for non-compliance include up to three years in prison for developers and up to one year in jail for agents and purchasers who disobey regulatory authorities’ and appellate tribunals’ orders.
Way forward
The central government and each state must work together to settle any disputes resulting from the implementation of RERA. Governmental organizations need to be held responsible for the delay in issuing clearances. States shouldn’t weaken the RERA’s rules. All state legislation should continue to contain provisions outlining how breaches will be punished.
Establishing a strong IT infrastructure is necessary for project monitoring and swift resolution of complaints. The government has already set up Central Advisory Council (CAC) for the effective implementation of RERA. The range of CAC’s responsibilities should be expanded to include providing advice to state agencies on matters relating to RERA compliance.
Ensure the sector has a steady source of funding; developers should have access to endowment funds.
Structural Defect Liability of the Promoter
One key aspect of RERA that remains ambiguous is the structural defect liability of the promoter. Structural defects are defined as issues that affect the safety or usability of a building or part of a building. The responsibility for fixing these defects falls on the developer for five years after the completion of the project.
However, there is ambiguity around the definition of a structural defect, how it should be identified, and the extent of the promoter’s liability. While RERA does provide for a defect liability period, it does not specify the time frame for identifying and rectifying such defects.
Why In News
This article discusses the significance of Real Estate (Regulation & Development) Act, 2016, its provisions, and the persistent ambiguity surrounding the liability of promoters for structural defects, as well as suggesting possible solutions.
MCQs on Challenges and Way Forward for Real Estate Regulation in India
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What is the purpose of the Real Estate (Regulation and Development) Act, 2016 (RERA)?
A. To regulate the real estate industry and protect property consumers
B. To provide tax incentives to real estate developers
C. To limit the number of real estate projects in each state
D. To promote foreign investment in the real estate industry
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What is the maximum advance payment a promoter can accept without an agreement for sale according to RERA?
A. 10% of the price of the plot, apartment, or building
B. 20% of the price of the plot, apartment, or building
C. 30% of the price of the plot, apartment, or building
D. There is no limit on advance payments
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What is the liability of a developer for structural defects according to RERA?
A. The developer is responsible for fixing structural flaws for a period of five years
B. The developer is responsible for fixing structural flaws for a period of two years
C. The developer is responsible for fixing structural flaws for a period of ten years
D. The developer is not liable for structural defects
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What penalties can be imposed for non-compliance with RERA regulations?
A. Up to three years in prison for developers and up to one year in jail for agents and purchasers
B. Up to five years in prison for developers and up to two years in jail for agents and purchasers
C. Up to ten years in prison for developers and up to five years in jail for agents and purchasers
D. No penalties are imposed for non-compliance with RERA regulations
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