END OF WOES – SOMETHING TO CHEER FOR PROSPECTIVE APARTMENT AND FLAT BUYERS

A brief on Real Estate (Regulation and Development) Act, 2016

This note is only intended as a general overview and is not to be viewed as a substitute for legal advice. Brands & Bonds shall not be liable for any actions taken or not taken on the basis of this note.

Finally, the apartment, flat and villa buyers has a reason to cheer and relax a bit with the enactment of a new law, albeit long overdue. After a lot of opposition and debates, the Indian Parliament had passed the “Real Estate (Regulation and Development) Act, 2016 on May 1st 2016 aiming to protect the rights of an ordinary home buyer, who has been running from pillar to post and frequently knocking the door of Consumer Courts and at times even invoking the Competition Commission for protection of their rights against unscrupulous builders and real estate developers. The Act intents to protect the interests of purchasers by promoting transparency, accountability and efficiency in the construction and execution of real estate projects undertaken by promoters, developers and real estate moguls.

For the past few years, real estate sector had been on the raise especially with demand for dwelling places coupled with the keen interest of the NRIs to invest in their homeland. Taking advantage of this boom many private players have entered this sector complicating the scenario by unfair and one sided contracts with customers who are left with no other option but to sign on dotted lines with various unilateral clauses. Thereby, 99% of the apartment and villa projects have not seen the door of accomplishment. This unfair play on the part of unscrupulous promoters and builders have broken the confidence of NRI’s and foreign investors in the real estate sector. Unfortunately, once the purchasers invest their life savings in the housing sector, they are completely left in dark regarding the progress of their projects, and they cannot even enforce accountability against erring developers in the absence of an effective mechanism. It is in this context the “Real Estate (Regulation and Development) Act, 2016 gears in attention.

OBJECTIVE

The primary objective of the Act is to regulate and promote the real estate sector and to restore the confidence of consumers in the real estate sector by introducing transparency and accountability therein. It offers a single window system of clearance of all real estate projects.

The Real Estate (Regulation and Development) Act, 2016 aims to regulate and promote the real estate sector by regulating the transactions between buyers and promoters of residential as well as commercial projects. It also has provisions for establishing a regulatory authority at state level called "Real Estate Regulatory Authority" (RERA) for monitoring the real estate sector and adjudicating disputes relating to Real Estate Projects. The main aim of the Act is to protect buyers and help investment in real estate sector and to boost up domestic and foreign investments in the sector.

APPLICATION OF THE ACT

The Act applies only to new projects and under construction projects which had not received the completion certificate prior to May 1, 2016. Furthermore, the new projects with an area up to 500 square meter or those having only up to 8 apartments and existing projects undergoing renovation provided there is no new allotments, are exempted from the purview of mandatory registration as per the Act.

SALIENT FEATURES OF THE ACT

Establishment and incorporation of Real Estate Regulatory Authority (RERA) at every State in India for monitoring and adjudicating disputes relating to real estate projects.
Establishment of Real Estate Appellate Tribunal.
Registration of all real estate projects is made mandatory with RERA having territorial jurisdiction over such projects. No sale, marketing, advertising or offers in a real estate project can be made without registration of the project with RERA. RERA can also refuse to register a project, if the same is not in compliance with provisions of the Act. Registration of a project can even be cancelled, in case, RERA receives any complaint and the same is found to be correct after inquiry.
RERA shall approve or reject the application for registration within 30 days, failing which it shall be deemed to have accepted the application for registration.
It is mandatory for a promoter to upload details of proposed project on the website of RERA, including details of registration, types of apartments or plots booked, list of approvals taken and the approvals which are pending subsequent to commencement certificate, status of the project, sanction plan, layout plan etc.
Real Estate Agents are brought under the purview of this Act and it is made mandatory that they have to be registered as per the Act as “Registered Agents”
Structural or quality defects or deficiency in service, if brought to the notice of the promoters within 5 years of handing over of possession by the allottees/buyers, will have to be rectified by the promoters within 30 days without any additional charge.
No promoter/builder shall accept a sum more than ten per cent of the estimated project cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a buyer.
It has been made obligatory for the promoters/builders to deposit and hold 70% of the amount collected from buyers/allottees for a particular project in a separate escrow account to ensure that the amount be used for that particular project.
It is made obligatory for all the promoters to obtain insurance in respect of title of the land and buildings and construction of every project.
The promoter shall not transfer or assign his majority rights and liabilities in respect of a real estate project to a third party without obtaining prior written consent from at least 2/3rd number of allottees (excluding the promoter if he is an allotee), and the prior written approval of RERA.
The promoter shall be liable to return the amount to the buyer in case of default in completing the project and hand over possession with interest as may be prescribed in the Act.
The promoter shall compensate the buyer in case any loss caused to the buyer due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force.
Any aggrieved person may file a complaint with RERA, as the case may be, for any violation or contravention of provisions of this Act or rules and regulations made thereunder against any promoter, allottees or real estate agent.
RERA shall maintain a database of the defaulters on its website , including the names and photographs of defaulting promoters, the project details, registration for which has been revoked or have been penalised under this Act, with reasons therefor, for access to the general public
RERA shall also maintain a database of real estate agents on its website for public viewing, which includes the names and photographs of real estate agents who have applied and registered under this Act, with such details as may be prescribed, including those whose registration has been rejected or revoked;
During the pendency of enquiry on the basis of a complaint, RERA can restrain any promoter, allottee or real estate agent from continuing with the act complained of until the completion of the said enquiry.
A person aggrieved by any direction or decision or order made by RERA or by an adjudicating officer under this Act may prefer an appeal before the Appellate Tribunal having jurisdiction over the matter.

PENALITIES

Punishment for non-registration: Fine of 10% of project cost for non-registration. If a promoter continues to violate the provisions regarding registration, he shall be punished with imprisonment for a term which may extend to three years or fine which may extend to ten percent of the estimated cost of the project or both.
If a promoter fails to comply with orders or directions of RERA, he shall be liable to a penalty, which may extend up to five percent, of the estimated cost of the project as determined by the Authority.
If a promoter fails to comply with the orders or directions of the Appellate Tribunal, he shall be punished with imprisonment for a term which may extend to three years or fine, which may extend up to ten percent of the estimated cost of the project, or with both.
Where an offence under this Act has been committed by a company, every person who, at the time, the offence was committed was in charge of, or was responsible for the conduct of 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.
No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which RERA or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

The Real Estate (Regulation and Development) Act, 2016 is revolutionary step towards regulating the highly unregulated real estate sector and bringing more transparency to real estate transactions. It is an initiative to protect the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects. With a clear intention of protecting the interests of buyers/allottees, the Act helps the consumers to safeguard themselves from any foul play or exploitation by promoters. The new legislation is expected to be a game changer in the real estate sector. Finally, the ordinary home buyer has something to cheer on....

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