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Real Estate (Regulation & Development) Act, 2016

The real estate sector which has so long been afflicted by lack of transparency and regulatory mechanisms has been resurrected by the enactment of the RERA Act. This is expected to bring in more investor confidence and growth in the sector. This also ensures that the gullible buyer is not deceived by the sinister designs of builders and developers with mala fide intentions. This article delves into a holistic analysis of the said legislation.
Written by:
Prachi Darji
Published on
16-Oct-19

An Elucidation on the RERA Act, 2016

It is imperative for lawmaking bodies to formulate laws that optimize sectors of business through frameworks and regulatory authorities. The Real Estate (Regulation and Development) Act, 2016, as the Act describes it, was enacted for the establishment of a Real Estate Regulatory Authority and for the regulation and promotion of the real estate sector.

The primary objective behind the legislation of RERA was to ensure the protection of the interests of homebuyers.

What is RERA?

RERA, or the Real Estate (Regulation and Development) Act, 2016, is legislation aimed at the protection of homebuyers' interests and fostering a regime of transparency and fairness within. The Act addresses the pitfalls of the existing regime and replaced the same with a regime that defined the rights of homebuyers and the rules and regulations to be followed by the developers. Furthermore, the RERA specifies norms for the development of real estate projects, aimed at bringing greater transparency and accountability into play. Moreover, the RERA provides for the creation of a Real Estate Regulatory Authority and an Appellate Authority in each state for receiving and addressing complaints by the buyers and real estate investors, in case the developer commits wrongs.

Table of Content:

  1. Real Estate Business in India before RERA - Pre-RERA
  2. Authorities under the RERA Act
  3. Obligations on Developers or Promoters by RERA
  4. Obligations on Buyers by RERA
  5. Benefits to Buyers under RERA
  6. Benefits to Developers under RERA
  7. Impact of RERA
  8. How to Register Projects under RERA
  9. A step-by-step guide to file a RERA Complaint
  10. Penalties for non-compliance under the RERA Act
  11. Frequently Asked Questions


Real Estate Business in India before RERA - Pre-RERA

Before the enactment of the RERA Act in India, the Real Estate sector was unregulated. Hence, often the developers were found exploiting the gullible homebuyers. We had our property developer not deliver the property on time when we bought our home twelve years back. The property developers used to market close delivery dates, knowing very well of the certainty of prospective delays. There were no regulatory mechanisms to curb the same. There was often no construction linked payment schedule. The payment schedule always used to be time-bound, with even interests being payable for delayed payments while delayed deliveries were compensated with piecemeal payments. There was an acute lack of transparency relating to the financial conditions and status of the developer, often leaving the homebuyers in the dark. Often, the agreements on under-construction projects were executed in the absence of proper regulatory mechanism and the buyers were left with no other option but the Consumer Dispute Forum for issues arising in the real estate. Hence, having legislation to regulate real estate was the need of the hour.

Advocate Pushkar Taimni says, “The Delhi High Court has ruled that aggrieved homebuyers can present their case against errant builders before both Real Estate Regulatory Authority and National Consumer Disputes Redressal Commission (NCDRC) comes as a huge relief for many buyers.”

Authorities under the RERA Act

The statute has defined and elucidated on the authorities and the appointment of the respective office bearers within the Act under Chapters 5, 6 and 7 of the Act. The three authorities involved are the Real Estate Regulatory Authority at each of the states, the Central Advisory Council and the Real Estate Appellate Tribunal. Here, getting acquainted with the term ‘appropriate government’ would be advisable for the easy understanding of my elucidation on the respective authorities.

‘Appropriate Government’, within the RERA Act, refers generally to the respective state governments. Nonetheless, in the case of Union Territories sans legislatures, the term refers to the Central Government. In the case of Puducherry, the term refers to the Union Territory government, and as regards Delhi, the term refers to the Central Ministry of Urban Development.

  1. The Real Estate Regulatory Authority: The respective appropriate governments appoint a Real Estate Regulatory Authority within their respective jurisdictions. A single Authority for more than one state or more than one authority for a single state can be appointed as the case may be. Each individual authority consists of a Chairman and not less than two members. The authority meets at regular intervals and formulates policies for the smooth functioning of the Real Estate sector and for the protection of homebuyers’ interests. They have the authority to conduct investigations and give out orders or directions. They have the authority to impose penalties or interests. In doing so, the Authority will be guided by, as explained by the Act, the principles of natural justice. Furthermore, the Authority can take up matters suo motu and refer the same to the Competition Commission of India whenever that is deemed fit. The Act has provisions for monitoring the real estate activities before such contraventions even occur. The builders and the developers are required to register their projects with the Authority and the Authority has to keep a database and ensure compliance with the obligations set out by the Act.

  2. Central Advisory Council: This is an advisory council that has to be constituted by the Central Government from among members of different ministries involved and individuals who represent different strata of the Real Estate sector. This Council is to have the Central Minister of Housing as the ex-officio chairman. This council shall advise the Central Government on the implementation of the Act, policy questions, protection of consumer interest and fostering growth of the real estate sector. The council can also advise the government on other matters the government might ask opinions on.

  3. Real Estate Appellate Tribunal: The appellate authority, as the name suggests, has been established to entertain appeals by the aggrieved parties. More than one appellate tribunal can be appointed by the appropriate government, as the case may be. Every bench has to necessarily consist of a judicial member and at least one technical member. The appellate tribunal awards a hearing to both the parties and comes up with appropriate orders, including interim orders, as the case may be, for the solution of the issues addressed under the appeal. The appellate tribunal also consists of a chairman and not less than two members. The tribunal has administrative powers in addition to judicial powers conferred on them. The tribunal isn’t subject to the Code of Civil Procedure or the Indian Evidence Act and is guided by the principles of natural justice. This appellate tribunal has equal powers as that of a civil court and its orders are to be treated at par with a decree by a civil court.

Appeals: Appeals from the appellate tribunal go to the High Courts.

 

Obligations on Developers or Promoters by RERA: 

The promoter is the one who finances/ incorporates a project developed by a developer, as we can infer from the use of words. In many cases, the developers and the promoters of a project are the same.

  • Primarily, a developer or a promoter who undertakes a project with over 8 units or 500 sq. meters has to obtain a registration from the RERA. 
  • All builders and promoters must create a website and display on the RERA Authority’s website and enter all the necessary details of the proposed project for public view, which contains details of registration and details of other projects undertaken by them.
  • Promoters are supposed to get a completion certificate from the concerned authority in order to transfer it to the allottees, individually or collectively.
  • The relevant documents are to be maintained and handed over while transferring the property to the allottee through a registered conveyance deed. They have to form an association of owners before the transfer of the property.
  • Until the transfer happens, they will have to pay the bills such as electricity charges, water charges, etc.

Obligations on Buyers by RERA:

  • The allottees/ buyers are supposed to make timely payments for the property as well as for allied charges such as electricity charges, as and when applicable, on time and will have to bear an additional interest in case of delay.
  • They will have to necessarily participate in the formation of an association and are expected to take possession of the property within 2 months of the issue of occupancy certificate.
  • The allottee/ buyer will have to comply with the orders of the authority or the appellate tribunal, as and when the same is required of him/her. Contravention of the same can result in penalties being imposed.

Benefits to Buyers under RERA:

  • Primarily, the RERA Act and allied rules prevent the promoters and the builders from taking the consumer for a ride by ensuring timely completion of the projects.

  • The Act assists in bringing transparency by preventing anyone from leaving the buyers in the dark and prevents the scope for the indirect accumulation of the black money.

  • “Agreement for Sale Rules" has brought an end to the one-sided agreement and the buyer exploitation in the sector.

  • The Real Estate Regulatory Authority and the Appellate Tribunals facilitate the faster, efficient and more convenient resolution of disputes relating to the real estate sector.

  • The Act also brings equity in operations.

  • The Act has defined “carpet area” objectively, thus eliminating different standards being adopted for the carpet area calculation by different builders.

  • The Act makes sure that the consumers have their right to information regarding the projects they are interested in investing in.

  • Similar interest rates for delays have been brought to bring parity between the consequences of delays in the payment by the buyer and the consequences of the builders for not completing the project on time.

  • The Act mandates the builder or promoter to maintain an escrow account for each project and the funds of each project are maintained in the respective escrow account, thus avoiding diversion of funds

  • Selling on wrong promises, defective titles and defective projects have been prevented by the introduction of the Act since it provides the compensations and countermeasures for these situations.

  • Furthermore, setting up of the state Authority for grievance redressal favors the buyers by the creation of a forum for a specific response to the grievances rather than general and non-specific relief as given by the Consumer Disputes Redressal Forum.

“Bringing in more transparency in the real estate development, Karnataka RERA has directed the property developers to specifically mention the RERA registration number on all the print advertisements for new projects,” says Advocate Mohammed Arif Khan Makki.

Benefits to Developers under RERA:

  • The Act promotes genuine developers ensuring more security for the well-intentioned businessmen in the sector.
  • As mentioned above, the Act brings transparency and accountability into play.
  • The Act instills investor confidence ensuring more investment flows to the sector.  This even magnifies the possibilities for foreign investment (FDI, ECB) in the real estate sector.

Impact of RERA

RERA has essentially streamlined the advances made by the banks and other financial institutions by incentivizing advances only to genuine buyers by mandating registration. Such registration can only be obtained post the submission of the required documents and approvals. This has been brought into play in most of the states and is hence turning out to be the general norm for real estate management in the nation. It has brought regulations that usher in security to the buyers and investors and hence, contributes to the growth of the sector by attracting more investments.

Click here to read more on the Impact of RERA on buyers.

How to Register Projects under RERA?

Registration of projects under the RERA has to necessarily happen as per these steps:

  1. The Builder or Promoter is required to open an escrow account in accordance with Section 4 (2) (I) (D) of the RERA Act.
  2. All the necessary documents have to be collected and submitted with Form A, the form for RERA registration.
  3. Any other applicable form has to be filled and submitted as required.
  4. Pay the registration fee for the registration of projects as applicable to the respective state.
  5. A RERA number shall be allotted on completion of the registration. This could be used for further references.

A step-by-step guide to file RERA complaint:

STEP 1: Visit the State’s official website and file the complaint on the said portal’s complaint registration page. One can easily find the link to the same.

STEP 2: The said link leads to the complaint form, where all the relevant details including Name, Address, Contact details, and Project details need to be filled up with supporting documents.

STEP 3: Finally, after the filling of the form, the complainant can pay the complaint registration fee and complete the process. The said complaint will be taken up by the respective authority.

Click here to read about How to send a Legal Notice against Builder for possession delay.

Penalties for non-compliance under the RERA Act:

Here’s a table of offences and penalties listed out under the RERA.

Specific Non-Compliance

Penalty

Non-registration of the project with the RERA

10% of the total estimated cost of the project

The project has not been registered and any order or direction for the same has been issued by the authorities

5% of the estimated cost of the project

 

Information or advertisement regarding the project found to be false

5% of the estimated cost of the project

Order of the RERA has been contravened or has not been executed

Daily penalty for every day after passing of the order which has been contravened up to 5% of the estimated cost of the project

Order of the Appellate Tribunal has been contravened

Up to 3 years imprisonment with or without a fine of up to 5% of the estimated cost of the project

 

Frequently Asked Questions:

Since when is the RERA Act applicable?

Since, the land is a subject matter falling under the state list, which means that state legislative assemblies have the authority to legislate upon the matters relating to land, the RERA Act was notified by each state on different dates and hence became effective in each state on different dates.

Is it compulsory for builders to register their projects with RERA

The RERA Estate Act makes it mandatory for all commercial and residential real estate projects where the project has an area of over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority (RERA) for launching a project. This is a step towards providing greater transparency in project-marketing and execution.

What are the rules of the RERA Act?

RERA specifies certain norms for building and development of real estate which will enhance the transparency in transactions in the real estate sector. It has provided several rights to the home buyers and has also specified certain rules and regulations to be followed by all builders/ developers.

How long does it take to get a RERA Registration number?

If you are applying for a broker license, sales agent license, or a developer license, RERA will respond within 5 days of receiving a complete application.

How do I file a case before the RERA Authority or Adjudicating Officer?

You can file a complaint under Section 31 of RERA either with the Real Estate Regulatory Authority or the adjudicating officer. This complaint can be filed against promoters, allottees and/or real estate agents. Many state governments have laid out the procedures for filing applications under RERA

How many times can a builder delay closing?

By law, a builder is permitted two extensions of 120 days each, without having to pay delayed closing compensation, provided that the homeowner was given proper written notice. After the 240 days have elapsed, the builder must set a Delayed Closing Date and the homeowner is entitled to delayed closing compensation.

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Reviewed by: Prachi Darji
Associate - Legal, MyAdvo Techserve Pvt. Ltd.

Prachi Darji is an expert corporate lawyer, currently associated with MyAdvo as an in-house legal advisor. She has finished B.Sc, LLB(Hons.) from Gujarat National Law University. She has an expertise in various domains of law including Intellectual Property Law, Company law, etc. At MyAdvo, she is taking care of litigation strategies and internal legal processes.

LinkedIn: https://www.linkedin.com/in/prachi-darji-539345118

Email: prachi@myadvo.in