In this blog post, Gurshabad Singh Sandhu, a student from Rayat and Bahra University School of Law, Mohali and pursuing Diploma in Entrepreneurship Administrative and Business Law from NUJS, Kolkata describes and analyses the different nuances and features of the Real Estate (Regulation and Development) Act, 2016.

Introduction

The Rajya Sabha passed the Real Estate Regulator Bill, which will help regulate the sector and bring in clarity for both buyers and developers. The Real Estate (Regulation and Development) Act, 2016 is an Act of the Parliament of India which seeks to protect homebuyers as well as help boost investments in the real estate industry. The bill was passed by the Rajya Sabha on 10 March 2016 and by the Lok Sabha on 15 March 2016. The Act came into force on 1 May 2016 with 69 of 92 sections notified. The Central and state governments are liable to notify the Rules under the Act within a statutory period of six months.[1]

 

Key Features Of The Act 

• Real Estate Regulatory Authority: Under the Bill, the purchasers of real estate units from a developer would have a specialised forum called the “Real Estate Regulatory Authority” which will be set up within one year from the date of coming into force of the Act. In the interim, the appropriate Government (i.e., the Central or State Government) shall designate any other regulatory authority or any officer preferably the Secretary of the department dealing with Housing, as the Regulatory Authority. The promoter has to register their project with the Regulatory Authority before booking, selling or offering apartments for sale in such projects. In case a project is to be promoted in phases, then each phase shall be considered as a standalone project, and the promoter shall obtain registration for each phase.
• The Registration application must disclose the following:[2]
  • Details of the promoter (such as its registered address, type of enterprise such proprietorship, societies, partnership, companies, competent authority);
  • A brief detail of the projects launched by the promoter, in the past five years, whether already completed or being developed, as the case may be, including the current status of the projects, any delay in its completion, details of cases pending, details of type of land and payments pending;
  • An authenticated copy of the approval and commencement certificate received from the competent authority and where the project is proposed to be developed in phases, an authenticated copy of the approval and commencement certificate of each of such phases;
  • The sanctioned plan, layout plan and specifications of the project, plan of development works to be executed in the proposed project and the proposed facilities to be provided thereof and the locational details of the project;
  • Proforma of the allotment letter, agreement for sale and conveyance deed proposed to be signed with the allottees;
  • Number, type and carpet area of the apartments and the number and areas of garages for sale in the project;

• 70% of Realisation from Allottees in a separate bank account: This Act obliges the developer to park 70% of the project funds in a dedicated bank account. This will ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money for one project, thus delaying completion and handover to consumers.
• Acceptance or Refusal of Registration: Upon receipt of an application by the promoter, the Regulator Authority shall grant or reject the registration within a period of 30 days. Upon being granted a registration, the promoter will be provided with a registration number, including a login Id and password for accessing the website of the Regulatory Authority, to create his web page and to fill in the details of the proposed project. If the Regulatory Authority fails to grant or reject the application of the promoter within the period of 30 days, then the project shall be deemed to have been registered.
• Carpet Area: Under the Bill, developers can sell units only on carpet area, which means the net usable floor area of an apartment. This excludes the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
• Refund of amount in case of delay in handing over possession: In case the promoter is unable to hand over possession of the apartment, plot or building to the allottee (i) in accordance with the terms of the agreement of sale; or (ii) due to discontinuance of his business as a promoter on account of suspension; or (iii) revocation of his registration or for any other reason, then the promoter shall be liable, on demand being made by the allottee, to return the amount received by him from the allottee with interest and compensation at the rate and manner as provided under the Act. This relief will be available without prejudice to any other remedy available to the allottee.
• Real Estate Appellate Tribunal: It will help establish state-level Real Estate Regulatory Authorities (RERAs) to regulate transactions related to both residential and commercial projects and ensure their timely completion and handover. Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days and Regulatory Authorities to dispose of complaints in 60 days while no time frame was indicated in earlier Bill.[3] The Appellate Tribunal shall have the same powers as a civil court and shall be deemed to be a civil court. An appeal against the order of the Appellate Tribunal may be filed before the jurisdictional High Court within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal.

 

Protection Of Buyers

This law makes it mandatory for developers to post all information on issues such as project plan, layout, government approvals, land title status, subcontractors to the project, the schedule for completion with the State Real Estate Regulatory Authority (RERA) and then in effect pass this information on to the consumers. [4] The current practice of selling by ambiguous super built-up area for a real estate project will come to a stop as this law makes it illegal. Carpet area has been clearly defined in the law. Currently, if a project is delayed, then the developer does not suffer in any way. Now, the law ensures that any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer. The developer cannot make any changes to the plan that had been sold without the written consent of the buyer.

 

Limit On Receipt Of Advance Payment

A promoter shall not accept a sum more than 10% percent[5] of the cost of the apartment, plot, or building, as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement of sale with such person and register the said agreement of sale, under any law for the time being in force.

 

Enforcement and Applicability of The Act

The Act under S.84 contemplates that within six months of the RERA Act being enforced, State Governments shall make rules for carrying out the provisions of Act. The said Rules are to be notified by the respective State Government.

On October 31, 2016, Central Government, released the Real Estate Regulation and Development Rules, 2016, vide Notification by the Ministry of Housing & Urban Population (HUPA). The Rules so issued by the Central Government apply to the five Union Territories without Legislature viz., Andaman & Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep and Chandigarh. For Delhi, the Ministry of Urban Development is in the process of finalisation of rules while the state governments have to notify the rules on their own. States like Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu tag behind in the implementation of the Rules, with their Rules still not notified. The saving grace being that they are at the advanced stages of finalising the Rules. Maharashtra has issued Rules for consultation also.

 

Penalty In Case Of Non-Compliance

Penal provisions have been prescribed under the Act against the promoter in the event of any contravention or non-compliance of the provisions of the Act or the orders, decisions or directions of the Regulatory Authority or the Appellate Tribunal which include the following:

• If promoter does not register its project with the Regulatory Authority – the penalty may be up to 10% of the estimated cost of the project as determined by the Regulatory Authority;
• In case the promoter provides any false information while making an application to the Regulatory Authority or contravenes any other provision of the Act – the penalty may be up to 5% of the estimated cost of the project or construction.
• The maximum jail term for a developer who violates the order of the appellate tribunal of the RERA is three years with or without a fine.

 

Conclusion

The Bill intends to increase transparency and accountability in the real estate sector by providing mechanisms to facilitate and regulate the sale and purchase of commercial and residential units/projects and timely completion of projects by the promoters.

 

 

 

 

 

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References:

[1]“Real Estate Bill is an act now, may protect home buyers”. Economic Times. Retrieved 2 May 2016.

[2] India: Salient Features Of The Real Estate (Regulation And Development) Bill 2016 Article by Sudip Mullick and Amit WadhwaniKhaitan & Co
[3]“Big cheer for homebuyers! Rajya Sabha passes Real Estate Bill”, The Economic Times, 10 March 2016

[4] ECONOMICTIMES.COM|Mar 10, 2016, 09.36 PM IST

[5]G. Shyam Sundar writes on the impact of the Real Estate Regulation and Development Act, 2016