This article is written by Akshaya V, pursuing LLB from CMR University, School of Legal Studies. This article is an effort to simplify the concept and working of the Real Estate (Regulation and Development) Act, 2016 through the coverage of important provisions and stipulations including an analysis of the Act.
It has been published by Rachit Garg.
The real estate sector is an important component of the economy and plays a catalytic role in meeting the country’s housing and infrastructure needs and demands. While this sector has grown significantly in recent years, it has been largely under-regulated with the absence of standardisation and lack of adequate buyer protection. Though the Consumer Protection Act of 2019 provides a forum for real estate buyers to address their concerns, the option is only curative and does not adequately address all the problems of buyers and promoters in that sector. The absence of uniformity has been a constraint to the healthy and orderly growth of the industry. Therefore, the need for regulating the sector has been accentuated in various forums.
History of the Real Estate (Regulation and Development) Act, 2016
The real estate sector was struggling as there were no rigid laws governing the same. The need of the hour was to appoint a comprehensive regulatory body to govern the same. The 2009 conference of National Housing Development and Municipal Administration Ministers discussed affordable housing for all including land-use policies, financial strengthening of local public bodies and a road map for hovel free cities. To address the issues of land valuation system and urban development regulation, the discussion also included the creation of a draft Real Estate bill by the Ministry of Housing and Urban Poverty Alleviation. In July 2011, the Ministry of Law and Justice suggested that the legislation is part of the concurrent list of the Indian Constitution. Later, on 14 August 2013, the Real Estate (Regulation and Development) Bill was introduced in Rajya Sabha. The Union Cabinet approved twenty substantial Amendments to the bill in December 2015, based on Rajya Sabha Committee recommendations. The law was then passed by the Rajya Sabha on March 10, 2016, and the Lok Sabha on March 15, 2016. The Parliament enacted the Real Estate (Regulation and Development) Act, 2016, herein referred to as the RERA Act, which aims to protect the rights and interests of consumers by minimising the malpractices done by the developers and promoting uniformity business practices and transactions in the real estate sector. The RERA Act came into effect on and from 1 May, 2016. At the time of passing of the Act, only 69 out of 90 Sections were notified and all other provisions were effective on and from 1 May 2017. On 31st October 2016, the centre, through the Housing & Urban Poverty Alleviation Ministry, released the general rules of the Real Estate (Regulation and Development) Act, 2016. The Act was legislated under entry 6 and entry 7 of the concurrent list of the Indian Constitution.
Scope and applicability of the Real Estate (Regulation and Development) Act, 2016
The Real Estate (Regulation and Development) Act 2016, hereinbelow referred to as the ‘Act’ applies to the whole of India except Jammu and Kashmir. Provisions of the RERA Act apply to residential apartments, buildings and plots whether residential or commercial. The Real Estate Project defined in the Act includes the development of buildings consisting of apartments, converting existing buildings into apartments and developing land into plots for the sale of all or some of the said apartments to carry out the purpose of this Act. Under RERA Act, it is mandatory to register all projects of more than five hundred square metres. The main aspects covered by the RERA Act include all project-related information, contract documents for buying and selling properties, carpet area stipulation, limitation of an advance fee to ten per cent of the apartment a deposit of seventy per cent of the money collected from the buyers in the escrow account, timely completion of the project and penal provisions. Hence, it is imperative to note that the RERA Act is one such comprehensive Act which covers all the projects mentioned above irrespective of whether it is commercial or residential.
Need for the Real Estate (Regulation and Development) Act, 2016
- To control and regulate the real estate sectors by shutting out malpractices;
- To keep consumers out of perils such as delayed delivery, transfer of title of the property, the quality of amenities provided and necessary changes to be made etc., before purchase;
- To appoint authorities to manage the real estate sector and to establish an Appellate Tribunal for each State. To enable home buyers to file complaints in case of any wrongdoing committed by the builders or developers;
- To contribute a good percentage to India’s GDP;
- To create accountability and responsibility for the authorities so appointed;
- To tighten the security on the use of investments done by the home buyers or investors;
- To have a supreme authorisation on the registration for the projects required to be registered; and
- To maintain quality in delivering the project to the buyers as per their interest and give scope for complaints to the authorities in case of any structural defects.
Importance of the Real Estate (Regulation and Development) Act, 2016
Real estate’s working was previously unregulated. The enforcement of RERA intends to protect the buyers or investors and in turn boost their confidence. It requires transparency and authority to keep track of its functioning approach. In reality, it now serves as a spotless ground for buyers as well as reducing the risk of those buyers or investors who bought or invested in the real estate before the implementation of the Act. The Act clarifies the relationship between property buyers and developers. It lays down the process of establishing trust between suppliers and purchasers. It has even created a state agency to oversee real estate and business transactions. The RERA Act is now assisting home buyers in receiving their real estate projects on schedule which is a huge comfort for Indian homebuyers.
Salient features of the Real Estate (Regulation and Development) Act, 2016
- To regulate and promote the real estate sector by establishing the Real Estate Regulatory Authority.
- To carry out the sale of plots, buildings or apartments as the case may be, or the sale of all the real estate projects transparently and efficiently.
- To protect the interests of the consumers and buyers and ensure the prevention of malpractices against them.
- To establish adequate and speedy dispute redressal systems and also establish Appellate Tribunals to hear and adjudge appeals from the orders, directions or decisions of the Real Estate Regulatory Authority.
- Establishes state-level regulatory authorities called RERA.
- To work on residential real estate projects and register all the projects that are to be undertaken without which the promoters cannot promote or sell.
- To cast duties on the promoters to upload details of the project on the website including layout and site plans.
- To ensure that two-thirds of the allottees give their written consent in addition to RERA’s written approval when a promoter has to transfer or assign a majority of the rights and responsibilities in a real estate project to a third party.
- To ensure that the buyer or promoter, as the case may be, pays an equal sum in the event of any default.
- Where the promoter causes the buyer any loss as a result of other people claiming property (defective title of property) that has been built or is being built, the promoter shall be liable to pay compensation to the buyer.
- To ensure that the money collected from project buyers must be kept in a separate bank account and utilised solely for the construction of the project. This sum is subject to change by the State Government.
- The Act provides the right to legal representation on behalf of the client by a CA, CS or CMA or legal practitioners
- It imposes a stringent penalty on promoters, and real estate agents and also prescribes imprisonment.
An overview of the Real Estate (Regulation and Development) Act, 2016
- State-level regulatory authorities (Section 20) – Real Estate Regulatory Authority (RERA): The Real Estate Regulatory Authority (RERA) is established at the state level. The Act allows state governments to create multiple regulatory authorities, each with the following mandate:
- Register and maintain a database of real estate developments and make it available for public inspection on the company’s website;
- Protection of interests of promoters, real estate agents, and buyers;
- A housing development that is both sustainable and affordable; and
- Provide advice to the government and ensure adherence to the Act and its regulations.
- Real Estate Appellate Tribunal (Section 43) – The decision of the Real Estate Regulatory Authorities can be appealed to the tribunals established for each state under the Act including its composition, application for settlement of the dispute, qualifications for chairperson and members, powers of tribunal and vacancies of the Appellate Tribunal.
- Mandatory Registration (Section 3) – Regulatory Authorities require all projects with a plot size of at least 500 square metres or eight flats to be registered.
- Deposits – Placing 70% of the monies accumulated from the buyer shall be deposited in a separate escrow account dedicated solely for the construction of that project.
- Penal interest on default (Section 61) – Both the promoter and the buyer are responsible to pay an equal rate of interest in the event of either party’s default.
- Ceiling on advance payments (Section 13) – Without initially entering into a sale agreement, a promoter cannot receive more than 10% of the cost of the plot, apartment, or building as an advance payment or an application fee from a person.
- Punishment (Section 66) – For violations of orders of Appellate Tribunals and Regulatory Authorities, developers can face up to three years in prison while agents and buyers can face up to one year in prison or a fine for every day during which the default continues, which may extend cumulatively extend up to ten per cent of the estimated cost of the plot, apartment or building of the real estate project.
Important definitions under (Section 2)
- Appropriate Government [Section 2(g)] – “Appropriate government” means in respect of matters relating to,—
- the Union territory without Legislature, the Central Government,
- the Union Territory of Puducherry, the Union territory Government,
- the Union Territory of Delhi, the Central Ministry of Urban Development, and
- the State, the State Government.
- Appellate Tribunal [Section 2(f)] – “Appellate Tribunal ” means the Real Estate Appellate Tribunal established under Section 43.
- Person [Section 2(zg)] – “Person” includes,—
- an individual,
- a Hindu undivided family,
- a company,
- a firm under The Indian Partnership Act, 1932 or The Limited Liability Partnership Act, 2008, as the case may be,
- a competent authority,
- an association of persons or a body of individuals whether incorporated or not,
- a co-operative society registered under any law relating to co-operative societies, and
- any such other entity as the appropriate Government may, by notification, specify on this behalf.
- Planning area [Section 2(zh)] – “Planning area” means a planning area or a development area or a local planning area or a regional development plan area, by whatever name called, or any other area specified as such by the appropriate government or any competent authority and includes any area designated by the appropriate government or the competent authority to be a planning area for future the planned development, under the law relating to town and country planning for the time being in force and as revised from time to time.
- 5. Promoter [Section 2(zk)] – “promoter” means,—
- a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees, or
- a person who develops land into a project, whether or not the person also constructs structures on any of the plots, to sell to other persons all or some of the plots in the said project, whether with or without structures thereon, or
- any development authority or any other public body in respect of allottees of—
- buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the government, or
- plots owned by such authority or body or placed at their disposal by the government, for the purpose of selling all or some of the apartments or plots, or
- an apex state level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its members or in respect of the allottees of such apartments or buildings, or
- any other person who acts as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale, or
- such other person who constructs any building or apartment for sale to the general public.
- Real Estate Agent [Section 2(zm)] – “real estate agent” means any person, who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building, as the case may be, in a real estate project, by way of sale, with another person or transfer of a plot, apartment or building, as the case may be, of any other person to him and receives remuneration or fees or any other charges for his services whether as a commission or otherwise and includes a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation for sale or purchase of plot, apartment or building, as the case may be, and includes property dealers, brokers, middlemen by whatever name called.
Responsibilities of the appropriate Government
- Notify the rules for the implementation of this Act, within six months of commencement of this Act
- Establish the Real Estate Regulatory Authority, within one year of commencement of this Act, ie., latest by 30th April 2017.
- Shall depute an officer, preferably, a housing secretary as an interim regulatory Authority
- Establish the Appellate Tribunals within one year from its commencement, ie. , maximum by 30th April 2017.
- Identify an existing Appellate Tribunal for the time being established under any other law in force, as the Appellate Tribunal until a full-time Appellate Tribunal is established.
- Appoint members of the Appellate Tribunal and the Chairperson and members of the Regulatory Authority based on the suggestions and recommendations of the Selection Committee.
- Appoint employees and other officers of the Regulatory Authority and the Appellate Tribunal.
- Identify and establish office space and other infrastructure for its functioning.
- To constitute the Real Estate Regulatory Fund, 2017.
- The Central Government is required to establish the Central Advisory Council.
Projects exempt from the ambit of the Real Estate (Regulation and Development) Act, 2016
The following projects do not require to be registered under the Act when:
- the area of land does not exceed 500 sq. metres;
- the number of apartments does not exceed eight.
- In the case of renovation or repair or re-development:
- where the area of land proposed to be developed does not exceed 500 square metres or the number of apartments proposed to be developed does not exceed eight, inclusive of all phases;
- where the promoter has received a completion certificate for a real estate project before commencement of this Act;
- For renovation or repair or re-development which does not involve marketing, advertising, selling or new allotment of any apartment, plot or building, as the case may be, under the real estate project.
Application for registration of real estate projects (Section 4)
Every promoter must submit an application to the Authority for registration of the real estate project in the form, manner, and time stipulated by the regulation of the Authority along with the fee specified by the Authority.
Step 1: An application has to be filed along with the fee and other documents in the prescribed form for registration with RERA by the applicants.
Step 2: The approval or rejection of the application for registration shall be done within thirty days from the date of receiving the application by the Authority.
Step 3: The promoter of the project shall be provided with a registration number, user ID for login and password for the applicant on successful registration.
Granting of registration by the authority (Section 5)
- The authority, shall within thirty days from the date of receipt of the application –
- Grant registration of the real estate project subject to the provisions of the Act and issue the applicant a registration number, as well as a Login Id and password, to enable him to access the website of the Authority and create his web page to fill in the details of the proposed project; or
- Reject the registration by rejecting the application if it does not conform to the provisions of the Act and record reasons in writing.
Provided applications cannot be rejected without giving an opportunity of being heard to the applicant.
- As per sub-section (1), if the authority does not register the project within thirty days, then the project is deemed to be registered and the promoter shall be given the user ID for login and password for accessing the RERA website and to create his website for uploading the details of the proposed project.
- The registration so granted under this section is valid for the time specified by the promoter in section 4 under sub-clause (c) for the completion of the project.
Extension of registration (Section 6)
- There has been a major delay in handing over the project to the buyers by the developers. The Act was promulgated to avoid such delays. Hence, the developer, at the time of registration should specify a timeline during which the project will be handed over to the buyer.
- The specification of the timeline is very important because if the project is not handed over within the said time, it may be usurped by the regulator and be revoked.
- Under this Section, the discretion solely lies with the regulator to grant an extension of registration.
- The regulatory authority may take into account the force majeure conditions or any reasonable circumstance to merit the extension.
- The promoter shall make an application detailing the force majeure or the reasonable circumstances which resulted in the delay in such form and by paying the prescribed fee as the regulatory Authority may specify from time to time.
Revocation of registration (Section 7)
The Authority may revoke the registration granted under Section 5 after being satisfied that –
- the promoter fails to do anything required by or under this Act or the rules or regulations made thereunder,
- the promoter violates any of the terms or conditions of the competent authority’s approval,
- the promoter is involved in any unfair practices or irregularities.
The authority, upon the revocation of the registration –
Debar the promoter and his access to the website with regard to the project he undertook and put his name under the list of defaulters and display his photograph on the website. He shall also inform the other Real Estate Authorities in other States and Union Territories about the revocation so made.
Lapse on the revocation of registration (Section 8)
When a registration expires or is revoked under this Act, the Authority may consult with the appropriate government to take whatever action it deems appropriate, including completing the remaining development works by a competent authority or an association of allottees, as determined by the Authority. As per the provisions of the Act, the orders, decisions or directions given by the Authority shall not take effect until the period of appeal expires. Where the project is revoked under this Act, the association of allottees will have a preferential right of refusal for proceeding with the remaining development works.
Registration of real estate agents (Section 9)
Real estate broking is one of the easiest businesses in India as there are no specific qualifications or experience requirements. Before the onset of RERA, there was no code of practice that set accountability, transparency and professional benchmarks. As we see, in many parts of the country, many non-professional agents or brokers operate without a sense of accountability. Thus, the RERA Act also covers agents who have to mandatorily register under Section 9, without which a real estate agent or broker cannot facilitate the sale or purchase of any building, plot, or apartment as part of a registered real estate project sold by the promoter in any of the planning areas. Every real estate agent willing to act as one shall apply to the Authority within a prescribed time and in such form and such fee as to be prescribed. The Authority, once satisfied that the provisions of the Act in relation to the agent’s registration shall –
- provide the real estate agent with a single registration number,
- reject the application in case it does not conform with the provisions of the Act or the rules thereunder with reasons recorded in writing.
Provided that no application shall be denied until the applicant has been allowed to be heard on the issue. The applicant shall be given a reasonable opportunity of being heard in the matter, without which the application cannot be rejected.
Promoter (Section 12)
No deposit or advance is to be taken by the promoter without first entering into the agreement for sale (Section 13) – A promoter may not accept an advance payment or application fee from a person over ten per cent of the cost of the apartment, plot, or building without first entering into an agreement for sale and registering it.
Structural defect – In case of any structural defect, workmanship defect, quality of delivery, or any provision related to service, or any duty of the promoter, as the case may be, under the agreement for the sale relating to such development, must be brought to the notice of the promoter within five years of the date of handing over possession by the allottee. The promoter is required to rectify such deficiencies without charge within thirty days and in the event of the promoter failing to do so within that period, the aggrieved allottees are entitled to receive suitable compensation in the manner stipulated under the Act.
Obligations of the promoter in case of transfer of a real estate project to a third party (Section 15) – The promoter may not transfer or assign his majority rights and liabilities in a real estate project to a third party without the prior written consent of two-thirds of allottees, excluding the promoter, and without the Authority’s prior written approval: Provided that such transfer or assignment shall not affect the erstwhile promoter’s allotment or sale of apartments, plots, or buildings in the real estate project.
Obligations of promoter regarding the insurance of real estate project (Section 16) – The promoter shall secure all insurances that may be required by the competent government, including but not limited to insurance in respect of –
- Title to the land and buildings that are part of the real estate project; and
- Real estate project construction.
Transfer of title (Section 17) – In a real estate project, the promoter shall execute a registered conveyance deed in favour of the allottee and hand over the physical possession of the plot, apartment, or building, as the case may be, to the allottees, as well as the undivided proportionate title in the common areas to the association of the allottees or the competent authority, as the case may be and hand over the common areas to the association of the allottees or the competent authority. The promoter is bound to comply with the direction of the competent authority, as the case may be, under this provision within three months from the date of issuance of the occupation certificate.
After obtaining the said occupation certificate and transferring physical possession to the allottees, the promoter is entrusted with the duty to hand over the necessary plans and documents including common areas to the allottees’ association or the competent authority as applicable in accordance with the local laws. Where there are no local laws in place, the promoter shall, within thirty days of receiving the completion certificate, hand over all essential documentation and plans including common areas, to the allottees’ association or the appropriate government, as the case may be.
Return of amount and compensation (Section 18)
If the promoter fails to complete or is unable to give possession of an apartment, plot, or building:
- In accordance with the terms of the agreement for sale or by the date specified therein; and
- Due to discontinuance of his business as a developer due to suspension or revocation of the registration under this Act or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw.
He shall be liable to the allottees on-demand, without prejudice to any other remedy available, to refund the amount received by him in respect of that plot, apartment, building or structure, as the case may be, with interest at such rates and compensation as may be prescribed under this Act.
Establishment and incorporation of Real Estate Regulatory Authority (Section 20)
Within one year of the date of enactment of this Act, the competent government shall, by notification, create a body to be known as the Real Estate Regulatory Authority to exercise the authorities conferred on it and perform the responsibilities assigned to it under this Act.
Provided that the appropriate government of two or more states or union territories may, if it so chooses, establish a single authority, provided the relevant government may, if it so desires, establish multiple authorities in a state or union territory:
Provided that until a regulatory authority is established under this Section, the competent government may by order nominate any regulatory authority or any officers, preferably the Secretary of the department dealing with housing as the regulatory authority to discharge the functions under the Act.
Term of office of the Chairperson and members (Section 23)
The Chairperson and Members shall serve for a term of five years from the date of their appointment or until they reach the age of sixty-five years, whichever is earlier and shall not be eligible for re-appointment. Before selecting anybody as a Chairperson or member, the competent government must be satisfied that the person has no financial or other interests that might jeopardise his or her duties as a member.
Removal of the Chairperson and members from office in certain circumstances (Section 26)
- In accordance with the notified procedure under this Act, the appropriate government shall remove the Chairperson or other members from office if either of them –
- has been declared adjudged insolvent,
- has been convicted of an offence involving moral turpitude, or
- has become incapable, either physically or mentally to act as a member, or
- has got any financial or other interest which may prejudice exercising his power as Chairman or other members.
- The Chairperson or member shall not be removed from office for the reasons specified in clauses (d) or (e) of sub-section (1) unless the appropriate government orders it following an inquiry conducted by a High Court Judge in which the Chairperson or member has been informed of the charges against him and has been given a reasonable opportunity to be heard on those charges.
Powers of the Regulatory Authority
- Power to issue interim orders – Section 36 of the Act says when the Authority is satisfied that an act in violation of this Act or the rules and regulations thereunder has been, is being, or is about to be committed, the Authority may, by order, restrain any promoter, allottee, or real estate agent from carrying on such act until the conclusion of the inquiry or until further orders, without giving such party notice, if the Authority deems it necessary.
- Power to issue directions – Section 37 of the Act says the Authority may provide such instructions to the promoters, allottees, or real estate agents, as the case may be, as it deems necessary to carry out its powers under the provisions of this Act or rules or regulations adopted thereunder and such directions shall be binding on all parties concerned.
- Power to rectify the orders – Section 39 of the Act says the Authority may alter any order passed by it at any time within two years of the date of making of the under this Act, in order to correct any mistake obvious from the record and shall make such amendment if the mistake is brought to his notice by the parties. Provided, no such alteration shall be made in respect of any order to which an appeal under this Act has been filed. Furthermore, the Authority shall not change any substantive portion of its order issued under the provisions of this Act while correcting any mistakes obvious from the record.
Responsibilities of the Regulatory Authority
- To facilitate registering the real estate project and real estate agents.
- To extend the registration of the real estate or project and its revocation.
- To renew or revoke, as the case may be, the registration of the real estate agent.
- To maintain a website of records for public reviewing.
- To appoint more than one adjudicating officer for addressing the issues relating to real estate matters.
- To notify rules and regulations.
- To recommend for any growth and promotion of healthy and transparent functioning of the project.
Establishment of Central Advisory Council (Section 41)
The Central Government may establish a Council to be called as the Central Advisory Council by notification, with effect from the date specified in the notification. The ex-officio Chairperson of the Central Advisory Council shall be the Minister of Government of India in charge of the Ministry of the Central Government dealing with housing. It shall consist of representatives from the Ministry of Finance, Ministry of Industry and Commerce, Ministry of Urban Development, Ministry of Consumer Affairs, Ministry of Corporate Affairs, Ministry of Law and Justice, Niti Aayog, National Housing Bank, Housing and Urban Development Corporation, five representatives from State Governments to be selected by rotation and five representatives from Real Estate Regulatory Authorities to be selected by rotation.
Functions of Central Advisory Council (Section 42)
The Central Advisory Council is purely an advisory organisation with no administrative duties. It has no duty or power to recommend how the Act has to be implemented. As a result, the council’s main objectives are as follows:
- All matters relating to the implementation of this Act.
- The policy of the government to be followed for encouraging the Act.
- How can this Act advance consumer interests and how can the Act help support real estate expansion and other things that have been entrusted to the Central Government.
- To examine its proposals and create rules to implement them.
Analysis of the effectiveness of the council
The Central Advisory Council is in charge of predicting and improving the RERA’s implementation efficiency. More importantly, the council must endeavour to improve the real estate sector as it is a significant contributor to the country’s GDP. While the goal has been stated, the following areas must be thoroughly investigated for this council to make a significant change.
Keeping up the federal spirit – To maximise the efficacy of this Council, it is necessary to have representation from all of the states to avoid leaving any area unrepresented. Currently, the Council is made up of five states that are chosen on a rotational basis. This denies the rest of the states the ability to express their views. The representation should include not just those states that are now doing well in the real estate business, but also those that are not doing so well but have the potential to do so. As a result, state representations should be increased to at least ten to fifteen states.
Representation of environmental concerns – Consumer interests are not restricted to money in real estate, thus environmental issues should be strongly represented on the CAC. Consumers are also interested in environmentally sustainable models, which should be adopted by real estate developers. The CAC may assist in promoting excellent practices in real estate developments, which will motivate promoters to go green and adopt green alternatives while executing such projects. As a result, both the promoters and the consumers will profit from it.
Regularise interactions – The RERA meetings must be held on a more regular basis to avoid the RERA becoming a “paper tiger.” This will also keep the RERA from becoming more diluted. The most recent meeting took place on May 18, 2018. As a result, laws must be enacted to make the meetings mandatory at least once a year. Regular interaction is required for representations to work.
The Real Estate Appellate Tribunal
Real Estate Appellate Tribunal is formed by the Appropriate Government under Chapter VII of the Real Estate (Regulation and Development) Act, 2016 to ensure faster resolution of disputes. Parties aggrieved by the RERA order can appeal before the Real Estate Appellate Tribunal and it has to adjudicate such cases within sixty days. Civil Courts have been prevented from exercising jurisdiction on such matters. If any of the parties is not satisfied with the Real Estate Appellate Tribunal order they can file an appeal against the order of the Real Estate Appellate Tribunal order to the High Court within sixty days.
Establishment of Real Estate Appellate Tribunal (Section 43)
The appropriate government, shall within one year of commencement of this Act, by notification, establish a Real Estate Appellate Tribunal. There shall be one or more benches of the Appellate Tribunal, for various jurisdictions in the state or union territories, if the appropriate government deems necessary. Every bench of the Appellate Tribunal shall consist of at least one Judicial Member and one Administrative or Technical Member.
The Act also allows for the establishment of a single appellate tribunal for two or more states or union territories. The designated tribunal may hear cases until such a tribunal is constituted and once the tribunal is constituted, all the existing cases will be transferred to the newly established common Tribunal. If the appropriate government of two or more states or union territories deems it necessary, may establish a single Appellate Tribunal.
It may be noted that when a promoter files an appeal with the Appellate Tribunal, it shall not be entertained, without the promoter first having deposited with the Appellate Tribunal at least thirty per cent of the penalty or such higher percentage as may be determined by the Appellate Tribunal or the total amount to be paid to the allottee including interest and compensation imposed on him or with both, as the case may be before the said appeal is heard.
Application for settlement of disputes and appeals to Appellate Tribunal (Section 44)
Section 44 of the Act deals with applications for settlement of disputes and appeals to the Appellate Tribunal. It provides that:
- The appropriate government or competent authority or any individual aggrieved by the Authority’s or adjudicating officer’s direction, order, or judgement, may appeal to the Appellate Tribunal.
- Every appeal under sub-section (1) must be filed within sixty days from the date on which the appropriate government, the competent authority, or the aggrieved person receives a copy of the Authority’s or the adjudicating officer’s direction, order or decision and it must be filed in such form and with such fee as may be prescribed.
Provided that the Appellate Tribunal may hear any appeal after sixty days term has expired if it is satisfied that there was a sufficient reason for not filing it earlier.
- The Appellate Tribunal may pass such orders, including temporary orders as it may deem fit after receiving an appeal under subsection (1) and after providing the parties with an opportunity to be heard.
- The Appellate Tribunal must submit a copy of every order it makes to the parties as well as the Authority or adjudicating officer.
- It shall deal with the appeal preferred under sub-section (1) expeditiously and dispose of the appeal within sixty days of the date of receipt of the appeal.
Provided that if any such appeal is not resolved within sixty days the Appellate Tribunal shall record its reasons in writing for not disposing of the appeal within that period.
Qualifications for appointment of the Chairperson and members (Section 46)
- No person shall be qualified to be appointed as a Chairperson or member unless he –
- Has been or is a Judge of High Court;
- In case if he is a judicial member, he has served in the judicial office within the territory of India for at least fifteen years or has been a member of Legal Services of India and has held the post of Additional Secretary of that service or any equivalent post, or has been an advocate having at least twenty-years experience with advocating real estate matters; and
- In the case of a Technical or Administrative Member, he is a person who is well-versed in the areas of law, planning, commerce, accountancy, real estate, development, economics, infrastructure, public affairs, industry management or administration or a state government equivalent to the post of Additional Secretary to the Government of India or an equivalent post in the Central Government;
- The appropriate government shall appoint the Chairman of the Tribunal after consulting with the Chief Justice of the High Court or his nominee;
- The Appropriate Government shall nominate the judicial members and technical or administrative members of the Appellate Tribunal on the suggestions and recommendations of the Selection Committee which consists of the Chief Justice of the High Court or his nominee, the secretary of the housing department and the secretary of law as prescribed.
Term of office of the Chairperson and members (Section 47)
The Chairperson of the Appellate Tribunal or a Member of the Appellate Tribunal shall serve for a term of not more than five years from the date of his appointment, but shall not be eligible for reappointment. Provided that if a person who is or has been a High Court Judge is appointed as Chairperson of the Tribunal, he shall not hold office after he has attained the age of 67 years: Furthermore, no Judicial member, technical member or administrative member shall hold office once he has reached the age of sixty-five. Before choosing anybody as Chairperson or Member, the competent government must ensure that the person does not have any criminal convictions or financial or other interests that may prejudicially affect his functions.
Powers of the Appellate Tribunal (Section 53)
The Tribunal is not bound by the Code of Civil Procedure of 1908 or the Indian Evidence Act of 1872, which impose strict procedures. It shall be guided by the principle of natural justice and also has the authority to regulate its own procedures. However, the Chairperson has administrative powers under the Act as he has been provided with powers of general superintendence and direction during the time of their conduct in the affairs of the tribunal and all the orders passed by the tribunal are to be executed as a decree of a Civil Court. The powers of the civil court are entrusted to the Tribunal which includes the following –
- Summoning and enforcing the attendance of any person and examining him on oath;
- Requiring the discovery and production of documents;
- Receiving evidence on affidavit;
- Issuing commissions for the examination of witnesses or documents;
- Reviewing its decisions;
- Dismissing an application for default or deciding it ex-parte, setting aside any order of dismissal of any application for default or any order passed by it ex-parte; and
- Any other matters as the Authority may specify by regulations.
Role of High Courts (Section 58)
All appeals from the Appellate Tribunal are heard by the High Court of the respective states. This must be done within sixty days from the date of decision or order on any of the grounds set out in Section 10 of the Code of Civil Procedure, 1908. In such instances, there is no right of appeal if the decision has been reached with the parties’ consent.
Power to make regulations (Section 85)
- The Authority shall, by notification, enact regulations consistent with this Act to carry out the purposes of this Act within three months of its establishment, by notification.
- Without prejudicing the generality of the foregoing power, such regulations may provide for all or any of the following:
- The form and manner of making an application and the fee payable therewith under Section 4(1);
- The form of application and the fees for extension of registration;
- Documents required under Section 11(1)(f) of the Act;
- Exhibition of layout plans and sanctioned plans along with specifications, approved by the competent authority under Section 11(3)(a) of the Act;
- Preparation and maintenance of other such details under Section 11(6);
- Time, places, and procedure for transaction of business in the meetings of the Authority under Section 29(1);
- The form and manner along with the fee payable for filing a complaint under Section 31(2) of the Act;
- Standard fee to be levied on the promoter, the allottees or the real estate agent under Section 34(e); and
- Such other matters which are required to be specified by regulation.
Penal provisions under RERA
|Violation of the provisions of law||A promoter shall be punishable with three years of imprisonment or a fine of ten per cent of the cost of the building.|
|Non-registration of a project||A promoter shall be punishable with a fine of ten per cent of the estimated cost of the building or the project.|
|False information||Shall be punishable with a fine of 5 per cent of the cost of the building or the project.|
|Failure to comply with Authority’s directions||The agents shall be punishable with a fine which may extend up to five per cent of the cost of the building and daily during which the offence continues.|
|Failure to comply with the orders of the tribunal||An agent shall be punishable with imprisonment for a period of one year with or without a fine, which may extend to ten per cent of the cost of the building.|
|Non – registration of the project||An agent shall be punishable with a fine of Rs. 10,000 per day or five per cent of the total cost of the building.|
Analysis of the Real Estate (Regulation and Development) Act, 2016
Advantages of RERA for the buyers
The customers are usually the ones who suffer the most if there is a problem, so the RERA was implemented having them in mind. The RERA Act has the following advantages:
- Risk of delay is avoided: In recent years, builders have been known for delaying the completion of projects. If there is any delay, the RERA act stipulates that a penalty must be paid.
- No excess charges: This Act contains all the information on the pricing per area. The RERA statute defines a built-up area, super built-up area and carpet area, making it impossible for builders to charge excessively. Payment for the super built-up area is forbidden. A customer will only be charged for the carpet area specified in the Act.
- Transparency: One of the most significant benefits provided to consumers is transparency. On the RERA website, the builders are expected to provide details about everything. This will assist customers in learning the finer points of the buildings and projects.
- Liability: Quality has always been a concern, particularly when it comes to a place where we must reside. If there is a quality issue, the consumer should notify the builder, who should address the issue within 30 days.
- Quick redressal: Regulatory organisations and appellate tribunals will be established in each state under RERA to resolve builder-buyer issues. A person who has been aggrieved by any direction can expect a response from the appellate court within 120 days. If the buyer is not pleased with the decision of the Appellate Authority, he may further appeal to them. However, the appeal will only be heard after payment of
- Thirty per cent of the penalty,
- or a higher percentage as decided by the Appellate Tribunal,
- or the whole sum due to the allottee, including interest and compensation, if any.
Advantages of RERA for builders
The following are the few advantages given to the builders:
- Adequate financial inflow: The start of a project is a big stumbling block for the property business. Financial changes such as the formation of the GST and as a result, the liberalisation of FDI have aided RERA in making business easier. Lenders are more prepared to provide income to builders now that the RERA Act has restored trust and openness. The transparency of monetary transactions has improved since demonetization. Many international and domestic investors are being encouraged to invest in Indian projects. As a result, there are more structured financial inflows, making property developments easier to implement.
- Increased competition: There are further chances of reviving the real estate market up to the mark which will surely interest home buyers to invest and buy property without any fear of fraud. Due to such progressive rules, it will most likely generate competition among the developers as the buyers will be interested in investing their money into the upcoming projects without much fear.
- Better functioning: In the past, there were no suitable regulations or norms governing the real estate industry. There were also a lot of unresolved issues. The RERA act made it easier for the real estate industry to work efficiently and consistently.
- Imposition of penalty: If a customer does not pay his dues on time, the legislation contains a clause requiring the consumer to pay a penalty for the late payment.
- Transparency: Both the buyer and the seller benefit from transparency being the core aspect of the Act. Transparency also aids in the development of a positive relationship between the builder and the customers.
Disadvantages of RERA
As much as there are real benefits of enforcing RERA, there are also some disadvantages. The builders are the ones who have suffered the most, as a result of the RERA statute, and have had to shoulder a lot of costs. This Act has had a significant impact on business. The following are some of the drawbacks of RERA:
- The RERA rules and regulations do not apply to projects that were initiated before the adoption of RERA.
- Compulsory registration may be a drawback because the government can take a long time to approve a plot.
- There is also internal politics in this industry. Sometimes the government requests additional funds or requires them to bribe the government to obtain approval, resulting in financial difficulties.
- There are no specific requirements for buildings less than 5000 square metres. This will allow them to charge excessive fees resulting in a conflict.
- A project may take longer to complete than expected. It is tedious to begin a new endeavour without completing the previous one as a builder cannot sell a building until it is completed and it becomes difficult for them to start a new project.
- It takes around two years for the promoter to acquire clearance, and thus the sector’s expansion will be hampered.
- There are no provisions for rentals in RERA.
- There is a cash flow problem due to the seventy per cent deposit of payment in the escrow account.
- The punishments are severe. In case of contravention of the provisions of this Act or failure to comply with the provisions of the Act, the punishment is either five per cent of the cost of the project.
Impact of the Real Estate (Regulation and Development) Act, 2016 on the industry
The implementation of RERA has caused significant disruption in the business. The real estate business has contributed significantly to the country’s economy but this measure has harmed the industry and all builders are currently in financial distress as the Act has a direct impact on the prices of homes and home loan interest rates. The sector is beset by financial difficulties and has been hampered by numerous obstacles. The implementation of RERA has caused significant disruption in the business. The real estate business has contributed significantly to the country’s economy but this measure has harmed the industry and all builders are currently in financial distress. The sector is beset by financial difficulties and has been hampered by numerous obstacles. RERA has had a massive impact on the corporate world. The execution of demonetisation was already a problem but then the simultaneous enforcement of RERA produced a mass outrage. Property sectors of many states are becoming more transparent and credible as a result of existing regulations. Benefits are anticipated to accrue over time to all or any buyer. The scope and spirit of the Act can be upgraded by technologically enabled platforms that can handle greater data sets that are not yet recognised by many countries. The predicted advantages of the Act are likely to grow as a result of the increased focus on its implementation.
The economic impact of RERA on the industry
In India, three main policies were recently brought in by the Union Government. They were demonetisation, Goods and Services Tax and Real Estate (Regulation and Development) Act which impacted the economy to a large extent. RERA was enforced after six months of demonetisation which detrimentally affected the real estate market and impeded its development. RERA affected the small-scale developers and contractors, especially in the metropolitan areas as many of their planned real estate projects were either abandoned or delayed until they were registered under RERA Act and as a result job prospects for the workers were scarce. There were also changes in liability and increased responsibility of the builders in terms of the delivery of the property. Furthermore, it led to a situation where sellers could not possibly sell the property at lower prices due to limited incentives and buyers were not willing to buy property due to their income hit by demonetisation or the reduced liquidity of the property. The real estate market was completely sluggish causing economic impacts and imbalance.
Lacunas in the RERA Act
- The RERA Act categorically describes what is a carpet area but in terms of describing a net functional area, it did not include the area sold to the allottees for their individual use, such as the living room, bedroom, kitchen area and the lavatory, which should have been included.
- Every potential project is to be registered under the Act under Section 3 of the Act. RERA also bars pre-launches in cases where authorisation is absent by the agency concerned. It is challenging when there are several phases in constriction of a real estate project and approval is required for each project. As there is no single-window clearance, the project’s progress will face hindrances and be delayed. Whereas Section 32 of the Act says that it is the duty of the Real Estate Authority to make a recommendation on the development of a single-window system to the appropriate government of the competent authority to check if the projects are completed in due time.
- In many states, the implementation of the Act began only in May 2017 although the Act was effective from May 2016 and as of 2019 many states and union territories did not have the Real Estate Authority’s website launched. As per the status of RERA implementation in India, the National Capital Territory of Delhi, Assam, Manipur, Nagaland, Arunachal Pradesh, Sikkim, Jammu and Kashmir and Ladakh have not launched the Real Estate Authority’s Website.
- As there are insufficient recovery powers with RERA, there is a big lacuna as there is a failure to comply with all the orders issued in favour of homebuyers by the RERA Authorities in the respective states
- The Real Estate (Regulation and Development) Act, 2016 does not mention that it is available only for registered projects.
- The Act provides for certain categories of projects that are not required to be registered; these are within the scope of this Act. Although the projects mentioned in Section 3(2) have been pulled out of registration requirements, it has not been done so in the purview of other provisions of the Act.
- The provisions for registration and obligations to be carried out at the time of the registration are applicable only for the registered projects and not all projects.
- There is a lack of cash caused by a variety of extrinsic and intrinsic issues in the sector. Builders are forced to seek alternative sources of funding, resulting in a spike in home prices. This fluctuation has an impact on the demand and supply situation in this industry.
- Cash flow issues will arise as there is seventy per cent investment in the escrow account, causing project delays. This step is however taken to keep the developer’s mind from wandering to new projects and to finish the current project.
- If a builder fails to comply with any provisions of the Act, he is punished with up to three years imprisonment or a fine of ten per cent of the total cost of the project. This issue put the buyers at risk and forced them to leave their homes until the problem was resolved.
- RERA does not include any rental agreements, so it is entirely up to the buyer to save the rental agreement, which clearly states the agreed and disagreed portions, to save the property and make correct use of it.
Key challenges of the Real Estate (Regulation and Development) Act, 2016
RERA, 2016 aim to create symmetry of information between the promoter and the buyer, transparency of contractual terms, basic accountability standards, and a fast-track dispute resolution process. However, the system’s stumbling blocks are outlined below:
- There is still a disparity in the timelines that states use to enact RERA Acts. Only 15 states have issued final guidelines, while others are still working on them.
- There is also a lot of misunderstanding among brokers and distributors about how to advertise projects to customers. Prohibitions on the development of builder microsites, restrictions on selling, KYC, and other issues are yet unclear.
- There is also some confusion regarding the re-execution of agreements in cases when the deed has already been signed. While some states demand that all such arrangements be re-executed under the RERA, others exempt existing agreements. This mismatch between states is causing a lot of misconceptions among property buyers.
Current issues in India in relation to the Real Estate (Regulation and Development) Act, 2016
The government intends to put tenanted or abandoned buildings, as well as their renters, under the Real Estate (Regulation & Development) Act of 2016, giving the consumers the same protection as other homebuyers for the first time. Many cities, particularly Mumbai, have tenanted or decommissioned buildings that contain people who have been living there for decades at low and artificially discounted costs. According to Magic Bricks, over seventy-four per cent of homebuyers in India are uninformed of the online process for checking the status of the project under the Real Estate Regulatory Act and also unclear about whether the projects are registered on a website or not. They majorly lack the relevant information such as carpet area, payment methods and the builder’s registration number. Many projects were supposed to register on websites and distribute fliers with the builders’ specific details.
Analysis of the establishment of the tribunals
When it comes to the establishment of Appellate Tribunals and related tasks, there have been some aspects that require attention. The following are some of them:
- Real Estate Appellate Tribunals have not been formed in all Indian states and union territories. Appellate Tribunals have been formed in 22 states, with 13 permanent and 9 interim tribunals. The states must establish permanent authorities and Appellate Tribunals to better execute the Act and reduce the burden on the district courts.
- There was a petition raised in the Gujarat High Court to ensure that the tribunals are constituted as per the Act. Because the Appellate Tribunal lacked technical members, it was called “Coram non-judice.” Technical members must be recruited since the real estate business necessitates specialised knowledge that judicial members may lack. Real estate is a vital national asset. The goal of the Act will be defeated if the Tribunal becomes bureaucratized. Other difficulties were noted as well, such as the Appellate Tribunal’s failure to give information on the number of appeals filed, pending appeals, and so on. To avoid further dilution of the RERA, it is necessary to guarantee that the institutions involved are given sufficient autonomy to function efficiently and that additional bureaucratisation is avoided. Important factors such as vacancies not being filled or appointments not being made impede institutions and contribute may defeat the objectives of the Act.
Geetanjali Aman Constructions v. Hrishikesh Ramesh Paranjpe
Issue – In this case, the issue was about project registration and the dispute was with regard to Section 3 of RERA. The most essential rule in this regard was Section 3(2), which stated specifically that projects are not necessary to be registered if their area does not exceed 500 square metres or if the building does not have more than eight storeys.
Arguments – Even after arguing that it is an “or” condition and not a “and” condition, the defendant failed to get the desired result. The argument put forward stated that the first condition that it must be within 500 sq meters. is satisfied, while the allottees have filed that since there are approximately 22 flats and 9 shops, it violates the second condition The question before the court was to interpret Section 3(2) and it held that Section 3(2) will be interpreted in its truest sense now and that the developer needs to satisfy both the conditions to get approval.
Decision – Held that the developer has to register the project within one month and pay thirty lakhs.
Mr. Jatin Mavani v. M/s. Rare Township Pvt. Ltd, 2018
Issue – The issue, in this case, is the filing of several RERA proceedings on the same subject matter. In this case, the complainant claimed that despite booking an apartment and paying the appropriate consideration, he was not provided with the flat on time and that other customers similarly sought redress from Maharashtra RERA, requesting the cancellation fee be waived and the sum already paid to be refunded.
Arguments – The respondent builder argued that the first complainant never had the agreement registered and hence it could not be carried out. Even after the respondent asked him to enter into a new agreement, he refused and is now coming up with other buyers which would amount to a multiplicity of proceedings under the same authority, as he was a party to an earlier proceeding.
Decision – The Maharashtra RERA took note of this and decided that the complainant had exhausted his remedy when he first sought the forum and that he now has no locus standi in approaching the court because, if he is regarded as an allottee, numerous proceedings before the same court would not be permitted.
Sushil Ansal v. Ashok Tripathi, Saurab Tripathi, 2020
Facts – In this case, a decree was challenged in the NCLAT, which ordered the company to file for insolvency in order to pay a sum of rupees 73 lakh awarded by Uttar Pradesh RERA. The question was whether home buyers may be considered financial creditors.
Decision – The forum determined that homebuyers can enforce their decree under civil law, but they cannot seek remedy from the IBC. According to the 2019 amendment, either 100 buyers or ten per cent of the allottee must file bankruptcy, but the fact that there are only 100 buyers can force the company to file bankruptcy by only two or three individuals. It is clarified that a home buyer is not to be seen on the same lines as a financial creditor when it comes to enforcing a decree for the repayment due to default on the part of the promoter itself.
Baldev Singh v. Ultratech Township Developers Pvt Limited, 2020
Issue – The question, in this case, was whether an allottee can demand a refund while withdrawing from a project which was nearing completion. The Authority in his opinion held that it not only protects the interest of the buyers but promotes orderly growth of the real estate industry through efficient project execution in the interest of the larger public.
Decision – The Haryana RERA Panchkula’s view can be summed up as follows –
“In case the relief of refund is granted to the complainant, interests of the rest of the non-complainant allottees could also get seriously jeopardised. Moreover, the flat of the respondent is complete and ready for possession and the complainant can take possession of the flat after clearing his pending dues.”
The Act is a great step forward in terms of boosting transparency in the real estate market, increasing promoter and developer accountability, and providing effective grievance resolution channels. As there are stringent rules and regulations in the highly corrupt sector, there will be less litigation. The establishment of laws like RERA is a big step forward in terms of raising awareness among customers, promoters, and builders. In the future, similar to RERA, the modernisation of land records, land acquisition, and GST could be prioritised for the real estate sector’s growth. The RERA is dedicated to the successful and effective implementation of the country’s real estate law, and it has adopted relevant and consistent steps to promote the sector’s development. Various policy measures adopted under the RERA would undoubtedly produce significant improvements in the economic and social transformation to stimulate the long-term development of RERA, as well as a customer-friendly environment.
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