Are the provisions under RERA 2016 Act sufficient for ongoing projects?

The much maligned real estate sector of India has exploited the home buyers to a large extent. To protect the interest of the buyers, Real Estate Regulatory Authority is being formed. The RERA 2016 bill was passed by the parliament in March 2016. The Ministry of Housing has updated the draft rules for RERA India. Based on ground realities, the ambit of this bill not only focuses on new projects but also on ongoing projects. The ongoing projects which have not yet received the completion certificate from the government, shall now be liable to get the project registered under RERA within three months of time. But the question which arises here is, how certain provisions of the act will match with the ongoing projects.

  • One of the provisions under draft rules mentions that a developer has to maintain an escrow account of 70% for every project. This means that the 70% of money of the project to be developed cannot be used for other purposes. But what if a builder has already received 70-100% from the sale proceeds and only deposits 70% of the money to be received. It isn’t necessary that the cost of the project will be covered in that 70%. The provision should have made it compulsory for the developers to calculate the cost of the project and then deposit the amount.
  • Another provision in draft rules states that the promoter is required to state the date of completion of project to ensure on time delivery, while registering an existing project, a promoter might just issue a completion date as per the date of registry, which in turn leads to delayed possession. The provision should mention that the completion date should be in compliance with the date as promised to the buyers.
  • Another rule in draft explains that a developer needs to define the layout plan of each project and the layout of any project can be changed only with the consent of two-thirds of buyers. In case of existing projects, a developer might have changed the layout plan earlier and gets the latest layout approved under RERA Act.

A coherence needs to be created between the rules for existing and new projects to harness the right benefits of RERA and bring transparency in this unregulated sector.

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