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RERA shall act as the principal regulator and its functions include protection of the interests of the stakeholders, accumulating data at a designated repository and creating a robust grievance redressal system. This is beneficial, as prior to May 1, 2017, the preferred redressal mechanism for the consumers was to approach consumer courts which was not only time consuming but also expensive.
Only when registration is completed and other approvals (construction related) are in place, can the project be marketed, thereby, ensuring that a wide range of information on the project is already available on RERA’s website before the buyer makes a commitment to purchase a flat. The litmus test is that promoters are not permitted to sell any properties prior to registration. Since marketing is prohibited, buyers will not find themselves in a situation where complete payment has been made but possession is being denied due to non-receipt of requisite approvals.
Reserve account: One of the primary reasons for delay of projects was that funds collected from one project, would invariably be diverted to fund new, different projects. To prevent such a diversion, promoters are now required to park 70% of all project receivables into a separate reserve account. The proceeds of such account can only be used towards land and construction expenses and will be required to be certified by a professional. This will ensure that promoters can no longer use the excuse of insufficient funds to stall construction of projects.
Continual disclosures by promoters: Lack of information regarding project completion is a common complaint amongst home buyers. After the implementation of the Act, home buyers will now be able to monitor the progress of the project on RERA’s website since promoters will be required to make periodic submissions to the regulator regarding the progress of the project. This is beneficial as consumers will now be privy to details of a project they are interested in on an ongoing basis.
Title representation: For most home buyers, it is impossible to carry out an independent due diligence to ascertain whether the promoter has a legitimate title (or the right to develop). Further, promoters invariably avoid making such warranties in sale agreements to avoid legal responsibility.
To prevent such abuse, promoters are now required to make a positive warranty on his right title and interest on the land which can be used later against him by the home buyer, should any title defect be discovered. Additionally, they are required to obtain insurance against the title and construction of the projects, proceeds of which shall go to the allottee upon execution of the agreement of sale.
Two-third consent: Any change in the sanctioned and layout plan of the land, by the promoter, will now require the prior written approval of at-least two-thirds of the allottees and with respect to a specific apartment will require the prior approval of the concerned owner. This is highly beneficial as there have been complaints in the past, that promoters have converted common areas into new towers without seeking due consent. Further, promoters are not allowed to transfer or assign their majority rights and liabilities under the project without obtaining prior written consent from two-thirds of the allottees.
Standardisation of sale agreement and defects liability: The Act prescribes a standard model sale agreement to be entered into between promoters and homebuyers. Typically, promoters insert punitive clauses against home buyers which penalised them for any default while similar defaults by the promoter attracted negligible or no penalty. Such penal clauses could well be a thing of the past and home buyers can look forward to more balanced agreements in the future.
Penalty: To ensure that violation of the Act is not taken lightly, stiff monetary penalty (up to 10% of the project cost) and imprisonment has been prescribed against violators.