In this article, Charmi Chhadva who is currently pursuing M.A. IN BUSINESS LAWS, from NUJS, Kolkata, discusses Salient features of the Real Estate (Regulation and development) Bill, 2016

Real estate is one of the evolving sectors in India. It is one important instrument of investment. The prices of real estate has been on a rise since past ten years and it has been necessary for the Parliament to look into this matter to stop the current practice of selling on the basis of ambiguous super built-up area for a real estate project. Such practices of selling real estate projects are illegal in nature. As per the current scenario, if a project is delayed, then the developer does not suffer in any way. And after the inclusion of the newly amended bill, 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. Any default by the developer shall imply maximum jail term for three years with or without a fine.

Real Estate (Regulation and Development) Bill, 2016

The Real Estate (Regulation and Development) Bill, 2016 is an act of the Parliament of India to protect home-buyers as well as commercial real estate investors. The law vests authority on the real estate regulator to govern such transactions.  The bill was passed by the Rajya Sabha on 10 March 2016 and by the Lok Sabha on 15 March 2016 and it has received the presidential assent on 25 March 2016. The Act is seen as a significant move towards ensuring consumer protection and normalising business practices and transactions in the real estate sector. This Bill has been passed to protect the consumers and investors who invest huge amounts in the real estate sector and to bring about better protection and transparency with safety of such investors. The law bars developers from advertising as well as bars them to sell homes until they obtain all approvals from local authorities.

Also they will have to be registered with regulators that will be set up in every state alongside appellate tribunals for dispute resolution. The law holds the promoters accountable for not registering their projects with the Real Estate Regulatory Authority (Regulatory Authority) and even for providing insufficient information about their project. The real estate broker are also accountable under the law.

All the ongoing projects which are over 17,000 currently will have to register with the authority. The buyer can contact the developer in writing within one year of taking possession to demand after sales service if any deficiency in the project is noticed.

Urban Development Minister Venkaiah Naidu said in the Rajya Sabha that “The consumer should be king here too”.

Some of the important amendments in the Bill are as under,

Real Estate Regulatory Authority

The purchasers under the real estate projects from a developer would have a specialised forum called the “Real Estate Regulatory Authority” which will be active within one year from the date of coming into force of the Act. Until the Regulatory Authority is functional, 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.

Registration

1. The promoter has to register their project (residential as well as commercial) 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.
2. Further, projects which have not received a completion certificate and are on-going, the promoter of such project shall make an application to the Regulatory Authority for registration of their project within a period of three months of the commencement of the Act.

The following types of projects shall not be required to be registered before the Regulatory Authority:

1. • Where the area of land proposed does not exceed 500 square meters or the number of apartments to be constructed in the project does not exceed eight apartments. However, the appropriate Government (Central and State Government), if it considers appropriate may also reduce the threshold limit if it thinks fit;
   • The projects for which the completion certificate has been received prior to the commencement of the Act;
   • Projects for the purpose of renovation or repair or re-development which does not involve marketing, advertising, selling and new allotment of any apartment plot or building.

The application for registration must disclose the following information

1. 1. Details of the promoter which should include the registered address, type of enterprise;
   2. A brief detail of the projects by the promoter, in the past five years, whether already completed or under development mentioning the current status of the projects and any delay in its completion with details of cases pending and type of land and payments pending;
   3. An authenticated copy of the approval and commencement certificate received from the competent authority and when in phases, an authenticated copy of the approval and commencement certificate of each of such phases;
   4. 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;
   5. Proforma of the allotment letter, agreement for sale and conveyance deed proposed to be signed with the allottees;
   6. Number, type and carpet area of the apartments and the number and areas of garages for sale in the project;
   7. The names and addresses of the promoter’s real estate agents, if any, and contractors, architects, structural engineers affiliated with the project; and,

A declaration by the promoter supported by an affidavit stating that:

1. 1. • He has a legal title to the land, free from all encumbrances, and in case there is an encumbrance, then details of such encumbrances on the land including any right, title, interest or name of any party in or over such land along with the details;
      • the time period within which he undertakes to complete the project or the phase; and
      • 70% of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.

Carpet Area

The developers can sell units only on carpet area. 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.

70% of realisation from allottees in a separate bank account

1. Most important feature of the Bill is that according to the Act, the promoter shall deposit 70% of the amount realised from the allottees, from time to time, in a separate account to be maintained in a scheduled bank. This is intended to cover the cost of construction and the land cost and thus the amount deposited shall be only used for the concerned project and for no other purpose.
2. The promoter can be entitled to withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the project.
3. The promoter must also get his accounts audited within six months after the end of every financial year. Such an audit is a must to verify the accounts of the promoter that the amounts have been used correctly and without any default by the promoter.

Post registration procedure

1. After the promoter has applied for registration, the Regulatory Authority shall within a period of 30 (thirty) days, either grant or reject the registration.
2. Upon granting a registration, the promoter will be provided with a registration number which shall include a login Id and password for accessing the website of the Regulatory Authority and to create his web page and to fill in the details of the project.
3. If the Regulatory Authority fails to reject the application within period of 30 (thirty) days from the date of the application, then the project shall be deemed to have been registered.
4. The registration, if granted, will be valid until the period of completion of the project as committed by the promoter to the Regulatory Authority. This period shall be extended by the Regulatory Authority for a period not exceeding one year, only due to specific reasons as mentioned in the Act and along with the payment of such fee as may be specified by the Regulatory Authority.

Revocation or lapse of registration

1. The Regulatory Authority may revoke the registration granted on receipt of a complaint or suo moto or if there has been a recommendation of the competent authority in case of any default by the promoter or when the promoter violates any terms of the approvals in the project or when the promoter is involved in any kind of unfair trade practice.

In the event the registration is revoked by the Regulatory Authority or it lapses:

1. • the promoter would be stopped from accessing the website for the project and will be specified in the list of defaulters on the website;
   • the remaining development works shall be carried out by another competent authority or in any other manner as may be determined by the Regulatory Authority;
   • the Regulatory Authority shall direct the scheduled bank where the project activities are carried out, to freeze the account and take such further necessary actions.

Advertisement/prospectus

1. The advertisement or prospectus by the promoter must mention the website address of the Regulatory Authority, where anyone can find all details of the registered project along with the registration number and other such important details which are important for the people to know before investing in such a project;
2. Where any person has relied on such advertisement or prospectus and makes an advance or a deposit, and then if such a person sustains any loss or damage if such information on the advertisement or prospectus is incorrect, false statement, he shall be compensated by the promoter in the manner as provided under the Act. The person can also withdraw the entire amount from the project as per his wishes.

Limit on receipt of advance payment

The promoter cannot accept more than 10% percent as the advance payment or an application fee, from a person without first entering into a written agreement of sale and register the said agreement of sale, under any law for the time being in force.

Addition and alteration in the plan

1. The promoter cannot make any addition or alteration in the approved or sanctioned plans, its designs, specifications and amenities of the apartment, plot or building without the previous consent of the allottee.
2. The promoter also cannot make any other addition or alteration in the approved or sanctioned plans, its designs and specifications of the apartment, plot or building and common areas within the project without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such a apartment, plot or building.

Structural defect

In case any structural defect which is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over the possession of the unit, the promoter shall rectify such defect without any further charge, within thirty days. If the promoter fails to rectify such defect within such time, the aggrieved allottee shall be entitled to receive appropriate compensation in the manner as provided in the Act.

Restriction on transfer and assignment

The promoter cannot transfer or assign his rights and liabilities in respect of a project to a third party without obtaining prior written consent from two-thirds of the allottees, except the promoter, and without the prior written approval of the Regulatory Authority.

Delay in handing over possession

In case of any delay in handing over the possession of the unit by the promoter to the allottee, the promoter shall be liable to return the amount received by him from the allottee with interest and compensation at the rate as provided under the Act. This relief will be available without prejudice to any other remedy available to the allottee and when the allottee does not intend to remove himself from the project, he shall be paid interest by the promoter for every month of delay, till the handing over of the possession, at a prescribed rate.

Adjudicating Officer

The Regulatory Authority shall appoint (in consultation with the appropriate Government) one or more judicial officers for adjudging the compensation to be paid by the promoter in default, who is or has been a District Judge, to be an adjudicating officer for holding an inquiry in this regard.

The Real Estate Appellate Tribunal

1. The Bill proposes to establish a Real Estate Appellate Tribunal (Appellate Tribunal) within one year from the date of commencement of the Act.
2. Any person aggrieved by the decision made by the Regulatory Authority or by an adjudicating officer, may make an appeal before the Appellate Tribunal within a period of 60 (sixty) days from the date of receipt of a copy of the order or any such direction.
3. The Appellate Tribunal shall dispose the appeal within a period of 60 (sixty) days from the date of receipt of appeal.
4. The Appellate Tribunal shall have 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 60 (sixty) days from the date of communication of the decision or order of the Appellate Tribunal.

Other relevant provisions

1. The rate of interest payable by the allottee and the promoter in the event of their respective defaults shall be the same.
2. After the promoter executes an agreement for sale for any apartment, plot or building, no mortgage or charge can be created by the promoter on such apartment, plot or building.
3. The promoter may cancel the allotment only in terms of the agreement for sale. However, the allottee may approach the Regulatory Authority for relief, if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale.
4. The promoter shall also obtain insurance as notified by the appropriate Government, including but not limited to the title of the land and building and construction of the project. The promoter shall also be liable to pay the premium and charges in respect of the insurance.
5. The promoter shall execute a registered conveyance deed in favour of the allottee or the association of allottees in respect of the undivided proportionate title in the common areas, and hand over of the possession within the time limit as provided in the law. In the absence of any such law, the conveyance deed shall be carried out by the promoter within a period of three months from date of issue of the occupancy certificate.
6. The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land in the manner as provided under the Act and such a claim shall not be barred by any limitation provided in any other law for the time being in force.
7. The physical possession of the apartment, plot or building shall be made within a period of two months of the occupancy certificate by the allottee.

Offences and Penalties

1. Stringent penal provisions have been prescribed under the Act against the promoter in case of any non-compliance with the rules and/or provisions of the Act or orders or directions of the Regulatory Authority or the Appellate Tribunal which are the following:

• If the promoter does not register its project with the Regulatory Authority within such period of time as provided in the Act then the promoter shall be liable to a penalty which may be up to 10% of the estimated cost of the project as determined by the Regulatory Authority;
• And if the promoter does not comply with the aforesaid order of the Regulatory Authority then the promoter shall be liable to a imprisonment which may be up to three years and a further penalty of up to 10% of the estimated cost, or both; and
• In case the promoter provides any false information while making an application to the Regulatory Authority or contravenes any other provision of the Act then the promoter shall be liable with a penalty which may be up to 5% of the estimated cost of the project.

1. These penal provisions have also been prescribed for any contravention or violation committed by the real estate agent or the allottee.

2. If any allottee fails to comply with, or contravenes any of the orders, or directions of the Regularity Authority, there may be a penalty for the period during which such default continues, which may cumulatively extend up to 5% of the cost of the plot, apartment or building.

Further, if any allottee fails to comply with, or contravenes any of the orders or directions of the Appellate Tribunal, he may be liable for an imprisonment up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the cost of the plot, apartment or building, as the case may be, or with both.

The Bill prevails

The provisions of this Act/Bill shall prevail in case there is any inconsistency between the provisions contained in this Act/Bill and in any other law (including a state law) for the time being in force

Conclusion

This is the best move by the Parliament to ensure transparency and accountability for the home-buyers and the investors in the real estate sector and it shall serve justice to all such home-buyers and investors and now the Government needs to establish the Regulatory Authority (or any other authority, in the interim) within the timeline prescribed under the Act to start implementing the provisions of the Act and make the Act functional.

This was all about Real Estate (Regulation and Development) Bill, 2016. What are your views on the Real Estate (Regulation and Development) Bill, 2016? Comment below and let us know.