Prestige Park Grove

RERA ACT for Developers and Investors

An upcoming development in Whitefield is called Prestige Park Grove.

Everybody wants to purchase a home. Although real estate costs continue to be high in relation to income levels, not everyone can afford to buy a home.

Even worse, although there used to be individual criteria for each developer or builder, there are now none. Every builder had their own set of procedures, and they all designed the builder-buyer agreement to their own advantage.

The rights of the average person investing their entire life savings in real estate are severely constrained. The government passed the RERA Act to defend the rights of homebuyers and make sure that builders and developers do not take advantage of them.

Why does RERA exist?

The Real Estate Regulations Act (RERA), which was passed in 2016, was created to safeguard homebuyers' interests. RERA's primary goal is to protect buyers from dishonest building practises.

Real estate transactions will be more transparent because to RERA's stipulation of specific building and development standards.

It has set particular laws and regulations that all developers and builders must abide by and has granted homebuyers a number of rights.

Additionally, each state must set up a Real Estate Authority and an Appellate Tribunal in accordance with the RERA Act. Property buyers may lodge a complaint with this organisation if the builder or developer commits an error.

Benefits of RERA ACT Standard carpet size:

The carpet area that went into determining a home's pricing was not previously mentioned. Varying builders/developers assigned different carpet area estimates.

The carpet area for the same flat might be estimated by one builder at 1500 square feet and by the other at 1400 square feet.

As there was no established method for calculating the Carpet Area, this used to occur. As opposed to this, the RERA Act makes clear that all builders and developers must use the same formula to determine carpet area.

The term "carpet area" refers to the net useable floor area of an apartment, excluding portions covered by exterior walls, regions below services shafts, exclusive balconies or verandas, and exclusive open terraces, but including the area covered by the interior partition walls of the apartment.

This would introduce standardisation in the calculation of Carpet Area because the idea of Carpet Area has been rigorously developed.

The majority of developers base their fees on carpet area, which has a direct effect on the cost of real estate. Builders calculate a property's cost using the formula below:

Property Cost = Carpet Area x Rate per Square Foot

The Carpet Area used to be overstated by builders, driving up the cost of the property as a result. Developers won't be able to modify the computation of Carpet Area in order to artificially raise costs, nevertheless, as the procedure for doing so has been distinctly established by RERA.

Interest rate for default:

If the buyer defaults on payment or the builder fails to complete the project, all parties are required to pay interest at the same rate.

In the past, the builder used to receive a lower interest rate from the home buyer if the builder delayed giving the buyer possession of the property, and the buyer used to give the builder a higher interest rate if the buyer defaulted.

There was no equivalent interest payment between the two parties. Both parties must now pay the same interest rate, as stated plainly under the RERA Act.

Reduces the Risk of Bankruptcy for a Developer:

A developer typically has several projects going at once. Previously, contractors were permitted to move funds from Project A to Project B's building.

This is no longer viable because the builder must now deposit 70% of the project's revenue in a separate bank account as a result of the implementation of RERA. A civil engineer, an architect, and a chartered accountant in good standing must all certify the project's completion before the owner can withdraw money from such an account.

The funds cannot be utilised for other initiatives or objectives; therefore, they will only be used for the purpose for which they were raised.

There have been instances in the past where a builder obtained money from house buyers with the intention of constructing their residences, but the money was afterwards utilised for other purposes. They were unable to complete the building because they eventually declared bankruptcy.

The money won't be wasted because it can only be used for what it was intended, and it will be used to finish the project on time.

The following rights are available to the buyer in the case that the vendor makes a false promise:

The buyer has the right to cancel the project and get a full refund of any money paid in advance or otherwise, along with interest and compensation, if the builder's obligations and the actual project differ.

Before entering into a selling agreement, the builder may demand an advance or application fee equal to up to 10% of the price of the apartment, villa, or other property.

Rights of the Buyer in the Event of a Defect After Possession:

Within five years of taking ownership of the apartment, if a structural issue or a flaw in the builder's work, quality, provision, or service is found, it will be fixed free of charge within 30 days.

The buyer is entitled to reimbursement if the builder doesn't fulfil these duties.

The buyer's rights and possession hold-up

If the builder doesn't finish the project by the deadline, the customer has the following options:

can cancel the project, in which case he would be entitled to a full refund plus interest from the due date of completion until the money was returned.

If he continues to work on the project until it is finished, he is entitled to compensation as well as interest from the project's due date until it is really finished.

Let's say the project wasn't able to completion on 31.3.2023 as it was intended to. You have until January 1, 2023 to leave the project as a result. If you decide to leave the project, you will be entitled to interest starting on January 1, 2023 until the payment is made.

If you don't abandon the project and it is finished on 31-3-2024, you will be entitled to interest each month from 31-3-2023 to 31-3-2024.

In the event of a title defect, the buyer is entitled to the following:

If you discover a problem with the property's title after you've taken possession of it, you can file a claim for reimbursement against the builder. There is no deadline, therefore you are not required to find the problem right away.

Informational freedom:

The buyer will have access to all project data, including the design of the plan, the execution strategy, and the progress of each step of completion.

Establishing a Grievance Resolution Authority:

The state agency established by RERA, which will have jurisdiction over all complaints, can receive any complaint against the builder. If you don't agree with the ruling, you can appeal it to the Appellate Tribunal, which will either determine your case within 60 days or, if that's not possible, will explain why it didn't.

Before an appeal to the Appellate Tribunal can be heard, the builder must deposit at least 30% of the fine, or whatever higher percentage the Appellate Tribunal decides, or the full amount that must be paid to the allottee, including interest and any compensation that may have been imposed on him, if any, or both, depending on the situation.

Role of RERA in a Situation

To the exclusion of the following, RERA is applicable to all developers and builders:

when the developer obtained a completion certificate before RERA went into effect and the project won't require more than eight apartments or 500 square metres of land.

Any apartment, plot, or building that is being marketed, advertised, or sold with the intention of renovating, repairing, or developing it is not covered by this.

Other Things to Consider

Rental properties are unaffected by RERA; only real estate development is. All residential and commercial projects, including buildings, offices, and retail establishments, are subject to RERA. RERA's scope of application RERA is applicable to all builders and developers, with the following exceptions: To guarantee that every family has their own home, the government established the Pradhan Mantri Awaas Yojana, which offers a financial subsidy for home purchases.

RERA ACT advantages Standardized carpet area:

Before, the carpet area used to determine a home's price was not specified. Each builder/developer computed the Carpet Area in a unique way.

One builder would estimate the carpet space for the same apartment to be 1500 square feet, while the other would estimate it to be 1400 square feet.

This used to occur since there was no established formula for determining the Carpet Area. Contrarily, the RERA Act makes clear that this is the case, and all builders and developers must calculate carpet area using the same technique.

"Carpet area" refers to an apartment's net usable floor area, which excludes regions protected by exterior walls, spaces beneath utilities shafts, exclusive balconies or verandas, and exclusive open terraces, but which includes the area protected by the interior partition walls of the apartment.

Given that the definition of Carpet Area has been properly defined, this would bring about standardisation in the computation of Carpet Area.

The majority of developers base their fees on carpet area, which has a direct effect on the cost of real estate.

Builders use the following formula to determine the cost of a property:

Carpet Area x Rate per Square Foot equals Property Cost.

In the past, builders would exaggerate the Carpet Area, driving up the cost of the property. However, because the method for determining Carpet Area has been clearly set by RERA, developers will not be allowed to manipulate the calculation of Carpet Area in order to increase prices.

Interest rate in case of default

All parties shall pay the same rate of interest in the event of Buyer's default in payment or Builder's failure to complete the Project.

Previously, the interest paid by the builder to the home buyer was lower if the builder delayed possession of the property, while the interest paid by the buyer to the builder was higher if the buyer defaulted.

Between the two parties, there was no equivalent interest payment. The need that the interest rate be the same for both parties is now expressly stated in the RERA Act. Reduces the Risk of a Developer Going Bankrupt:

A developer typically has several projects under construction at once. Previously, builders were allowed to transfer money made from Project A to Project B's building.

This is no longer permitted because the builder is now compelled to deposit 70% of the project's revenue in a different bank account as a result of the introduction of RERA. He is only permitted to withdraw funds from such an account when the project has been completed and approved by a practising chartered accountant, civil engineer, and architect.

The money will only be used for the reason for which it was raised because it can no longer be utilised for other projects or purposes.

There have been cases in the past where a builder collected money from home owners to build their homes but then used the earnings for other uses. They later declared bankruptcy and were unable to finish building the property.

The funds won't be misappropriated because they can only be used for the purpose for which they were raised, and they will be put to use for that purpose, guaranteeing that the project is finished on schedule.

Buyer's Rights Against False Promises:

The buyer has the choice to leave the project if the builder's duties and the actual project are different. In this situation, he is entitled to a complete refund of any money paid in advance or otherwise, along with interest and compensation.

The builder may demand up to 10% of the price of the apartment, villa, or other property as a down payment or application fee prior to entering into a selling agreement, as applicable.

Right of the Buyer in the Event of a Defect After Possession:

Within five years of taking ownership of the apartment, if a structural flaw or a flaw in the builder's work, provision, or service is discovered, the flaw will be fixed without charge and within 30 days.

The buyer is entitled to compensation if the builder doesn't accomplish this.

Rights of the buyer Neglected possession:

The following choices are available to the buyer if the builder doesn't complete the project by the deadline:

to abandon the project, in which case he will be given a complete refund with interest calculated from the required date of completion until the amount is paid back.

Continue working on the project until completion, at which point he will be eligible for payment and interest accrued from the project's due date until it was really finished.

For instance, let's say the project wasn't able to be finished on 31.3.2023, as planned. You can therefore cancel the project up until January 4, 2023. You are entitled to interest starting on January 1, 2023 and continuing until the payment is made if you decide to abandon the project.

In the event that you decide not to abandon the project and it is finished on 31-3-2024, you will be eligible to receive interest payments every month from 31-3-2023 to 31-3-2024.

The following rights belong to the buyer in the event of a title defect:

After acquiring ownership of the property, you have the right to sue the builder for damages if you find a flaw in the title. It is not time-barred, therefore you are not required to identify the error within a specific window of time.

Knowledgeable right:

The buyer will have access to all project data, including the execution plan, plan layout, and stage-by-stage progress.

Development of a Grievance Redress Authority:

Any complaint against the builder can be made to the state body established under RERA, which would have the authority to handle all complaints. If you disagree with the decision, you may file an appeal with the Appellate Tribunal, which will decide your case within 60 days or, if that is not possible, will note the reasons why it was unsuccessful.

Before the appeal is heard, the builder must deposit at least 30% of the fine, or any higher percentage that the Appellate Tribunal may decide, or the full amount that must be paid to the allottee, including interest and any compensation that may have been imposed on him, if any, or both, depending on the situation.

Applicability of RERA

RERA is applicable to all builders and developers, with the exception of the following:

When the promoter got a completion certificate prior to the implementation of RERA, the amount of land being developed is under 500 square metres, or the number of apartments being built is under eight.

without promoting, advertising, or selling any unit, land, or building, for the purpose of renovation, repair, or redevelopment.

Additional Factors

RERA does not apply to renting out real estate; it only covers real estate development.

RERA applies to all housing and business projects, including buildings like shops and offices.

The government has introduced the Pradhan Mantri Awaas Yojana, which offers a financial subsidy for home purchases, to ensure that every family has their own home.

Benefits of RERA ACT

Standardized carpet area:

Previously, the carpet area used to compute the price of a home was not defined. The Carpet Area was calculated differently by each builder/developer.

The carpet space for the same flat would be calculated as 1500 square feet by one builder and 1400 square feet by the other.

Because there was no standard formula for calculating the Carpet Area, this used to happen. The RERA Act, on the other hand, has explicitly specified this, and all builders/developers will use the same formula to calculate carpet area.

"Carpet area" refers to an apartment's net useable floor area, excluding regions covered by exterior walls, areas under services shafts, exclusive balcony or verandah area, and exclusive open terrace area, but including the area covered by the apartment's internal partition walls.

This would introduce standardisation in the computation of Carpet Area because the definition of Carpet Area has been precisely specified.

Because most developers charge on the basis of carpet area, this has a direct impact on real estate pricing. The following is how a property's price is calculated by builders:

Property Cost = Carpet Area x Rate per Square Foot

Previously, builders would overstate the Carpet Area, causing the price of the property to rise as well. However, given that RERA has clearly established the technique for calculating Carpet Area, developers will not be able to manipulate the calculation of Carpet Area in order to raise prices.

Interest rate on default:

In the event that the buyer defaults on payment or the builder fails to complete the project, all parties must pay the same rate of interest.

Previously, if the builder delayed possession of the property, the interest paid by the builder to the home buyer was lower, and if the buyer defaulted, the interest paid by the buyer to the builder was higher.

There was no interest payment equivalence between the two parties. The RERA Act now clearly states that the interest rate for both parties must be the same.

Reduces the Chances of a Developer Going Bankrupt:

A developer normally has numerous projects under construction at the same time. Previously, builders were permitted to move cash generated from Project A to Project B's building.

This is no longer allowed since, with the implementation of RERA, the builder is required to deposit 70% of the project's revenue in a separate bank account. He can only withdraw money from such an account once the project is completed and certified by a civil engineer, architect, and a practising chartered accountant.

Because the funds can no longer be diverted to other projects or utilised for other purposes, they will be used only for the purpose for which they were raised.

There have been instances in the past where a builder gathered funds from home buyers for the purpose of constructing their homes but then utilised the proceeds for other purposes. They later went bankrupt and were unable to complete the property's construction.

Because the funds can only be used for the purpose for which they were raised, they will not be diverted and will be utilised for the purpose for which they were raised, ensuring that the project is completed on schedule.

Buyer's Right in Case of False Promises:

If the builder's obligations and the actual project differ, the buyer has the option to withdraw from the project, in which case he is entitled to a full return of any money paid in advance or otherwise, plus interest and compensation.

Before engaging into a sale agreement, the builder may take up to 10% of the cost of the apartment, villa, or other property as an advance or application fee, as the case may be.

Buyer's Right in Case of Defect After Possession:

If a structural defect or a defect in craftsmanship, quality, provision, or service is detected within 5 years of the apartment's possession, the builder will rectify the defect at no additional cost within 30 days.

In the event that the builder fails to do so, the buyer is entitled to compensation.

The buyer's rights Delay in possession:

If the builder fails to finish the project by the deadline, the buyer has the following options:

To withdraw from the project, in which case he will receive a full refund plus interest from the due date of completion till the sum is reimbursed.

Continue with the project until it is done, in which case he will be entitled to compensation as well as interest from the project's due date until it is really completed.

For example, suppose the project was meant to be completed on 31-3-2023 but was unable to do so. So you have till 1-4-2023 to withdraw from the project. If you opt to leave the project, you will be entitled to interest from January 1, 2023 until the payment is received.

If you decide not to withdraw from the project, and the project is completed on 31-3-2024, you will be entitled to interest every month from 31-3-2023 to 31-3-2024.

In the event of a title defect, the buyer has the following rights:

If you discover a fault in the title of the property after you have taken ownership of it, you can sue the builder for compensation. It is not time-barred, which means you do not have to find the flaw within a certain amount of time.

Informational right:

The buyer will have access to all project information, including the plan layout, execution plan, and stage-by-stage completion status.

Establishment of a Grievance Redress Authority:

Any complaint against the builder can be brought to the state body established under RERA, which will have the jurisdiction to resolve all complaints. If you are unhappy with the order, you may submit an appeal with the Appellate Tribunal, which will resolve your case within 60 days or, if that is not possible, will record the reasons for the failure.

If the builder wishes to appeal the Authority's order to the Appellate Tribunal, he must deposit at least 30% of the penalty, or such higher percentage as the Appellate Tribunal may determine, or the total amount to be paid to the allottee, including interest and compensation imposed on him, if any, or both, as the case may be, before the appeal is heard.

RERA's Applicability

Except for the following, RERA applies to all builders and developers:

Where the promoter has received a completion certificate before the introduction of RERA and the area of land proposed to be developed does not exceed 500 sq metres or the number of flats scheduled to be constructed does not exceed 8.

For the purpose of renovation, repair, or redevelopment that does not include the promotion, advertising, or sale of any apartment, plot, or building.

Other Considerations

RERA only applies to property development and not to property rentals.

All residential and commercial projects, including stores, offices, and structures, are covered by RERA.

To guarantee that every family has their own home, the government has launched the Pradhan Mantri Awaas Yojana, which provides a loan subsidy for home purchases.