The Real Estate (Regulation & Development) Act, 2016, which went into effect on May 1, 2017, established a standard for stringent compliances that all developers, builders, and construction giants across the nation must follow. The majority of states have set up their own RERA offices, where employees are subject to the laws and guidelines in place. The Act requires all projects to be registered with the appropriate State RERA office by the company’s promoters within three months of its implementation, even though it is not retroactive in nature.

RERA’s goal

The Real Estate Regulatory Authority, which would oversee and advance the real estate industry, is intended to be established by the RERA. The main aim of the Act is to protect the interest of homebuyers and promote timely delivery of properties or projects.

RERA was passed in order to increase investment in the industry. The real estate industry would be more transparent and accountable if it included clauses requiring timely project completion and delivery to buyers, as well as the availability of information about the project plan, layout, government approvals, land title status, and subcontractors, as well as the consent of two-thirds of the allottees for any project alterations or additions.

RERA and RERA Registration Applicability

With the exception of the states of Jammu and Kashmir and West Bengal, all states and union territories have adopted and implemented RERA. The State of West Bengal has taken an entirely different route. The State of West Bengal has adopted the West Bengal Housing Industry Regulation Act in place of RERA. In a related development, the Real Estate (Regulation and Development) Bill, 2018 was approved by the State Advisory Council of Jammu and Kashmir.

RERA requires that all commercial and residential real estate projects that have more than 500 square metres of land under development or more than eight apartments to be built register with the RERA authority prior to the real estate project’s launch. To register a real estate project, each promoter must submit an application to the relevant authority. Projects that were in progress on the day this act went into effect and for which a completion certificate had not yet been issued must register with RERA. Real estate projects will be penalised if they neglect to register a property.

On the other hand, registration is not necessary for restoration, repair, or redevelopment projects that do not include marketing, advertising, selling, or new allocation.

Adherence to RERA

The process of complying with the various provisions of the RERA regulations begins with RERA registration. In an effort to guarantee that all compliances are met, it provides the public and RERA authority with all project details. The following are a few of the requirements for builders:

• Uploading of Agreements, Plans, Approvals, etc.: RERA regulations require that information be published on the RERA Authority website for public viewing, along with copies of agreements, approvals, etc.

• Quarterly updating with RERA: Every registered project must update the required information about the project on the website of the relevant State RERA authority on a quarterly basis. If this isn’t done, the RERA authority may impose severe penalties and initiate criminal proceedings.

• Separate bank accounts for 70% of receipts: 70% of customer receipts must be deposited into separate RERA-designated bank accounts; these accounts can only be used for project costs. This is mandated by the RERA law for all developers.

• Observe Process for booking and allotment prescribed by RERA regulations: During the process of booking a new flat or allotment, developers are required to fulfil certain obligations and responsibilities. These include: Make sure the RERA registered agent is used for the transaction.

• Observe the established booking and allocation procedure. Certain duties and responsibilities have been imposed by RERA regulations on developers when scheduling new apartments or allotments, some of which include:
  • Make sure the RERA registered agent is used for the transaction.
  • supplying the buyer with the approved plan
  • Refusal to accept an advance exceeding 10% of the unit cost

• Obtaining the required insurance and approvals – In accordance with RERA regulations, the builder or developer must obtain the required insurance and approvals in accordance with State laws. The insurance-related RERA regulations are highly ambiguous and necessitate in-depth investigation.

• Creation of an allottee’s association: In accordance with RERA regulations, each builder or developer must establish a co-operative society, society, or association in accordance with the guidelines provided by the relevant State Government. In the event that the State Government does not provide anything specifically, society will be established three months after the month in which the majority of the flats are sold.

• Timely delivery and completion, including common areas: Each builder or association must finish the project by the deadline and turn over ownership in three months. Every common area will be given to the association of the apportioned land.

• Evaluation of the building’s quality: The developer must assess the building’s quality. According to RERA law, the builder is required to fix any structural flaws without charging extra for a period of 30 days following notification.

Account for Projects (70:30 rule) and peculiarities with respect to withdrawal from RERA Designated account.

• 70% of project funds must be deposited by developers into a specific bank account. Just thirty percent of the total collections are freely withdrawable or usable.

• 100% of the money to be realized from the allottees must be deposited in the aforementioned separate account if the estimated receivables of the ongoing project are less than the estimated cost of project completion.

• Withdrawal of funds from the RERA Designated Separate Account requires certification by a chartered accountant, engineer, and architect. It will be calculated on percentage completion basis.

• Only the project’s construction and land costs are allowed for payment from  withdrawals made from the Designated RERA  Separate Account.

• Admin and marketing costs cannot be covered by funds in the RERA designated account.

RERA QUARTELY COMPLIANCES

Following information is required to be submitted with respect to the undergoing project as per UP RERA Rules within 7 days of the end of the quarter

1. Details of Registration Granted by Authority
2. Bookings No. & Types of Flats / Apartments/Plots
3. List of Garage (Parking) booked / closed parking
4.  List of Approvals taken & Pending subsequent to commencement  certificates 
5. Status of the project with respect to
   1. Construction of Building and Floors with Photographs
   1. CA Certificate under Form REG-3
   1. Architect Certificate under Form REG-1
   1. Engineer Certificate under Form REG-2
6. Status of approvals – Received, Applied and Expected date of receipt
7. Any Advertisement or Publicity done during the quarter
8. Any other details as mentioned in the respective state rules

RERA ANNUAL COMPLIANCES

1. Audit of accounts of the company within 6 Months from the end of financial year by the Chartered Accountant in practice, who is the auditor
2. Produce a statement of accounts duly certified and signed by CA (As per Form REG-5)  submit each year by December of Next Year
3. Audit involves verification that withdrawal has been in compliance with proportion to the % of completion of Project.

RERA penalties for noncompliance

The following particular penalties are explicitly stated in the RERA Act for violations committed by promoters, builders, real estate agents, and other parties falling under its purview:

• 10% of the project’s total estimated cost is due if it is not registered with the RERA Authority. However, during the default period, the agent is assessed a penalty of Rs. 10,000 per day, up to 5% of the cost of the property.

• When it is discovered that information or advertisements about the project are false: The promoter will be penalised five percent of the project’s estimated cost.

• If any of the Act’s provisions—aside from those listed above—are broken, the promoter and agent will be penalised 5% of the project’s or property’s estimated cost.

• Instances in which an RERA order has been broken or not followed: For the promoter, agent, and allottee, the daily penalty for each day after the order’s passing that the violation occurred could be as much as 5% of the project’s or property’s estimated cost.

• In cases where an Appellate Tribunal order is broken, the promoter, agent, and allottee may be penalised up to 10% of the project’s estimated cost or property.

• If the Promoter disregards the penalty order issued by the Authority for failing to register the project, they could face up to three years in prison, an additional penalty of 10% of the estimated cost, or both.

• If Promoter does not follow the Appellate Tribunal’s order, they risk imprisonment for up to three years, an additional penalty of 10% of the estimated cost, or both.

• Agents who violate the Appellate Tribunal’s order risk a year in jail or a daily fine equal to 10% of the estimated cost of a flat or piece of land.

Final Thought

In the long run, the legislative framework was insufficient to hold the developer and builder accountable for their misbehaviour and for violating the terms and conditions of the builder-buyer agreement. The purpose of RERA’s introduction and implementation is to further safeguard homebuyers’ interests and shield them from financial hardship.