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Tata Capital > Blog > Loan for Home > Difference between a RERA registered builder and others

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Difference between a RERA registered builder and others

Difference between a RERA registered builder and others

There was a time when the real estate industry was in the hands of real estate promoters, developers, builders, and property brokers. Typically, these promoters would plan a real estate project and offer it to customers through various means including glitzy advertisements and unbeatable offers.

Once hooked, customers would pay the booking amount and then get stuck with the builder till the property was handed over to customers. Many a time the builders would delay the project by giving some outrageous reasons. That’s not all. Some of the unscrupulous promoters would indulge in unfair trade practices that included

  • Charging on super built area (which included common areas)
  • Deviating from the sanctioned plan
  • Profiteering from the rise in property prices by cancelling original allotment despite having received the booking amount
  • Collecting dubious charges
  • Indiscipline in financial management – diversion of funds

All customers could either wait or approach the courts to get their issues sorted out.

It was not just the customers. In the absence of any regulation, the home loan market too was at the mercy of builders and they could convince financial institutions to offer home loans to buyers with attractive home loan interest rates.

Introduction of RERA

During the past few years the plight of property buyers received attention from the authorities and serious efforts were made to address the issue culminating in RERA. Perhaps, even the financial institutions offering home loans expressed their desire to have a regulator who could streamline the real estate sector. 

RERA is the acronym for Real Estate Regulation Authority. RERA owes its existence to the Real Estate (Regulation and Development) Act, 2016 enacted by the Indian Parliament to safeguard the interests of property buyers in the country. The Act came into effect on May 1, 2017. Each state is authorized to set up its own RERA.

The Act protects the interests of the buyer by making the promoters, developers and builders accountable for their actions. Some of the important provisions of the Act are as follows:

  • Separate account – the promoter will have to maintain a separate account for the project in which a minimum of 70% of the buyer’s money should be deposited. These funds can be used only for developing the project it is meant for.
  • Advance – promoters cannot seek more than 10% of the project cost as advance prior to signing the sale agreement
  • Original relevant documents of the project – these must be made available to the buyers for their scrutiny
  • Carpet area/super built area – the rates to be quoted should be on the basis of carpet area and not super built area
  • Solicitation – the project can be advertised only after registering with RERA. The advertisements should carry the RERA registration number
  • Transparency – the project details must be uploaded on the RERA website
  • Dispute resolution – any stakeholder involved in the project can raise a complaint with RERA. if dissatisfied with a RERA decision, it can be escalated to the Appellate Tribunal

As can be seen from the above, the RERA provisions aim at safeguarding the interests of the buyer. Besides, the Act makes the promoters more responsible and can even help them to complete their projects well on time. The Act thrives on transparency and timely completion of projects so that all parties can enjoy a win-win situation.

Registered builders vs. non-registered builders

Some of the major objectives of RERA include reforming the real estate sector, fostering transparency, accountability and discipline in terms of keeping promises made.

One of the important steps under RERA is to register the project with the authority in each state. The registered builders have many advantages that can include

  • Stamp of RERA approval as a badge of honour
  • Ready acceptance of RERA approved projects for housing loans by financial institutions such as housing finance institutions, banks and NBFCs
  • Preference from buyers to buy from builders with RERA approved projects
  • Possibility of commanding higher prices because of RERA approval
  • Uncertainties and delays are minimized under the RERA dispute resolution system
  • Availability of appeal process with a time limit of 60 days
  • Courts cannot intervene in RERA decisions  

On the other hand, the non-registered builders will have to face a diminishing market as more and more builders take the registration route. The disadvantages of not registering with RERA are several and they may include

  • Diminishing market for non-registered projects – can offer projects only on land less than 500 square meters in area and having less than 8 apartments
  • Can offer projects which have received completion certificates before introduction of RERA
  • Can offer projects which are for repair, renovation or redevelopment without involving any new allotment or publicity
  • Lack of funding avenues for buyers because financial institutions may not want to extend loans to the buyer of non-registered projects
  • Ineligible to participate in government schemes such as PMAY which provide interest subsidies to buyers
  • Builders will have to depend only on their reputation to market projects
  • Probably only courts can intervene in cases of dispute even though a buyer has the option to try and settle the dispute through RERA  

If the non-registered builders have projects that are not yet registered, it makes sense to register as otherwise they run the risk of operating in a vastly reduced demand scenario. Now that you know the benefits of owning your dream home from a RERA approved project, we suggest you contact Tata Capital to avail the all-important home loan at attractive home loan interest rates and realize your dream without any hitch. If you want to avail a home loan and need to talk to someone, you can get in touch with Tata Capital experts here.