RERA 2016

The Real Estate (Regulation & Development) Act, 2016.

The Real Estate sector currently contributes up to 9 percent of the Gross Domestic Product (GDP) and is also the second largest employing sector in India. As with all other sectors, it has been desired for long, that investments in the sector must not only be individual in nature but also attract qualified institutional investors. This attempt requires both credibility and resilience in the real estate arena.

The main reason for formulating this legislation was to ensure transparency in the sector; a move that would automatically bring about consumer confidence and eventually result in more demand. Lack of professionalism, prevalence of fly-by-night promoters, builders without appropriate title deeds and clearances and excessive delays in handing over of possession to the allottees further harangued the poor consumers. This piece of legislation was in contemplation for the past nine years before it was finally passed by both houses of the parliament and has seen considerable improvements over the previous Real Estate Bill proposed in 2013.

The following were the shortcomings in the bill proposed in 2013.

a) The bill after becoming a law would apply only to residential projects and completely excluded commercial projects from its purview.

b) Only projects more than 1000 square metres and those involving the construction of a minimum 12 flats were to be covered.

c) Any proposed renovation or redevelopment that didn’t require marketing or advertising would be outside its ambit and

d) Projects that had already obtained a commencement certificate would not be included.

These anomalies have greatly been taken care of under the new act.

Now, even though Land is a State subject, the Center has the power to enact appropriate legislation on subjects such as Transfer of Property, Contracts and Registration of deeds and documents; all of which fall under the Concurrent list.

It is important to note, that the Center enacted law is modular in its scope. This means, the act will not come into existence until and unless the rules and regulations for the same are notified by respective states. Initially the Ministry of Housing and Urban Poverty Alleviation (HUPA) had notified 69 sections and the rest 32 were notified by May 1, 2017.

The main provisions of the act are as follows:-

  • The Act provides for the set-up of a regulatory authority or the Real Estate Regulatory Authority and an Appellate Authority.
  • All Builders and Promoters have to mandatorily register themselves and their projects by 31 July, 2017 with the regulatory authority, failing which they may not carry out any advertising, marketing or selling of the projects. The Registration provides the promoters with a unique number which they may use for logging into the regulator’s website for uploading certain details.
  • Where a project has to be developed in phases, each phase has to be registered separately.
  • Agents are also required to register themselves with these authorities, following which they will be given a unique number for the purposes of carrying on future transactions.
  • The Regulators must respond to the applications for registration or any complaints from the buyer within a time period of 60 days.
  • Previously, the buyers and the promoters, for settling their grievances, would approach the civil courts or the consumer courts. Overlapping of jurisdiction used to be a problem. However, this act has ensured that civil courts are barred from exercising any jurisdiction over matters to be covered under the RERA and they shall be handled only by the appropriate regulatory authority and further by its appellate authority. The Authorities have to dispose off such cases that arrive before it WITHIN a maximum 6 months time. However, the subject matters of dispute proposed to be under the authority’s jurisdiction needs to be enlisted. For instance, whether questions over the ownership of property over which the project has to be set up would fall under the civil courts or would be covered by RERA?
  • The Act covers both Residential AND Commercial projects. Also, the scope of the act has been enlarged to cover projects that involve an area of not less than 500 sqm or the construction of at least 8 flats. Moreover, projects that have not yet received the completion certificates, also have to register themselves.
  • The Act minimizes all scopes of misrepresentation by directing the promoters and builders to maintain a record of details regarding the status of the project. These details have to be updated within regular intervals with a maximum quarterly delay. They are also required to put up details of their authorized agents.
  • The Floor Space Area (FSA) has to be determined in terms of “Carpet Area” now. The Act also goes on to define carpet area. This removes ambiguities regarding the area to be purchased by the allottee.

Briefly, the Promoter/Builder needs to provide for the following details while registering his project:-

  1. His enterprise details (name and type) along with the registered address,
  2. Previous projects launched during the last five years, status of such projects and if any litigations are pending against them,
  3. Copies of approvals and commencement certificate,
  4. Copies of title deeds to show that he is indeed authorized to carry out works over the property and where the property belongs to a third person that such permission to use the property has been granted,
  5. Details regarding the architects, engineers and accountants involved in the project, and,
  6. Specifications for the project such as intended layout, time period for completion, number of flats and garages, their carpet areas and list of other amenities intended.
  • The promoters need to maintain a separate account where 70% of the amount they receive from the allottees need to be utilized only for the purposes of construction. This provision acts as a safety guard to prevent misappropriation and diversion of money received.
  • Any deviation from the intended plans and specifications and timeline of the project submitted during the course of deviation, needs to be approved by the allottees. However, the exact number of allottees required for such approval is not clear, i.e. whether the majority of the allottees will suffice or all of them need to consent.
  • Any transfer of rights and liabilities by the promoter to a third party needs to be consented to by two-thirds of the proposed allottees. Again, this serves as a safety guard to ensure that under circumstances where the promoter may not carry out his obligations in a financially viable manner, he may transfer his rights in the real estate project to another party who may be consented to if the allottees believe the latter can execute the obligations in a better manner. Ofcourse, in instances where the third party is known for discharging his obligations, getting consent from the allottees will not be a tough job!
  • Any contravention of order from the authorities by the promoters or their agents may involve a fine of up to 10% of the project cost or an imprisonment of a maximum of three years or both. Further, registrations already granted can also be revoked. While, any contravention by the allottees can result in a fine to be determined by such authority or an imprisonment for a maximum period of 1 year, or both.
  • Any breach of contract by either party (promoter or the allottee) will make them liable to pay ┬áthe amount involved in such breach at an interest of 2%.
  • The promoter/builder may not ask for more than 10% of the estimated cost of the project from the allottee before actually executing the sale agreement in his favour.
  • The promoter must hand over possession of the flats to the allottees within 2 months from obtaining of the occupancy certificate.
  • If the promoter does not complete the proposed project within the time period mentioned, the allottee has the right to revoke the contract and is entitled to receive the invested amount along with suitable interest. However if the allottee decides to go ahead with the project, the builder needs to pay him a suitable interest charged per month till the date of delivery.
  • Where there are defects within the premises, the allottee needs to complain of such defects to the promoters within 5 years from the handing over of the premises. Such defects must be remedied by the promoter within 30 days.

It is important to note that this act does not do away with the jurisdiction of the high courts and the very reason for excluding jurisdiction by the civil courts is to prevent case backlogs. The act proposes to bring all stakeholders upon a common field. Also, the act ensures that ONLY organized players enter within the market or “survival of the fittest”!


~Ishita Chakrabarty~