Warranties under the RERA Act
The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted by the Indian government to safeguard the interests of homebuyers and to regulate the real estate industry. RERA establishes certain rights and warranties for homebuyers, and it imposes significant responsibilities on promoters (developers). The provisions under RERA specifically detail the promoter’s liability and warranties, aiming to bring accountability, transparency, and reliability to real estate transactions.
1. Understanding the Role of the Promoter under RERA
The term “promoter” under RERA includes builders, developers, contractors, and any person responsible for the development and sale of a real estate project. RERA requires promoters to fulfill their obligations in an efficient and timely manner, ensuring that the rights and interests of the allottees (buyers) are protected. The promoter’s liability extends beyond just constructing and delivering the project; it includes responsibilities for adhering to the agreed specifications, timelines, and addressing any structural defects that may arise.
2. Mandatory Warranties Provided by the Promoter
Warranty of Title: Section 11(4)(a) of RERA mandates that the promoter should have a legal title to the land on which the project is being developed. If the title is not clear or has any encumbrances, it must be disclosed. Any claims or losses that arise due to defective title will hold the promoter liable.
Warranty of Structural Quality: Under Section 14(3) of RERA, promoters are required to rectify any structural defects in the construction, including quality issues or deficiencies, within five years from the date of possession. If any structural defect is reported by the allottee within this period, the promoter must resolve it within 30 days at no additional cost to the allottee.
Adherence to Specifications: The promoter must complete the project according to the agreed layout, specifications, and amenities as mentioned in the sale agreement or advertisement. Any alteration without the buyer’s consent (except for minor modifications) is a breach of this warranty.
Warranty of Timely Possession: Promoters must hand over possession of the unit to the buyer within the stipulated time, failing which they may be liable for penalties. This warranty ensures that buyers are compensated for undue delays, which were historically common in real estate projects before RERA.
3. Liability of the Promoter under RERA
The liability imposed on promoters under RERA extends to penalties and interest payments if they fail to meet their obligations. This includes:
- Delay in Delivery: Under Section 18 of RERA, if a promoter fails to deliver possession as per the agreed timeline or is unable to complete the project, buyers have the right to withdraw from the project. In such cases, the promoter must return the amount invested by the buyer along with an interest rate as specified by the State’s RERA Authority. If the buyer chooses to stay with the project despite delays, the promoter is liable to pay interest for every month of delay.
- Non-Adherence to Approved Plans and Project Specifications: If the promoter deviates from the approved plans or fails to deliver the unit as promised, the buyer is entitled to seek compensation. The promoter must also inform allottees of any minor additions or alterations and must obtain prior consent from the allottees for major alterations.
- Defects in Title: If a defect in title arises after the sale of the property, the promoter is liable to compensate the buyer. RERA mandates that the promoter’s liability in title matters is without any time limit, adding another layer of security for the buyer.
- Liability for False Advertisement and Misrepresentation: RERA prohibits promoters from issuing false advertisements regarding project details. If a buyer decides to withdraw based on misleading information, the promoter is responsible for refunding the entire investment with interest and compensation as specified under the Act.
- Violation of Agreement Clauses: If the promoter violates any terms and conditions agreed upon with the buyer, the promoter can be held liable. Additionally, under Section 61 of RERA, the promoter may face penalties for non-compliance with the Act, which can be as high as 5% of the estimated cost of the real estate project.
4. Impact of RERA’s Warranties and Liability Provisions on Promoters and Buyers
RERA’s warranties and liability provisions have had a significant impact on both promoters and buyers:
- Enhanced Accountability: With clearly defined liabilities and strict penalties for non-compliance, RERA has instilled a sense of accountability among promoters. This has reduced the risk of delayed possession, misrepresentation, and unapproved project modifications.
- Transparency and Buyer Confidence: Buyers are now more confident investing in real estate, as RERA mandates that promoters must disclose project details, timelines, and title clarity, reducing the possibility of fraud and misrepresentation.
- Financial Security for Buyers: Promoters are now financially liable for delays, structural defects, or deviations, ensuring that buyers are compensated for any undue inconvenience or financial loss.
- Improved Real Estate Standards: RERA’s provisions have improved construction quality standards, as promoters are liable for structural defects and have to adhere to agreed-upon specifications, thereby fostering a more reliable real estate sector
5. Conclusion
The warranties and liability provisions of the RERA Act have revolutionized the real estate sector in India. By holding promoters accountable, RERA aims to make home-buying a secure and transparent process. The Act not only protects buyers from issues related to project delays, structural defects, and misrepresentation, but it also promotes the efficient and timely completion of projects. For promoters, RERA presents a framework within which they must operate transparently and responsibly, transforming the relationship between real estate developers and homebuyers in India.