Introduction and Importance of the Real Estate (Regulation and Development) Act, 2016

- The Real Estate (Regulation and Development) Act, often referred to as the RERA, was introduced by the Government of India in 2016.

- The primary objective of this legislation is to regulate the real estate sector and foster transparency, accountability, and efficiency in the various transactions involved.

- RERA was established with an intent to safeguard the interests of homebuyers while encouraging fair practices within the industry.

- To ensure transparency and accountability across the sector, the Parliament passed the RERA Act.

Key Objectives of RERA

- Providing transparency in the sale of properties including flats, apartments, plots, buildings, or any form of real estate project.

- Establishment of an adjudication mechanism to expedite dispute resolution.

- Ensuring the rights and interests of buyers and allottees within the real estate sector.

- Bridging the trust gap between buyers and promoters, involving the regulatory authority as an intermediary.

- As part of its functions, the Real Estate Regulatory Authorities, established under the Act, are required to maintain a web portal with comprehensive details of all registered real estate projects for public viewing.

Reasons Behind the Introduction of RERA

- RERA was introduced in response to a series of challenges that plagued the Indian real estate sector post-2012, such as unemployment, recession, low rental yield, inventory pile-up, and unclear taxation and arbitration procedures.

Scope and Impact of RERA

- RERA applies to both commercial and residential projects, including plotted development.

- It also applies to projects measuring over 500 sq. metres or those with more than 8 units.

- Additionally, it covers projects that lack a Completion Certificate prior to the commencement of the Act.

Advantages and Disadvantages of RERA

- RERA has been instrumental in building uniformity concerning carpet area, common areas preventing malpractices in layout alterations, agreement changes, and misleading information about brokers, architects and contractors.

- It stipulates timely delivery of booked office spaces or homes by the developers, failing which they are liable to strict compensation and imprisonment.

- The major disadvantages include non-application of rules to ongoing projects or those held up due to clearance issues.

- Government agency delays in approval and clearance can obstruct timely delivery.

- Small developers with projects less than 500 sq.m. are exempted from this Act and registration with the regulator is not mandatory for them.

Rights and Provisions for Home Buyers and Builders under the Insolvency and Bankruptcy Code (IBC)

- Under the IBC, home buyers are classified as Financial Creditors. Any money advanced by a homebuyer to a real estate project is considered a financial debt, making them a creditor under the IBC.

- The homebuyers have the right to initiate insolvency proceedings against a defaulting builder company under IBC, with certain conditions involved.

- In the liquidation stage, homebuyers are treated as unsecured financial creditors, putting them at the fourth position under the waterfall mechanism of Section 53 of the IBC.

Note: Understanding the functioning of the Real Estate (Regulation and Development) Act, 2016 (RERA) is essential for government exams such as the Civil Services Exam. This comprehensive guide provides you with detailed information about RERA, its objectives, the reasons behind its introduction, its scope and coverage, advantages and disadvantages, and the rights and provisions for homebuyers and builders under the IBC.