Real estate sector has seen exceptional growth since Independence, but it remained unregulated till the enactment of the Real Estate (Regulation and Development) Act, 2016 (“Act”). We have witnessed that whenever a regulator is appointed for a sector, like SEBI, IRDAI, TRAI etc, it widens the sector. The Act mandates the respective State Governments and Union Territories to notify their own Rules, which would be in the lines of the Central Act and accordingly administer their own State Rules. A state can have more than one Real Estate Regulatory Authority or two states can have the same Real Estate Regulatory Authority.
With each passing day, the implementation of the Act is gaining pace all over the country and the State Real Estate Authority established under the Act have emerged as a influential tool in ensuring effective and proper implementation of the Act by the states across India. The aim of the article is to highlight the powers of the Real Estate Regulatory Authority conferred on it by the Act and how the Authority uses its powers to guard the interests of the buyers.
Section 20 (1) of the Act mandates each state to establish an Authority within a period of one year from the Act coming into force. The Authority so established shall be known as Real Estate Regulatory Authority which will exercise the powers conferred on it and carry out the functions assigned to it under the Act. Section 21 of the Act, provides for the composition of the Authority which mandates that the Authority shall consist of a Chairperson and not less than two whole time members. The Chairperson and the two whole time members are to be appointed by the appropriate government.
The preamble of the Act itself states that it is the duty of the Real Estate Regulatory Authority ‘to protect the interest of the consumers in the real estate sector’. To enable the Real Estate Regulatory Authority to accomplish its duty, the Act has imparted the Real Estate Regulatory Authority with broad powers that are akin to the civil courts in India.
Section 35 of the Act empowers the Real Estate Regulatory Authority to make an inquiry and investigate in relation to the promoter, allottee or the real estate agent, as the case may be. Section 35(1)of the Act provides that the Real Estate Regulatory Authority can either suo moto or on a complain, initiate any inquiry and investigation into allegations against the promoter, allottee or the real estate agent, as the case may be. It is on the discretion of the Real Estate Regulatory Authority to appoint one or more persons to make an inquiry in relation to the affairs of the promoter, allottee or the real estate agent, as the case may be.
To effectively exercise the investigative powers granted to the Real Estate Regulatory Authority under Section 35, the Act provides that the Authority shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit, in respect of the following matters, which are:
- Discovery and production of books of accounts;
- Examining the Witnesses on Oath
- Issuing Commissions for the Examination of Witnesses or Documents
- Summon and enforce the attendance of persons
Discovery and Production of Books of Account
The Real Estate Regulatory Authority has the power to direct the builders/developers to produce their books of accounts. The builders/developers have to comply with the orders of the Real Estate Regulatory Authority, failing which the Authority can appoint commissioners for conducting searches and discovery of books of accounts relating to the project. If there is any financial irregularity in the books of accounts, the accounts will reflect the same. Financial irregularity may arise when the developer has not used money received from the allottees for the project, but instead has used it for other purposes.
Examining the Witnesses on Oath
The Real Estate Regulatory Authority has the power to summon any person and examining them on oath. In a real estate transaction, the builders/developers and buyer generally records the terms and conditions of the transaction in writing (for example: agreement for sale, memorandum of understanding, letter of allotment etc). Therefore, the Authority demands the concerned party to submit his/her affidavit on oath. This helps in the inquiry process and evidence collection. In certain circumstances, the Authority can resort to conduct oral examination of witness.
Issuing Commissions for the Examination of Witnesses or Documents
The Real Estate Regulatory Authority has the power to issue commissions for the examination of witnesses or documents. By appointing a commission, the Authority can examine all aspects of the complaint. Section 35(2)(iii) of the Act read with Rule 21 of the Haryana Real Estate (Regulation and development) Rules, 2017 provides that the Haryana Real Estate Regulatory Authority may call upon experts or consultants to help the Authority in conducting the inquiry proceedings. Rule 22(2) of the Uttar Pradesh Real Estate (Regulation and Development) Rules, 2016 also has the similar provision for calling upon experts to help the Authority.
Many a times, the developers/ builders ask the buyers to give “unconditional and irrevocable consent” to make alterations in project plans. In such scenario, where the developers/ builders are forcing the buyers to sign such letters, the best remedy a buyer has is to file a complaint under Section 31 of the Act for contravening the provisions of the Act. Once the complaint is filed with the Authority, the respective State Authority can invoke its power of investigation as provided under Section 35 of the Act.
Instances of Regulators Enforcing Powers
- An example of how the Real Estate Regulatory Authority has used these powers comes from the real estate authority of Uttar Pradesh, which recently put to use the power to initiate inquiry and investigation. The Lucknow bench of UPRERA ordered for forensic audit of the builder after hearing multiple complaints against the Ansal Group of Housing. The Rera bench ordered that the Ansal Group of housing have to go through forensic audit of their financial status so to as ascertain the amount of money that have been diverted for other projects. In addition to the audit, the Authority also appointed a financial advisor to watch over the activities of the Promoter.
- Another instance when Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has used the power to initiate inquiry and investigation is in the case of Intellicity Business Park. In this case, the developer failed to deliver a mixed-use project in Greater Noida. The Project was launched in 2010 wherein the Developer promised delivery in 2014. The Authority suspected that the funds received for the projected were diverted for personal reasons. Therefore, the Bench barred all the directors of the company from leaving the country or from making any sale, transfer or mortgage of any assets. The Greater Noida Authority had been directed to conduct the forensic audit and was also asked to come up with an alternative plan to revive the housing project.
- Another state worth mentioning here is that of Maharashtra. The Regulator appointed in the state of Maharashtra, popularly known as MahaRERA, has consistently been implementing the RERA as well as its rules to secure the safety of the buyers.
- Another instance is of Haryana Real Estate Regulatory Authority. The realtors in National Capital Region (NCR) witnessed the Authority ordering investigation against two developers who have not completed the projects in Gurugram. The affected buyers initiated complaints against the developers of “Greenopolis”. It was alleged that the developers have received more than eighty percent of the sale price from buyers. In this case, the Haryana Real Estate Regulatory Authority passed restraining orders against the developers of “Greenopolis” housing project. The Authority also prevented the Developers from any sale, transfer or creating any encumbrance over the land earmarked for common area, unsold units. The Developer was also prevented from withdrawing money from bank accounts, except for project development purposes. During these proceedings, the Haryana Regulator, acting under Rule 21 of Haryana Real Estate (Regulation and Development) Rules, 2017, also appointed a quantity surveyor for assessing the work completed so far. Additionally, the Haryana Regulator also ordered financial audits of these projects.
- In November, 2018, UP RERA directed the development authority of western UP to conduct a health audit of all unfinished projects. Health audit is different from a financial audit, in the sense that in a health audit the main focus will be on finding the stages at which the projects are slowed down and the reasons for the same. The audited projects shall be categorised into these- doing well, not doing well and abandoned. The Authority has suggested forming a monitoring committee to review the delayed projects. The land parcels where no development work has been started will be re-allotted to other developers.
Other Powers of the Authority
Section 36 of the Act also provides for powers of the Real Estate Authority. Section 36 states that if the Authority deems fit, it may pass interim orders to hold back the promoter from committing any act in contravention of the Act.
To ensure the compliance of orders/directions passed by the Authority, Section 63 of the Act provides that non-compliance with the directions of the Regulator is a continuing offence attracting penalty for every day of default, which can be cumulatively up to five percent of the estimated project cost.
Without a doubt, the Act along with the set- up of Real Estate Regulatory Authority under it is a new initiative to regulate the real estate sector. The act has brought an effective mechanism for redressal of grievances of the buyers, who till date had no exclusive avenue. This redressal system is not only consumer friendly but also cost and time-efficient.
Therefore we can see that the above steps taken by the RERA Authority proves to be very much effective and such cases where the money has been gulped by the builder and no construction activity is being carried out, the RERA Authority is the right door to knock for the justice as it was specifically enacted with the sole motive to safeguard the interest of the home-buyers.
However, what still remains in question is whether the RERA can uniformly and effectively be implemented across all states in India in its true letter and spirit so as to establish a regulated industry and safeguard the interests of the buyers/ allottees of real properties.
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