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The Real Estate (Regulation & Development) Act, 2016 (RERA) was enacted by the Indian Parliament in 2016 to regulate the real estate industry in India. RERA’s objective is to ensure transparent and fair transactions. It is a landmark development and a much-needed consumer-oriented reform introduced with the aim to usher in a new era of transparency and accountability. RERA has been introduced to curb the inflow of black money into the primary and secondary markets and help end speculation & price control. Its aim is to further improve the financial discipline of the developers as they will not be able to divert funds from a given project. This will ensure timely completion of the projects.

Real Estate (Regulation & Development) Act, 2016 (RERA) was passed with the consent of the President of India on 25th March 2016 and came into force from 1st May 2017. The Act aims to establish a Real Estate Regulatory Authority in each state and union territory for the promotion and regulation of the real estate industry. It aims to ensure the sale of real estate properties (plots, apartments buildings) and projects in an efficient and transparent manner by protecting the interests of consumers. It will be applicable to ongoing and upcoming commercial and residential projects. However, it will not be applicable to renovation, repair or redevelopment projects that do not involve marketing, advertising, selling and new allotment.

The biggest concern for any home buyer is a delayed possession of the property. In the absence of a regulator and no rules in place, it was the home buyer who had suffered in the hands of builders. Now with RERA, each state and union territory has its own Regulatory Authority (RA). The RA is responsible for framing rules and regulations according to the Act. The Act aims to empower the RA or an Adjudicating Officer to resolve disputes and pass judgements. It also aims to create Appellate Tribunals to hear appeals against the orders, directions or decisions of the RA or the Adjudicating Officer.

The core features of RERA include mandatory registrations, delivery of project as per commitment, customer centricity, financial discipline and land title. According to the Act, it is mandatory for all the real estate developers to register with the Real Estate Regulatory Authority of the state or union territory where the projects are developed. Even real estate agents need to register themselves according to this Act. As per the Act, the commitments made by the developers/promoters are legally binding on them. They need to notify the buyers of the carpet areas of the units sold to them. In addition, they need to provide a declaration along with a written affidavit about the time duration within which the project or a particular phase of a project would be completed. If any promoter/developer makes an incorrect or false statement in connection with building, plot, real estate project or apartment, then the concerned promoter/developer is liable to compensate the buyers with a full refund of the property along with the interest amount. RERA has been introduced to ensure consumer satisfaction by protecting the interests of home buyers. It aims to empower the buyers with enormous rights to deal with errand developers and acts as a deterrent for builders who cheat home buyers. RERA promotes financial discipline among developers as the developers cannot accept more than 10% of the cost of unit sold as an ‘Advance’ or ‘Application Fee’ from the buyers. Lastly, according to the Act, the developers need to provide a declaration that they possess the legal title to the land on which the development will take place. The declaration has to be supported with legally valid documents and a written affidavit. A separately written affidavit has to be provided by the promoter stating that the land is free from all encumbrances.

The developers would face adverse consequences if they do not comply with the rules and regulations of RERA. They can lose the registration of the project. In addition, they could face imprisonment up to a maximum period of three years and/or could be fined up to a maximum of 10% of the total estimated project costs. If a developer defaults or delays in granting the possession of the property to the buyers, as mentioned in the ‘agreement of sale’, the buyers can withdraw from the project and claim a full refund of the amount paid along with a certain rate of interest. The buyers have the complete right to avail of the refund even if the registration is cancelled.

If the buyers are not satisfied with the decision passed on by the Real Estate Regulatory Authority or the Adjudicating Officer, they can approach the Real Estate Appellate Tribunal (REAT) to challenge the same. REAT provides many benefits for home buyers. For instance, home buyers only need to pay for the carpet area. Also, developers must inform the buyers about any minor changes in the project and in case of any major modifications, the developers need to seek approval of at least 2/3 of the buyers.

Once you decide upon your home budget, selecting the right property can prove to be a herculean task. In order to get a property of your choice in your preferred location and meet your budget requirements, it is important to gather as much information as you can. It is necessary that you make a decision based on the current financial situation, lifestyle consideration and long-term family needs. Shortlisting a property involves two crucial steps that include requirement gathering and location & property shortlisting. In the requirement gathering step, you need to consider the must-have features of your residential property, the good to have facilities and the things that must be avoided. The must-have features comprise of the much-needed facilities that you must consider while buying a new home. Your home should be in a safe and decent locality. It should be well-ventilated and airy. It should be child-friendly and spacious and must have security & fire features. The construction should be of good quality. You also need to analyse the stage of construction. In order to balance the rent and pre-EMIs you must choose under-construction/sub-vented projects and if you wish to stop paying rent you can opt for ‘Ready to Move’ properties. The good to have facilities are basically the additional benefits, which your prospective building must have. These include clubhouse, garden, gymnasium, open space and party lawns or halls. While selecting the new home there are a few aspects that need to be avoided. You must not select a home in an area that has proximity to slums and noise destination such as night clubs and pubs. Your property must not be in an area that is very densely or sparsely populated. You and your family members should not face any difficulty while commuting from your residential area on a daily basis. You should avoid purchasing a home in a building that has a crumbling infrastructure. Buying a home in a locality that has high crime rates is definitely a big NO. After the requirement gathering step, the next step is of locality and property shortlisting. You need to consider various factors before shortlisting a locality. These include future development prospects and plans, ease of commute, proximity to schools, colleges and hospitals and historic price trends in order to get an estimate of capital appreciation. In order to identify a suitable locality, you can begin the initial research through various property-related websites, talk to your family and friends and seek the assistance of reliable real estate consultants/agents. Property analysis and developer analysis are two important tasks that need to be undertaken while selecting your new home. In property analysis, you need to compare all the shortlisted properties and assign them a rank based on your current and future requirements, ease of travel and socio-cultural environment. The ranking will help narrow down your process. In developer analysis, you need to analyse the developer’s past experience. You need to check the developer’s financial and project delivery capabilities. You need to research if there is any pending litigation against the developer which can delay the project completion. In addition, you must do a thorough background check by getting in touch with people who are residing in the completed projects and find out about their level of satisfaction. While shortlisting a property, the crucial factors to consider include family size, locality and stage of construction. Family size refers to the number of family members who would reside in the new home. You must choose a promising locality that has proximity to public transport, railways stations, schools, and parks. The locality should have ample greenery, water supply and power supply. You are eligible to purchase a home during different stages of construction such as launch stage, under-construction stage and ready-to-move stage.

While considering financial assistance in the form of home loan the two home financing options include banks and Housing Finance Companies (HFCs). Usually, banks are considered as the most common place to avail of a home loan. However, you can also avail of a home loan at attractive interest rates from an HFC. An HFC is a kind of a Non-Banking Finance Company (NBFC) solely into the financing of purchase or construction of homes. Banks are regulated by the Reserve Bank India (RBI) whereas HFCs are controlled by the National Housing Bank, a subsidiary of RBI.

When it comes to the funding of loan portfolios, banks use the money deposited by their customers in their Current Accounts & Savings Accounts (CASA) in order to lend the loans. It is the same money that is deposited by customers with banks. On the other hand, HFCs fund their loans either by raising money from the public or by borrowing money from banks. As HFCs borrow money from banks to provide loans, the cost of funding for them is much higher in comparison to banks. Hence, HFCs charge a higher interest rate as compared to banks.

When it comes to the Interest Rate Methodology, the HFCs interest rate on loans is based upon a rate called Benchmark Prime Lending Rate (BPLR). It is also referred to as Prime Lending Rate (PLR). HFCs use their costs of funds along with a certain profit margin to calculate the PLR. PLR is the maximum interest rate an HFC can charge to its borrowers. Most of the home financing loans come at a Discount % on this rate. So, your effective interest rate is determined by subtracting the Discount% from the PLR.

On the other hand, banks determine their interest rates based on a rate called Marginal Cost of Funds Based Lending Rate (MCLR). MCLR is a tenure-linked and is regularly published for different maturities, i.e. Overnight, Monthly, Quarterly, Semi-Annual or Annual. The base rate is the same for all the tenures. Banks charge a Tenure Premium to take into consideration the tenure-related risks & funding costs. Banks’ interest rate is calculated by adding the MCLR and the Spread. The ‘Spread’ is determined by the borrower’s riskiness and the type of loan product.

You need to determine which option is more suitable for you – banks or HFCs. Banks offer lower interest rates, long-term savings and transparent interest rate methodology. On the other hand, interest rates charged by HFCs are on the higher side. Usually, borrowers who are denied a home financing loan from banks approach HFCs as HFCs might consider any shortcomings with documentation. Moreover, they would be lenient with eligibility and credit score but will charge higher interest rates. They can sanction higher amounts as loan than banks for a given value of the property.

You need to identify which type of interest rate is suitable for you – a fixed interest rate or a floating interest rate. A fixed rate interest rate is where you pay a fixed interest and consequently fixed EMIs throughout the life of the loan. In such a loan, your rate of interest does not change with the modification in policy rates. You can be assured that as your income might increase over the period of time, your expenditure on the loan will be fixed leading to incremental future savings.

This will help you to have more control over the budget along with a sense of certainty and security. Thus, the fixed rates loan makes future planning easier. In the case of floating interest rates, you pay variable interest rates and variable EMI amounts during the loan tenure. The rate of interest applicable will be dependent on the prevalent economic conditions and policy rates. The floating interest rate is calculated by adding the Variable Component and the Fixed Spread.

Floating interest rates have a mix of drawbacks and benefits. If the prevailing rates go up, then you will have to pay more interest and consequently more EMI. If the rates go down, then you will have to pay less interest and consequently less EMI. Any adverse economic conditions and monetary policy decisions can have a negative impact on your savings as you will end up paying more in EMIs. However, Floating Interest Rates can bring you benefits as well. At the time of availing loans, the total floating interest rate offer is around 1 – 1.25 percentage points less than the fixed rates. Any favourable economic conditions and reduction in policy rates will further make you pay less EMI and save more.

To choose between a fixed home financing loan or a floating one should be a well thought & carefully studied decision. You should consult your financial planner or home loan provider before making a decision. You should read the terms and conditions carefully to become sure that you are getting what you wanted.

The Pradhan Mantri Awas Yojana (PMAY) is a scheme launched by the Government of India in 2015 with the objective to provide Housing for All by 2022. The government has chosen 2022 as the year because in this year India will be celebrating its 75th year of independence. The scheme has two components – Pradhan Mantri Awas Yojana – Urban (PMAY- U) and Pradhan Mantri Awas Yojana Rural/Gramin (PMAY-G).

The HomeCapital Down Payment Assistance Program was launched with the objective to make home-buying more affordable for home buyers by financing a section of their down payment requirements. Various factors like increasing income levels and government reforms have made it the ideal period to purchase a home. However, arranging for the down payment financing remains a challenge.

Due to lack of it, you as a buyer, depend on future savings, costly personal loans or family borrowings. This situation also results in greater EMIs and higher interest rates. This program provides you with complete assistance in buying your dream home today by addressing the problem of down payment. You can double your capability and widen your reach with this program.

Additionally, you can increase your home loan eligibility and make your home buying process quicker and easier. In the HomeCapital Program, you are given financial assistance in the form of an interest-free personal loan, which is equivalent to your contribution towards the down payment amount. This amount is provided by the company’s partner-lending institutions while HomeCapital pays the interest.