This post was written by Satyaditya Singh Dhakare, a student at National Law Institute University, while he was interning at iPleaders.

The Real Estate (Regulation and Development) Bill was recently cleared by the Cabinet.

How will it impact the real estate industry in India? How will developers be affected? Will home buyers benefit? Let’s take a look.

The bill aims to ensure sale of real estate in an efficient and transparent manner and to protect the interests of the consumers in the real state sector. The bill also talks about establishment of a Real Estate Regulatory Authority and an Appellate Tribunal.

Important features/ Rules introduced in the real estate bill

• A promoter cannot develop any immovable property or make any constructions without registering the real estate project and obtaining a certificate of registration from the Real Estate Regulatory Authority.
• The promoter will have to furnish all the details of the project. These details will include:

(a)    details of the sanctions accorded by the Competent Authority.

(b)   details of the registration granted by the Authority.

(c)    full and true disclosure of his enterprise details including its name, registered address, type of enterprise (proprietorship, societies, partnership, companies, local authority etc.)

(d)   a full and true disclosure of the nature of his title to the land on which the proposed project is developed.

(e)   the layout plan of the proposed project.

(f)     the plan of development works to be executed in the proposed project.

(g)    the names and addresses of the real estate agents, if any, for the proposed project.

(h)   the names and addresses of the architect, structural engineer, if any

• If a person makes an advance or a deposit on the basis of the information contained in the advertisement or prospectus and sustains any loss or damage by reason of any incorrect, false statement included therein, he shall be compensated by the promoter.
• A promoter cannot accept any sum of money as an advance payment or deposit, from a person without first entering into a written agreement for sale with such person.
• A promoter is supposed to develop and complete the project in accordance with the plans and structural designs.
• Developers are required to keep 70% of the money raised from sales into an account exclusively for construction purposes. This amount cannot be used for other projects. The Real Estate Regulatory Authority is entrusted with the responsibility of monitoring these activities.
• Every allottee who has entered into an agreement of sale to take a plot or a building shall be responsible to make necessary payments in the manner and within the time as specified in the said agreement. Although if the developer is unable to give possession to the buyer in accordance with the terms of agreement then the developer will be liable to return the amount received by him.

Real Estate Regulatory Authority

Under section 17 of the Bill, a Real Estate Regulatory Authority is supposed to be established by the “Appropriate Government”. Appropriate government means Central Government in respect of matters relating to Union Territory and State Government in respect of matters relating to State Government. The Authority will consist of a Chairperson and at least 2 whole time members. The Authority can take all possible measures for the growth and promotion of a transparent, efficient and competitive real estate sector. Its functions will be rendering advice to the appropriate government in matters relating to the development of real estate, maintaining a website of records of all real estate projects, ensuring compliance of the obligation cast upon the promoters etc. The Authority will also have the power to set up a dispute resolution mechanism.

Real Estate Appellate Tribunal

The Central Government shall establish an appellate tribunal under Section 35 of the bill to:
(a) adjudicate any dispute:

(i ) between a promoter and a allottee;

(ii) between a promoter and Authority;

(iii) between Appropriate Government and the Authority.

(b) hear and dispose of appeal against any direction, decision or order of the Authority under this Act

The Tribunal shall consist of a Chairperson, 4 Judicial Members and at least 4 Technical Members. It will not be bound by the procedures laid down by the Code of Civil Procedure,1908 and will have power to regulate its own procedures. The Appellate Tribunal shall also not be bound by the rules of evidence contained in the Indian Evidence Act, 1872. Every order made by the Appellate Tribunal under the Act shall be executable by the Appellate Tribunal as a decree of civil court, and for this purpose, the Appellate Tribunal shall have all the powers of a civil court. Under Section 47 of the bill, an appeal shall lie against any order(not being an interlocutory order) of the Tribunal to the Supreme Court of India.

Central Advisory Council

The Central Government can also establish a Central Advisory Council  under Section 49 of the Bill, which will advise the Central Government on:

(a) on all matters concerning the implementation of the Bill;

(b) major questions of policy as applicable to the real estate sector;

(c) protection of consumer interest;

(d) to foster the growth and development of the real estate sector

(e) any other duty or function as may be assigned to it by the Central Government

Penalties

The Bill also lays down penalties for non-registration, wilful failure to comply with the orders of the Authority or Appellate tribunal and contravention of other provisions of the Bill. The punishment for not registering the project is imprisonment for term which may extend up to 3 years or a penalty which may extend up to 10% of the estimated cost of project. If a promoter wilfully fails to comply with the orders of Authority, then he shall be liable to a penalty of 1 lakh rupees for every day during which such default continues, which may extend to 5% of the estimated cost of the project.

Where an offence under this Bill has been committed by a company, every person who, at the time the offence was committed was in charge of, or was responsible to the company for the conduct of, the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Critiques and Praises

The bill was severely criticised by the Developers & Builders  and the intermediary agents and brokers.The Builders and Developers argued that that there are already a lot of laws and regulations and if the Bill is passed, it will create a lot more difficulties – the government has tried to allay their fears, as can be seen here. On the other hand, the Bill is nothing less than a boon for the consumers. The consumers are often made promises before the sale of a property but none of them are fulfilled by the promoters/ developers and they almost never hand over flats on time. The consumers now have a quasi-judicial body to approach which can take care of all their problems related to real estate.

The Bill also defines complicated terms like “carpet area”, “development works”, “promoter”, “real estate agent” etc. so that the builders and their team of lawyers do not interpret these terms for their own benefit. This will also help the consumers who cannot afford quality legal service and end up losing their hard earned money.

Are the developer’s interests protected under the Real Estate Bill?

It would be wrong to say that the Bill only focuses on the consumer’s interests and not the developer’s interest. The Bill contains provisions which makes the consumers responsible to make payments in the manner and within the time as specified in the agreement. Section 16 of the Bill talks exclusively about the obligations of allottees.

One of the key feature of the Bill is that the no civil court shall have jurisdiction in respect of any matter which the Authority or the Appellate Tribunal is empowered by this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken by these two. The orders of the Appellate Tribunal can only be challenged in the  Supreme Court. The bill therefore provides substantial amount of power and authority to the Real Estate Development Authority and the Appellate Tribunal.

Please write about the chances of this bill being tabled (has it been tabled yet?) and getting passed.

Status quo

The Bill has been cleared by the Cabinet. It is to be tabled in the monsoon session of the Parliament. Taking into account the positive responses it has generated, the Bill is most likely to be passed and take the form of enacted law soon.