Important Provisions Of RERA (Real Estate Regulation And Development) Act

This Article is authored by Rhea Banerjee, pursuing B.A.LL.B from Indore Institute of Law.

Introduction –

Since decades there have been complaints regarding the real estate transactions by the buyers as they were highly one-sided agreements and mostly in favour of the developers, completely ignoring the say of the buyers. Thus, in 2016 the real estate developers witnessed an enormous change in the way of their operations and functioning. If one would look into the papers before 2016, it usually had a report speaking of the real estate lopsided functioning of the developers and how they miserably failed to keep up their promises, with respect to granting the possession of the developed properties or amenities or even returning the money of buyers in case of cancellation of agreement.

Thus, RERA and government’s model code have set an aim to create a fair and impartial relation between the buyer and seller, especially give equal rights to the buyer of the properties in the core market. With the medium of RERA, it will make purchase of properties much easier, make the developers more accountable and maintain transparency between the buyer and seller, and it is expected that the states don’t dilute the essence of provisions and spirit of the central act. RERA will be the first real estate regulator of India and it is mandatory for the all the states and union territories to form their own rules and regulator keeping the spirit and model of central act in mind.

Hence, the Real Estate (Regulation and Development) Act 2016 (RERA) was passed by the Indian parliament. The act aims for protection of interests of the buyers and even give an enhancement to the investments made in the real estate sector. The RERA Bill was first passed by the Rajya Sabha on March 10 2016 which was later followed by the Lok Sabha on March 15 2016 and the Act finally came into force from May 1, 2016. Out of the 92 sections only 59 were originally notified on May 1, 2016 and the rest of the sections were enforced on May 1, 2017. As per the Act, the central and state government need to notify their rules according to the Act within 6 months based on the model rules of central act. Till now, there are 22 states and 6 union territories who have notified the RERA rules and among them 19 states have an active online portal of RERA.

Aim of RERA –

The RERA was created with the perspective that there was need of regulating authority for the real estate sector and RERA was one of the means to bring this regulation under one legislation with the goal of promoting and regulating the real estate sector and keep a check on the sale of property, building, apartment to maintain transparency between the buyer and seller.  The initial reason behind enactment of this Act was to secure the interest of the consumers (in our case home/property buyers) and the second goal was to establish a common adjudicating mechanism which would provide speedy redressal. Along with speedy redressal the Act also aims for establishing Appellate Tribunal that would have appeals from the directions, orders of RERA or the adjudicating officer for the matter connected or incidental to.

Amendment made with respect to “Carpet Area” –

The promoters of real estate projects used to earlier charge properties on the basis of built-up area or super-built up area whereas this has now been changed and the promoters can charge the buyers only as per the basis of the carpet area and not the built-up or super built-up area. The Act even limits the promoter from charging not more than rate of 10% as an advance payment of the total cost of the building, plot or apartment unless both parties have entered into a written agreement of sale. The terms carpet area, built-up area and super built-up area are explained further-

• Carpet area- the name makes it clear, stating it is the net usable floor area in building/ plot/apartment
• Built-up area- this include the carpet area along with the area covered by inside and outside walls, balconies and verandah attached with the respective apartment for exclusive use of the buyer
• Super built-up- this involves the carpet area, built-up area and some additional common areas such as staircase, lift shafts, lobbies etc. 

Key Features Of Act

The enactment of the RERA Act has had some positive impact on the real estate sector and now it provides a common legislation for the purchase of flats, plots, apartment etc. and tries to achieve a standardised practise around the nation. Some of the noteworthy highlights of the Act are as follows-

• Formation of regulatory authority-

Earlier India didn’t have any unified regulator for real estate like SEBI for securities and equities. But with the enactment of the Act, it has established a Real Estate Regulating Authority in every state and union territory. This has led to protection of stakeholders and helpful for keeping a record at a designated repository and initiating a speedy redressal system. The authority has made it compulsory that the applications should be disposed off within a period of 60 days and time extension can be granted only if there was a legitimate reason to do so. Further, the Appellate authority are also established to hear out the appeals form RERA and adjudicating officer.

• Mandatory Registration-

As per the Central act, every real estate project (where the total area to be developed exceeds 500 sq mt or there are more than 8 apartments are to be constructed in any phase) they have to be registered at the respective state’s RERA.

The projects which are already existing without the completion certificate (CC) or occupancy certificate (OC) also need to comply with the registration requirements of the Act and these projects should file for registration within a period of 3 months and the authority will render the decision of acceptance or rejection within 30 days. Once the registration is accepted, then the promoters are required to post all their relevant and essential details on the official website of RERA. The detailed information of the project may include details of the promoter, status of land, approvals, schedule of completion etc. In case the promoter, fails to register this may lead to penalty of 10% of the total cost of the project or imprisonment upto 3 years.

• Reserve Account-

One of the major reasons for delay of projects was that the funds collected from one project was usually used to fund new and different projects. Thus, in order to avoid such diversions promoters were required to lock their 70% of the amount of all the project receivables into a separate reserve account. The proceeds of this account can be utilised only for construction and land expenses of that project and that too after it is certified by a professional.

• Continuous disclosures by promoters-

Post the enactment of the Act, in order to keep it transparent the home buyers were able to monitor the advancement of the project on the official site of RERA, since it was mandatory for the promoters to continuously make periodic submissions to the regulator concerning the progress of the project and keep him updated.

• Title Representation-

As per the central act the promoters are required to make a positive warranty stating his right on the title and interest on the land and in case any defect is found in the title, then this warranty can be used by the buyer against the promoter. Along with this the promoter are required to have an insurance against the title and construction of the project and details of which would be given to the allottee once the sale agreement is executed.

• Standardised sale agreement-

The Act has mentioned a model sale agreement which is to be entered between the promoters and homebuyers. Usually the promoters used to insert penal clauses against the buyers for any kind of defaults, whereas if the similar default was caused at the hand of the promoter, then it attracted no penalty for the same. The agreements were typically made to favour the seller but with the standard model sale agreement, the home buyers cannot be anymore cheated.

Important Provisions Of Rera 2016 –

There are certain sections which are of primary concern when one has to know about the Real Estate (Regulation and Development) Act, 2016. Some of the important ones are as follows-

• Section 2 (definitions)

This Act attempts to take care of any ambiguities with respect to the working of the regulation. There are numerous definitions brought under this Act which the real estate owners might not be aware of, some of those important definitions can be seen as follows-

• Section 2(f) “Appellate Tribunal” refers to the tribunal that is defined under section 43 (Real Estate Appellate Tribunal)
• Section 2(i) “Authority” means the Real Estate Regulatory Authority that is established under sub-section (1) of section 20
• Section 2(g) “Appropriate Government” has been defined with respect to matters-
• 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
• The State, the State government

• Section 3 (prior registration of Real Estate with RERA) and section 59 (contravention of Section 3)

As stated above, the promoters cannot advertise or market their projects or even sell or offer to sell their projects without completing their registration. In case of an incomplete project prior to the enactment of the Act, where the CC or OC has not been issued, the promoter has to make an application to the Authority for its registration within a period of 3 months. In cases, where the development is beyond the planning area, the allottees can be granted permission with the permission of local authorities.

Where the total area of the project is 500 sq mt or comprising of 8 apartments and the CC has been received already, no registration is necessary for repairing or re-development of those projects.

In case of non-registration of the project, it would attract the Section 59 raising a penalty of up to 10% of the estimated total cost of the project. And in case of contravention of an order or repeated violation of Section 3 would make the promoter liable for an imprisonment up to 3 years and an additional extension of 10% of the fine.

• Section 4 (application for registration of real estate project) and section 60 (penalty for contravention of section 4)

As per section 4 of the Act, it is mandatory to apply for the registration of your project and the registration amount (fee) is specified in the regulations for the same attached with list of documents that need to submitted in the application. The list of documents is as follows-

1. Brief details of the project/ enterprise
2. Brief details of the projects that were launched by the promoter in the past five years
3. An authentic copy of the approvals and commencement certificate from the competent authority for every phases of the project
4. The certified plan, layout plan and specifications of the proposed project or the phase thereof
5. The sanctioned and layout plan and specifications of the proposed project or the phase thereof which includes the fire-fighting facilities, drinking water facilities, emergency evacuation services etc.
6. Location details of the project with clear demarcation of the land to be used for the project, inclusive of latitude and longitude of the end points of project
7.  Proforma of the allotment letter, an agreement for sale and the conveyance deed proposed to be signed with the allottees
8. Number, type and carpet area of apartment for sale
9. Number and areas of garage for sale in the project
10. The names and addresses of his real estate agents, if any
11. The names and addresses of the contractor, architect, structural engineer and other persons concerned with project
12.  A declaration supported by an affidavit which shall be signed by promoter stating his legal title along with documents are authentic, time period estimate, no declaration or details of encumbrances (if any) and 70% of the deposited amount will be kept in a reserve account for the project.

The promoter can withdraw that amount only for the purpose of construction of the respective project after getting a certified copy from engineer, CA or any professional. The promoter also needs to get his accounts audited once in every 6 months in a year. If the promoter is found in contravention of section 4, then he will be liable for penalty u/s 60 of the Act i.e. upto 5% of the total estimated cost.

• Section 11 (functions and duties of promoter)

Once the promoter receives log in ID and password, the promoter has to create a web page of his project on the website of the concerned authority and all the details mentioned u/s 4 should be available for public viewing including the list of documents, list of disclosures of the promoter. The other pertinent functions of promoter are-

• Advertisement issued by promoter shall have the significant website address of the authority
• List of enclosures should be given to the allottee
• The promoter is responsible for all the obligations, functions till the conveyance and common areas of property are handed over to allottee
• The responsibility with regard to any defects will continue as mentioned u/s 14 of the Act
• To obtain a CC or OC and make it available to the allottees
• To obtain lease certificate in case of leasehold land, clearly specifying the period of lease, clearance of duties etc.
• Maintain crucial services at a reasonable charge until the association of the allottees takes over these matters
• Permit the formation of association
• Further execute a registered deed of conveyance of apartment, plot, building to the each and every allottee with the undivided proportionate title of the common areas to the to the association or competent authority
• Pay the outgoings till the transfer of possession is made and in case there is delay in payment then the promoter will be liable to pay the outgoings even after the transfer is made
• The allotment can be cancelled as per the terms of the sale agreement and the allottee has the right to approach the authority in case of any aggravation due to the cancellation

• Section 18 (Return of Amount and Compensation)

In case the promoter fails to complete the project or fails to handover the possession of the project as per the terms of the sale agreement or deal due to discontinuance of business or cancellation of agreement he will be liable for the following as per the demand of the allottees-

1. In case of withdrawal of the allottees, the promoter shall return the amount along with the interest as prescribed in the act
2. In case of non-withdrawal of the allottees, then the promoter shall pay him prescribed rate of interest every month

The promoter is liable to pay the compensation for any loss caused due to the defective title of the project and such a claim by the allottee is not time barred by any limitation. Even if the promoter fails to discharge his duties accordingly, then he is liable to compensate the allottee as mentioned in the Act.

Case Laws –

• In the case of Suman Nandi & Anr. v. Unitech Ltd & Anr, it was stated by the builder that he had shortage of labour in 2010 due to Common Wealth games which led to delay in delivery of project. But the NCDRC rejected the plea of builder and stated that one cannot hide behind the bogus plea of force majeure or any exceptions mentioned thereof in the Buyer’s agreement to cause deliberate delay of the possession.
• In case of Bhattacharjee v. Delhi Development Authority, the Delhi High Court highlighted the disadvantages of delay in delivery of possession, some of them were supervision charges, increasing interest on the properties, even the land costs keep increasing and the ready to move plots if kept empty for long start depreciating and deteriorating due to natural factors.

If we look into the impacts of the Real Estate Regulation Act, 2016 then it can be noted that the RERA Act has benefitted big as well as small enterprises and India is currently at a novice stage even the advocates are striving hard with the dos and don’ts of this Act and one who is a part of the real estate business should be in compliance with these RERA Act as well as the RERA rules framed specifically under each state, or it may cost upto a great penalty!

Read RERA Bare Act – RERA

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