Author: Team Jagoinvestor

Understanding RERA – 14 rules real estate investors should know

Posted on by Team Jagoinvestor

For Long, the real estate sector was unregulated and in favor of builders and developers. From getting delayed possession to bearing a huge loss of project cancellation, all has to be borne by home buyers.

Even in worse case after living in a society for a long period of 10-15 years, homeowners need to vacant the society due to builder’s mistake of not getting approval from government for the said project.

And after all these, for any of these malpractices, if a home buyer files a complaint, it use to take years to get a verdict. However, now to bring transparency and accountability to this sector, Real Estate Regulatory Act, 2016 has come to force.

This aims to create a more equitable and fair transaction between sellers and buyers of properties. The Real Estate (Regulation and Development) Act is expected to ensure consumers will not be cheated or taken for a ride by the developers.

So, we will see in 14 points that how RERA will benefit us. But, before that let’s see all loopholes and malpractices builders and agents use to do in the real estate sector.

  • Delay in project completion
  • Use to cheat buyers with false information
  • Divert funds to another project or for other purpose
  • Get-away with sub-quality construction
  • Offer special pre-booking rates
  • Keeping Date of possession clause in agreement empty
  • Altering the project developments without consent

14 RERA rules investors should know

1. Registering project with RERA :

RERA makes it mandatory for all commercial and residential real estate projects where the land is over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority (RERA) for launching a project, in order to provide greater transparency in project-marketing and execution.

The builders or developers have to publish all the details such as sanctioned plan, layouts, the location of the project with clear demarcation of land, carpet area, number and area of garage, etc. So, with RERA builder have to get all the clearance before they could advertise or sell any property, it will help in malpractices to be curbed.

Hence, before entering into the contract, you can check online on the website of RERA about every detail of the project by visit the RERA site of the concerned state and go into the registration tab. I have attached a screenshot of RERA Maharashtra. To get an idea about how RERA MAHARASHTRA REGISTRATION site looks like.

Snapshot of RERA website for registration

If you are offered to buy a property of any unregistered project then you can notify the same to RERA to save others from any kind of fraud.

2. Quarterly updates on Construction progress : 

Now builders/developers have to upload project details including number and types of units sold out, government approval taken or approval pending list & completion scheduled every three months. Along with that if there is any litigation going on related to that property then all the documents of proceedings have to be uploaded by builder/developer. Hence now you can check online the progress of the project they are putting their money in.

3. Escrow Account:

The developer will have to transfer 70 percent of the money received from customers to an escrow account. This will ensure the builder does not spend the money on other projects since they can withdraw money from this account after approvals from engineers and chartered accountants they appoint and your money will be used only for the project you invested.

4. Sale agreement standardization –

Earlier sale agreement use to be in such format that the home buyers were penalized on any default but similar defaults by promoters would not attract any penalty. But, now as per RERA norms, a standard model sale agreement has to be entered between promoters and homebuyers to ensure equality and protect buyers from various penalties and charges.

The agreement of sale shall specify particular details of the project including the construction of buildings and apartments, along with specifications, internal development works and external development works, the date on which the possession of the apartment, plot or building is to be handed over, etc.

5. Maximum 10% of cost of project as advance payment :

The promoter can not accept a sum of more than 10% of the cost of project, plot, etc.. as an advance payment or an application fee from you without first entering into a written agreement for sale with such person and register it.

6. Five years of defect liability period :

Under RERA, in case of any structural defect or poor quality, it will be the responsibility of the developer to rectify such defects for a period of five years. So, if any defect is found in the quality used in the construction of property then you can make the developer/builder liable for all sub-quality issues and ask for repairing or compensating the same.

You can also watch the video on RERA –

7. Carpet Area :

The area of a property is often calculated in three different ways – carpet area, built-up area, and super built-up area. Hence, when it comes to buying a property, this can leads to a lot of disconnect between what home buyer pays and what he actually gets.

But, now it is mandatory for the developers to disclose the size of their apartments, on the basis of carpet area (i.e., the area within four walls). This includes usable spaces, like the kitchen and toilets.

8. Title Representation :

Promoters are required to disclose clear title over the property and project. If any defect is found in title of property then you can ask for the compensation and there is no limit for the amount of this compensation.

9. False information to home buyers :

If you made an advance payment for a project on the basis of any false information given to you via prospectus or in advertisement then you have the right to ask for a refund of your money. And if you want to continue with the project then the builder has to pay penalty and that can go up to 5% of the cost of property.

10. Failure to complete possession on time :

If the promoter fails to complete or is unable to give possession on time then, the promoter is liable to pay the entire amount given by you if you wish to leave the agreement. But, if you wish to stay in the agreement then the promoter will have to pay interest for every month of the delay till you receive the possession.

11. Approval for alteration in sanctioned plans :

If a builder wants to make alteration in plans and specifications of your individual flat then he can do that only with the approval of you. And if a builder wants to make alteration in the entire project’s layout & common areas of society  then he needs approval of the 2/3rd number of total buyers.

12. Obligations of the promoter in case of transfer of real estate project to a 3rd party :

The promoter will not be allowed to transfer the majority rights and liabilities in respect of a real estate project to a 3rd party without the prior written consent from two-third allottees (buyers), except the promoter, and without the prior written approval of the RERA authority.

13. Agent registration is mandatory :

Now, every real estate agent has to register himself under RERA before selling or advertising any property and he has to abide by all rules of regulation like, maintaining books & records, not be involved in unfair trade practices or make any false statement oral or written.

14. Grievance Redressal: :

If any buyer, promoter or agent has any complaints with respect to the project, they can file a complaint with RERA. State real state regulatory department will try to resolve the dispute within 60 days. If you aren’t satisfied with RERA’s decision, a complaint can also be filed with the Appellate Tribunal within the next 60 days. Even after that if he is not pleased the complaint can be filled to high court and supreme court.

Benefits of RERA act 2016 :

This act is not benefiting only buyers but also agents and builders. RERA infuses credibility by making the sector mature & transparent and helping to Channelize investment into the sector. It will increase the confidence of financial institutions & foreign investors in the real estate sector.

Offense-wise penalties for developers :

The following are the penalties and compensation that can be levied on promoters.

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For non-registration of a project Penalty of up to 10% of the estimated cost of the project.
For violation of other provisions of the Act Penalty of up to 5% of the estimated cost of the project.
For non-compliance of the orders of the Authority Penalty for every day of default, which may cumulatively extend up to 5% of the estimated cost of the project.
For non-compliance of the orders of the Appellate Tribunal Penalty for every day of default, which may cumulatively extend up to 10% of the estimated cost of the project or with imprisonment for a term which may extend up to three years or both.

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Offense-wise penalties for Real Estate Agent :

The following are the penalties and compensation that can be levied on the real estate agent.
[su_table responsive=”yes”]

For non-registration under project, he is selling Rs. 10,000 per day of defaults which may extend up to 5% of the cost of the property.
For contravention of the orders or direction of the RERA Penalty on a daily basis which may cumulatively extend up to 5% of the estimated cost of the property whose sale or purchase was facilitated.
For contravention of the orders or direction of appellate tribunal Imprisonment up to 1 year with or without fine which may extend up to 10% of the estimated cost of project or both.

[/su_table]

Offense-wise penalties for Allottees(Homebuyers) of RERA registered project:

The following are the penalties and compensation that can be levied on allottees.

[su_table responsive=”yes”]

Contravention of any order of the RERA Penalty for the period during which defaults continues which may cumulatively extend up to 5% of the apartment or building cost.
Contravention of the orders or direction of appellate tribunal Imprisonment up to 1 year with or without fine for every day during which such defaults continues, which may cumulatively extend up to 5% of the apartments or building cost or both.

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*Apartment means block, chamber, dwelling unit, flat, office, showroom, shop, warehouse, premises, etc.

How to file a complaint :

After the implementation of RERA, we are optimistic that the new law will protect our interest. However, the most important question is, how to file a complaint or a case, under the new RERA rules.

So, for this, every state has described specific forms and procedures which are to be followed. The application can also be filed online, as per the format available. For filing a complaint, the complainant has to provide following details-

  • Particulars of the applicant and the respondent
  • Registration number and address of the project
  • A concise statement of facts and grounds of claim

The form has to be filled and submitted with Real Estate Regulatory Authority or the adjudicating officer.

Conclusion:

RERA is a huge step forward against thief developers. Till now, there wasn’t any regulator and neither were the rules in place. Delay in delivery of projects, bad material used for construction, changing of sanctioned plans every now and then was the major reason why RERA ACT,2016 came into existence.

However, even after RERA, there are many loopholes in this sector. For eg. It might happen that you wrongly signed some document which gives consent to any changes in agreement or project. Because RERA is just a mechanism which is in place to serve justice to all the parties. So, it is always your responsibility to be alert and get into any contract after due diligence.

I hope this article has helped you in understating RERA act 2016. Feel free to ask any doubts in the comment section.

Which is the best critical illness policy in India?

Posted on by Team Jagoinvestor

Do you know that, as per Indian health statistics, every year 3 % of the population go below the poverty line due to the heavy spending on illnesses?

It means, because of large financial outgo for treatments, every year 3% of the population, drop down to one level below their present class i.e. high-class people become middle and middle transforms to lower class. So, Imagine how badly our financial life may get affected if we do not have a proper source of funding at the time of facing non-curable diseases.

The probability of getting affected by life-threatening diseases are getting higher day by day.

As per the growing modern trend in our society, our lifestyle has changed in a bit good way but a lot in a bad way (eating junk/overeating & drinking). There is a rapid rise in obesity in India, which leads to diabetes, stroke and many heart diseases.

As per the statistics on Indian health –

    • Diabetes currently affects more than 62 million Indians, and India is projected to be home to 109 million individuals with diabetes by 2035.
    • About 1.7 million Indian’s deaths caused by heart diseases every year, according to WHO.
    • The incidence of cancer in India was 70-90 per 100000 population in the year 2014 which increased to 106.6 new cancer cases in 2016 per 100,000 people.

Along with bad lifestyle, pollution is also affecting our health. 7% of death in India is due to respiratory diseases. Before any of this life-threatening disease happens to us. We should be prepared financially so that we can utilize our energy fully on the treatment and not on the financial burden of that time. So, to meet those uncertain financial needs, having a critical illness policy cover will be the best resort.

If you are in a hurry so just watch the video below to get a brief idea.

 

What is critical illness cover?

Critical Illness insurance is an insurance product in which the insurer (insurance company) is promising to make a lump sum cash payment if the policyholder is diagnosed with one of the specific life-threatening illnesses on a predetermined list as part of an insurance policy. The policy may also be structured to pay out regular income and the payout may also be on the policyholder undergoing a surgical procedure, for example, having a heart bypass operation, etc.

Every critical illness policy specifies the illnesses covered and not covered. The major illnesses like heart attack, cancer, stroke, and coma are commonly covered by all the critical illness policies. As the probability of occurring these is high and the payment on these illnesses (cancer or coma) are not one time task, it might be the life time operational costs. And the cover for other critical illnesses varies from company to company.

Below given table highlights the commonly covered illnesses with varying and uncovered illnesses.

list of illnesses covered/not covered under critical illness policy

There are some illnesses that are not covered by any critical illness policy, so make sure that you are not buying a critical illness specifically for getting covered from the following illnesses, as these are not going to be covered by any critical illness policy. Before buying any critical illness cover from any insurance company one should carefully read the policy terms and conditions to see which all illnesses are covered under a particular policy.

here are the benefits of critical illness cover

Benefits of Critical Illness Cover –

  1. Financial security for your loved ones– Critical Illness cover not only pays for protecting your life but makes your family feel secure financially.
  2. More than 30 Illnesses are covered -Not all but some companies cover more than 30 illnesses. Before
  3. A second opinion of the doctor – Almost all the companies provide second opinion. Second opinion gives us the chance to get a better review on diagnosed illness from a specialized doctor.
  4. 100% payout -If diagnosed with a critical illness then the company pays the entire sum assured of the policy.
  5. Tax benefit – All the policies of critical illness comes with a tax benefit u/s 80D of Income Tax Act,1961.
  6. Peace of mind – Once you have taken the critical illness policy you can be relieved because your financial state is now taken care off. If you encounter any critical illness disease then you can now focus more on the treatment rather than managing funds from here and there.

Top 5 CRITICAL ILLNESS COVER

For your reference, I have done an analysis of finding the top 5 critical illness cover policies in India. Below given is the list of top 5 critical illness cover policies.

****** The premium details are for a 1-year policy including GST.

comparison table of top critical illness policies in India

6 points to get the best critical illness policy?

As now you know the top 5 critical illness policies, still it is not easy to select the best policy out of many. So, here are some of the points to evaluate the best critical illness policy.

#1 – The Premium amount

Comparing premium amount is as simple as, selecting a critical illness policy of that company which gives the best value for money at the same sum assured and illnesses cover you are looking for.

#2 – Sum Assured

Getting the highest sum assured should not be a criterion for policy buying. The standard cover suggested is of 10 lacs to 20 lacs, so that your financial life should not get affected due to any uncertain illness.

#3 – Waiting Period

A waiting period is a period up til which any of the illnesses specified under the policy are not covered.  For example, if it’s 2 months, then if any of the critical illness happens to you before 2 months, your claim will not be taken. The insurance companies will consider your claim for paying the sum assured only after the period of waiting has ceased after buying a critical illness policy. So, before buying policy make sure that policy is having lesser waiting period. Almost all the companies have a waiting period of 90 days (not including existing illnesses).

***For existing illnesses waiting period is 48 months.

#4 – Survival Period

The survival period is the length of time, for which the insured must survive after being diagnosed with the illness,  in order to get a claim. The insurance cover will be paid only after the survival period has passed. So, if a person’s death happens immediately after a heart attack, even if he has critical illness insurance, his or her family may not receive any payout from the insurer.

The length of survival period varies among different insurers, it can be 14 days or 30 days, etc. So,  for buying a critical illness policy make sure that the policy has the least survival period.

The logic behind the survival period clause is that, critical illness insurance benefits are meant to be used by the insured as a living benefit to recover from illness, not a Death benefit. So, from this it is very clear that you should have a term insurance(life insurance) to provide the cover to your family, even if already having a critical illness cover.

#5 – Diseases covered

On selecting the best critical illness policy do not look for the maximum number of illnesses, it will be very illogical and will also lead you to pay a higher premium. Instead, go for a standard set of illnesses ( i.e. 28-32 illnesses covering major 4 critical illnesses) that might happen due to your life style habits and hereditary.

#6 – Entry Age 

Check the entry age of policy before buying. Mostly the entry age for critical illness policy is of 18-64 years

Why have a Critical Illness Cover if I already have Health Insurance?

One last thing to keep in mind is that health insurance and critical illness are two different products. Critical illness typically covers you from specified illnesses and not regular health-related issues.

Health Insurance provides exhaustive scope of coverage. Such as in-patient hospitalization, pre & post hospitalization, day care treatments, ambulance costs, organ donor expenses, etc. Where as Critical Illness plans provide coverage for a specified list of illnesses mentioned in the policy contract.

Below given table briefly represents the difference between health insurance and critical illness plans,

table showing comparison between health insurance and critical illness insurance plan

So, as you now know why and how to select the best critical illness policy, if you think any critical illness cover is best suitable for you, then go for it. Having one critical illness insurance policy is must in today’s era.

Let us know your views and queries about this article in the comment section.