As per recent reports, the composite real estate price index of National Housing Bank, an initiative of the Ministry of Finance, for 50 cities in India grew by 3.9% in the financial year of 2018. This is mainly due to the emergence of RERA (Real Estate Regulatory Authority) and IBC, introduced by the Government of India, to help lower the concerns of homebuyers, brokers, etc.
What is the Real Estate Regulatory Authority?
Real Estate Regulatory Authority is a governing body set-up by The Real Estate (Regulation and Development) Act of the Parliament that was brought to action in 2016 to provide relief to homebuyers from the existing malpractices and discrepancies within the real estate sector of India.
According to this act, several committees have established across various parts of the country such as RERA Maharashtra, Delhi, Punjab, West Bengal, etc. The primary objective of these committees is to encourage transparency in the real estate industry and to keep all illegal activities in this sector under control.
The Central Government of India passed this act on 10th March 2016. However, the general rules of this Parliament Act were released in association with the Housing and Urban Poverty Alleviation Ministry on 31st October 2016. Every rule and regulation which belongs to the act under Section 84 is applicable to Lakshadweep, Andaman and Nicobar Islands and other Union Territories of India as well.
What is IBC?
In 2016, the Bankruptcy Law Reforms Committee of India framed the IBC or Insolvency and Bankruptcy Code in order to simplify all bankruptcy proceedings in India. The provisions of this insolvency resolution came into effect from 28th May 2016.
The primary objective of IBC is to ensure legitimate negotiation between two parties exchanging funds in the real estate sector. All rules and regulations under IBC apply to not only individuals but general and limited partnerships and companies as well.
Why are RERA and IBC important for the real estate industry?
Before the introduction of RERA and IBC, homebuyers were not provided with any protection as they were not segregated as financial creditors or operational creditors. With the emergence of Insolvency Law Reform committee, home loan borrowers were regarded as a financial creditor as per Section 5(8)(f) of IBC which states the following –
1. An amount that is raised from an allottee in a real estate project is regarded as an amount having the commercial effect of borrowing.
2. Both the terms – ‘allottee’ and ‘real estate project’ are to be referred from the RERA Act, 2016.
In order to know all about the RERA Act, you need to be aware of the several features of the same, which are essential for the legitimacy of the real estate industry in India.
These are –
• Transparency
Since the emergence of RERA registration, real estate developers are required to submit the official documents of all undertaken projects. Moreover, they cannot make any alterations in those projects without the consent of a homebuyer.
For example, when you are trying to invest in a property for rental yield, it is advised to maintain full transparency with your property developer.
• Security
Under this act, a portion of a homebuyer’s funds – a minimum of 70% – will be stored in a separate account which will be later provided to the builders for construction and related expenses. Moreover, builders are not eligible to ask for more than 10% of the property value as an advance payment during the property purchase agreement.
• Fairness
Real estate developers are not allowed to sell houses based on the super built-up area of the property but the carpet area of the same instead. Moreover, developers are required to repair any construction issue faced by a homeowner within 5 years of property purchase.
Hence, with the introduction of RERA and IBC, homebuyers can opt for home loan quickly since the process to avail a house is also minimised.
Financial institutions and reputed HFCs such as Bajaj Housing Finance Limited offer such loans at affordable interest rates. This NBFC also brings forth pre-approved offers that help in availing loans less time-consuming and easy. Check your pre-approved offer by providing your name and phone number.
Every property developer is required to let homebuyers know of the construction progress, offer essential information regarding the property if necessary, abide by the rules outlined by RERA Act and IBC.
It is advisable for buyers to check the cost of living when buying a home to avoid financial difficulties in the future.
Must Read:- Do you know about RERA and its impacton real estate?
