India’s housing demands have increased exponentially since the pandemic. The work-from-home option and the rise of freelance jobs have further boosted these demands. There is a growing interest in real estate in small cities like Raipur and Dehradun. SBI expects the home loan market will double in the next five years. So how does RERA help with the boom in India’s real estate?
RERA stands for Real Estate Regulatory Authority. The Indian government established this regulatory body for real estate in 2016 under the RERA Act. It aimed to regulate the market and ensure transparency in the real estate business. For instance, one could launch real estate projects only after receiving approvals from the concerned regulatory body.
Before 2016, there was very little regulation in the real estate market. It created problems for anyone involved in the business: real estate agents, builders, home loan agents, and home buyers. The Indian government hoped to solve these issues and boost the Indian real estate market with RERA.
The RERA ACT: What is it?
The Real Estate Regulatory Authority Act, or the RERA Act, came into force in 2016. Under this Act, the Indian government established mandatory rules for the Indian realty sector. The objectives of the RERA Act are as follows:
- To promote and maintain transparency in the Indian real estate sector.
- To protect the interests of prospective home buyers.
- To establish pan-India standardization.
One of the immediate goals of RERA was to boost investments in the real estate sector. India’s real estate market had several acts of fraud. The carpet area calculation, for instance, adds transparency to the deal. Home buyers are no longer at the mercy of developers.
The RERA Act aimed to reduce real estate fraud and boost the morale and confidence of investors. Real estate agents must register with the Real Estate Regulatory Authority to facilitate transactions. The pan-Indian standardization will also encourage foreign real estate investors.
RERA put the onus on the builders and sellers by demanding accountability.
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Benefits and highlights of the RERA Act
The Real Estate Regulatory Authority must dispose project applications within two months. It seeks to create a grievance redressal system and protect the stakeholders’ interests. Additionally, the Real Estate Appellate Authority (REAT) will act as a forum for appeals.
Registration is now compulsory for real estate projects. The RERA act states that any project exceeding 500 square meters or including more than eight apartments must register with state authorities. Developers must also register existing projects without completion and occupancy certificates. They also need to provide the following details during RERA registration:
- status of land
- completion schedule
- details of involved promoters
Furthermore, the developer must register their project successfully and receive the necessary approvals before marketing it.
Separate reserve account
Developers must park 70% of the receivables for the project into a separate reserve account. Why is this move revolutionary for home buyers? Before this, developers had the freedom to divert funds to new projects. It would lead to delays in the project completion schedule. The funds in the reserve account can be used only for land development and construction. It will also need certification from a professional.
Penalty and complaints
A homebuyer may register their complaint with the Real Estate Regulatory Authority. To ensure compliance, RERA may charge a penalty of up to 10% of the project cost. The violators may also serve prison time if found guilty.
Sale agreement standardization
RERA prescribes a standardized sale agreement for both home buyers and developers. It allows the home buyer to have more say in the sale agreement. Before the Act, developers could charge penalties from the home buyers in case of defaults. The standardization model lends balance to the sale agreement.
Frequent disclosures from promoters
The RERA act makes it easier for home buyers and home loan agents to monitor the progress of the real estate project. Promoters must frequently update the regulator regarding the property. Moreover, they must also secure insurance against the construction and title. The allottee receives the proceeds of this insurance after the execution of the sale agreement.
The promoters must be forthcoming about their interests and title on the land. If the home buyer finds discrepancies in the title, they can use the promoter’s favorable warranty to hold the latter accountable.
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RERA’s impact on real estate
Real estate agents must complete a registration process under RERA. Additionally, RERA must approve a project before it gets the green signal. It increases the project launch time but lays the groundwork for faster dispute resolution. Since agents must adhere to best practices, there is minimum litigation involved.
RERA’s verification process instills trust in investors. It encourages organized funding and has helped consolidate the real estate sector in India. For instance, RERA directly impacts real estate investment for NRIs. Developers also have a chance to rope in higher funding for their projects.
Overall, the Real Estate Regulatory Authority benefits every party involved in the transaction. It will lead to both consumer and investor confidence.
How does RERA impact home loans?
RERA affects both home loan rates and purchases. With a regulatory body in place, home loan buyers can rest assured about the project. Moreover, it directly impacts the prices of homes, thereby impacting home loan rates. A home loan agent has to verify the RERA compliance before disbursing the loan. The verification also allows for faster disbursal because of the state RERA regulation.
RERA is a boon for those who want to become home loan agents. It has made verification easier for a home loan agent. The standardized sale agreement allows faster home loan disbursal. Since there is an increase in overall interest for home loans, it will also affect the demand for home loan agents.
Conclusion: More transparency, faster transactions
India’s real estate has seen a spike in its growth. It continues to rise thanks to India’s flourishing middle class. As the demand for real estate increases, it becomes necessary to establish compliance. RERA has reduced the overall risk of builder insolvency. It has helped speed up the transaction rate in real estate. These changes prove that the Real Estate Regulatory Authority is a blessing for all parties involved in the real estate sector.