Overview of RERA for Promoters

Promoters are developers or builders responsible for constructing high-rise buildings and selling them to homebuyers. With the increasing number of complaints against promoters, the Real Estate Regulatory Authority (RERA) was introduced by the Government of India to establish guidelines that promoters must follow to legally construct and sell properties.

Over the past decade, homebuyers have faced multiple issues, including delayed possession, deviations from agreed project plans, and financial mismanagement by promoters. Many promoters have misused buyers' funds, leading to distrust in the real estate sector. RERA, established under the Real Estate (Regulation and Development) Act, 2016, aims to eliminate loopholes and create a transparent and accountable system for real estate transactions. The government's intervention was crucial, as declining trust in real estate developers was impacting investments and economic growth.

Since RERA's implementation in 2016, the real estate sector has become more transparent and reliable.

RERA defines a promoter as any individual or entity responsible for constructing or converting a building into apartments, selling such apartments, or developing land for real estate projects. This definition encompasses all aspects of construction, including new developments, conversion of existing buildings, commercial projects, land plotting, and estate development, even when conducted by an individual holding power of attorney from the landowner.

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Benefits of RERA

Accurate Project Details
During the development phase, builders promote their projects by highlighting various features and amenities. Under RERA, no changes can be made to the approved plan without the buyer's consent. If a developer is found guilty of violating this rule, they may face a penalty of 10% of the project's cost or imprisonment for up to three years.

On-Time Delivery
Developers often make false promises regarding project completion dates but rarely deliver on time. RERA enforces strict regulations to ensure construction progresses as scheduled, and flats are delivered within the agreed timeline.

All Clearances
Builders often attract buyers with lucrative discounts, leading customers to overlook necessary approvals. Delays in obtaining clearances can result in postponed possession. RERA ensures that developers secure all required approvals before selling flats.

Booking Amount
The advance payment required from buyers has been reduced from 20% to 10%. This amount must be paid only after registering the sale agreement with the developer. The agreement can be terminated only if the buyer defaults on payment three times, with a 15-day notice period given before termination.

No Promotion Without RERA
Promoters cannot advertise or market any project without registering it under RERA. Additionally, all advertisements must display the RERA registration number.

Functions and Duties of Promoters in the Real Estate Sector

• The promoter must register their proposed project with RERA.
• After registration, the promoter is required to create a webpage and display project details on the RERA website to make information publicly accessible.
• The promoter cannot advertise or offer the project for sale without registering it under RERA.
• At the time of booking and issuing the allotment letter, the promoter must provide certain documents, such as sanctioned plans, layout plans, and specifications approved by the competent authority.
• The promoter must clearly specify the phase-wise timeline for project completion, including provisions for community infrastructure such as water, sanitation, and electricity.
• The promoter is required to obtain the completion certificate and occupancy certificate from the relevant authority as per local or applicable laws and make them available to individual allottees or the association of allottees.
• If the project is developed on leasehold land, the promoter must obtain the lease certificate, specify the lease period, ensure all dues and charges related to the leasehold land are paid, and provide the lease certificate to the association of allottees.
• In case of failure to deliver possession on time, the promoter must refund the amount received from buyers.

Promoter Registration Under RERA Act

Promoters must apply for registration with RERA. This application should be submitted to the respective RERA authority within three months of RERA being implemented in that state.

Along with the application, a promoter must provide personal and project details. Additionally, reports on projects launched in the last five years must be submitted. This ensures that RERA maintains an official record of all documents, which will be made public and uploaded on the RERA India website along with the promoter's photograph.

If one examines the laws of RERA, it becomes clear that promoters who comply with the regulations will not face any difficulties in obtaining registration. In fact, this system allows ethical promoters to stand apart from those engaging in malpractices. Previously, many reputable promoters suffered due to the misconduct of others. The RERA authority is also required to act proactively—if it fails to approve or reject an application within a month of submission or does not provide a valid reason for rejection, the promoter will be automatically registered under RERA.

Once registered, all promoter details will be uploaded to the RERA website. Promoters will also receive a login ID to update project details for public awareness. A list of defaulters will also be published on the website, ensuring promoters have no option but to comply with regulations.

This system now makes it easier to distinguish credible promoters from non-compliant ones. While this may seem like a basic measure, its impact is significant, as homebuyers can now trust developers with government certification. This benefits promoters as well, as they can focus on delivering quality homes without concerns about government approvals. For smooth registration, promoters can seek assistance from RERA consultants who provide guidance throughout the process.

New Rules Under RERA That Promoters Should Be Aware Of

Rigidity in Change of Plan
A promoter has the authority to change a registered project's plan; however, strict regulations govern such modifications to ensure transparency and buyer protection.

Safekeeping Funds
Promoters must now keep at least 50% of the funds generated through house sales in a dedicated project account. This measure enhances buyer trust by eliminating delays due to financial mismanagement and preventing fund shortages.

Functions of a Promoter
The responsibilities of a promoter have increased. Promoters must now provide buyers with all necessary documents before signing an agreement. Until a local governing body is established, the promoter is responsible for delivering the promised services.

Who Needs to Apply for RERA?

• The Act applies to both commercial and residential real estate, including plotted developments.
• All private and commercial projects exceeding 500 square meters or more than eight units/apartments must register with RERA, ensuring even small-scale developments comply with the law.
• Ongoing projects without a Completion Certificate must also register with RERA within three months.
• Real estate agents involved in selling or acquiring properties must obtain prior RERA registration under the respective state laws. The RERA registration certificate is valid across the entire state or union territory.
• Applications for RERA registration must be approved or rejected within 30 days of submission.
• Failure to apply for RERA registration can result in a penalty of 10% of the project cost or imprisonment for up to three years.