As India strengthens its position as a leading player in the global market, industries and businesses have witnessed significant growth, which further have contributed in the steep rise in the real estate prices. In order to control the rising real estate price and to protect the interest of the home buyers, government has set up RERA Act that controls and monitors the real estate sector across the states.
What is RERA Act?
RERA stands for Real Estate Regulatory Authority and was introduced in 2016. The Real Estate (Regulation and Development) Act, 2016 focuses to protect home-buyers and raise investment in the real estate sector. Real Estate Regulatory Authority (RERA) Act is enforced in every state to regulate the real estate sector and helps in fast and efficient dispute rectification.
As per the RERA Act, it becomes necessary for all residential and commercial real estate projects wherein the land is over 500 square metres to register with the Real Estate Regulatory Authority (RERA) for launch of any project. This registration helps in creating better transparency in the execution of launched projects.
Under the Sec 84 of the RERA Act, it states that within six months of the RERA Act being enforced, State Governments shall make rules for carrying out the provisions of the Act.
Benefits of RERA for home buyers
- Standard Carpet Area
- Default Rate of Interest
- Reduced Risk of Bankruptcy
- Advance Payment
- Right to Information
- Possession Delay –Buyer’s right
- Defect in title – Buyer’s right
- Fake promises – Buyer’s right
RERA Act Rules
State Governments will set the rules to carry out the provisions associated with the Act. On 31 October 2016, the centre, through HUPA (Housing & Urban Poverty Alleviation) Ministry, released the general rules of the Real Estate (Regulation and Development) Act, 2016.
As per the RERA Act, there are 14 Indian States and Union territories that have notified their rules with RERA and the others are expected to do the same. Some of these states are Maharashtra, Gujarat, Bihar, Madhya Pradesh, Uttar Pradesh, Odisha, Andhra Pradesh, etc and union Territories like Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli and Andaman & Nicobar Islands.
Categories of projects under RERA
- Residential and Commercial projects.
- Land area measuring more than 500 squaremeters or eight floor apartments.
- Before commencement of RERA Act, projects without Completion Certificate.
- Projects those are only for the purpose of repair, renovation, improvement which does not involve selling, marketing, advertising, or new allotment of any plot, building or apartment will not come under RERA Act.
Information required by RERA from builders
- Number, carpet area and type of apartments/units.
- Agreement from affected allottees for any alteration/addition.
- Updation of RERA official website with details, including pending approvals and unsold inventory.
- Time frame of Project completion.
- No fake statements or false commitments in advertisement.
- No random cancellation of units by promoter.
Key Features of RERA ACT
- Improved Oversight of Projects: Subsequent to ratification of this act by an individual state, a State Real Estate Regulatory Authority will be set up. This state-level authority would be empowered to oversee all commercial and residential realty transactions in the state and also provide redress to the wronged parties on a case to case basis. The State Real Estate Regulatory Authority will also have the power to enforce punishment and fines on those who do not follow the new rules and regulations.
- Increased Transparency: As per the RERA Act, real estate developers are mandatorily required to deposit 70% of the funds allocated for project development into a designated bank account. Each project will have a separate dedicated account so that the funding for one project is not diverted to another by the developer. Additionally, it is now mandatory for the developer to provide all pertinent project information including plans, layout, approvals, sub contractors’ list, timelines etc. such that it can be easily accessed by customers as per their requirement.
- Clear Legal Definitions: Prior to implementation of the RERA Act, it was common practice to advertise size of property on the basis of super-built area. The super-built area did not have a legal definition and it often misled home-buyers. Now, project information will be provided based on the carpet area, which has been legally defined in the law making it easier for home buyers to evaluate properties.
- Redress for Project Delays and After Sales Service: Before the RERA Act was introduced, project delays often led to losses in terms of missed tax benefits or delayed tax benefits, which will now have to be borne by the developer instead of the home buyer. This translates into the developer being liable to pay the interest incurred on a home loan being serviced by the buyer for a property whose possession has been delayed. Moreover, buyers can now legally demand after sales services from the developer for project deficiencies that are recognized within one year of property handover.
- Quantifying the Tax Benefit Losses due to late Property Handover: The tax benefits available in case you apply for a home loan and get it approved are available in two categories – Section 80C and Section 24 of the IT Act, 1961. The section 80C tax benefit is related to the home loan principal payment which is capped at Rs. 1.5 lakhs annually. Section 24, on the other hand, covers all the interest payment benefits of the loan and features a cap of Rs. 2 lakhs annually.
Tax Savings under RERA Act
Let’s illustrate the potential tax savings generated under Section 24 with an example:
- Home Loan Principal = Rs. 75 lakhs
- Interest Rate = 8.5%
- Loan Tenure = 20 years
- Total Interest Payable over loan Tenure = Rs. 81 lakhs (approx.)
Table 1. Potential Tax Savings Benefits Under Section 24*
|Total interest payable over loan tenure||Section 24 Benefits||Potential Tax Savings Under Section 24 over loan tenure (20 years)|
|Rs. 81 lakhs (approx.)||Max. Rs. 2 lakhs annually||(Rs. 2 lakhs each year for 17 years) + Rs. 2.81 lakhs (for the remaining 3 years) = Rs. 36.81 lakhs|
*The facts and figures in the table are illustrative and subject to periodic change based on key factors.
However, these potential savings will be available to you only in case you receive possession of the house within three years. Otherwise, if the developer delays possession by a period exceeding 3 years, these potential tax saving benefits would not have been available to you. Now with the implementation of the new RERA Act, the developer is liable to pay for any home loan tax benefits that you are unable to receive due to late delivery caused by project delays.
Also Read: DDA Housing Scheme
Documents Required for RERA
- PAN Card of the builder.
- ITR of last 3 years and the balance sheet of the builder.
- Builder must clarify about the apartment (carpet area, number of floors, parking space).
- Declaration by the builder of having legal title of the land with proof.
- Details of the land (rights, title, mortgage)
- If the builder is not the owner of the land, the consent letter of the actual owner with documents will be required
- Details of the project (location, sanctioned plan, layout plan)
- Ownership documents (proforma of allotment letter, agreement of sale)
- Information of the persons involved (Architects, Engineers and others)
What is a RERA act?
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act to protect the interests of home loan buyers and also increase the investments in the real estate industry. The prime objective of RERA is to provide relief to the home buyers from the malpractices of biased property developers.
What is RERA certificate?
As RERA is all effective now, ongoing projects which have not received the occupancy certificate from local authorities will come under the purview of RERA. So these ongoing projects need to receive this occupancy certificate at the earliest which is also termed as RERA certificate.
What is RERA banking?
Under the RERA Act, any developer will need to maintain minimum 70% of money collected from home-buyers in a separate account.
What is the impact of RERA?
RERA has recently completed once year post its implementation. The impact of RERA has differed from state to state but has impacted in several ways like increased project cost, rise in capital cost, increased project’s launch time and initial blocking.
What is RERA Approval?
RERA is established in every state to provide speedy dispute redressal and to be a part of this adjudicating body is getting relieved from all hassles related to projects and related malpractices by the builders or property developers.