RERA ACT | All Information you need to know
Author: Kunal Chandriani, March 6, 2019 – Posted in: Real Estate – Tags: , , ,


RERA Act – Pre Realty Check

Real estate is considered to be one of the most integral factors in a person’s life. It’s a common dream of every individual to by a home so as to sustain himself and his family with pride. We all have studied since childhood that food, clothing and shelter are the basic needs of a man. But today’s reality is driving a man far away from such basic needs. An individual works hard to earn money, to achieve his objective of buying a house.

However, such individuals are taken for a ride by the cunning developers of such housing projects. A person invests all his hard earned money in a housing project to ensure safe and secured future for himself and his family. In this course, he works overtime at his workplace, obtains personal loans, bank loans, mortgages/ pledges his material investments and still with a smile on his face has a hope of a brighter tomorrow. He has a hope of getting his dream home at a specified date by the developer. However, on the contrary, the project goes for a toss by builder running in bankruptcy, legal hurdles and finally the projects have to be halted.

Thus, the buyer is left helpless by his money invested in dead assets. Only thing that exists is guilt in the minds of such buyers. This was the scenario due to non existence of any laws regulating the real estate sector.

Introduction of RERA ACT

It was in the year 2016 that homebuyers were relieved of the strain and stress with a confidence that what they invested is certainly going to revert. Due credit should be given to the ‘The Real Estate (Regulation and Development) Act, 2016’ (Hereafter to be referred as RERA) which seeks to protect the interests of the home-buyers as well as to increase the investments in the real estate industry.

The Act came into force on 1st May 2016. The provisions not effected so far, came into force on 1st May 2017. The provisions are framed in such a way that it will bring uniformity and set minimum standards of accountability of business practices in the real estate sector and in turn will bring transparency of contractual conditions.

Functioning of the Act

RERA ACT is a Central legislation. However, states and union territories have been empowered to make and notify their own Rules in this regards  (since land/ real estate is a state subject) which have to be in accordance with the Central legislation.  The State Governments of respective States were to submit their Rules by 31st July, 2017. The Act is applicable to whole of India, excluding the states of Jammu and Kashmir.  The Act covers both, residential and commercial projects.

Registration

It has been seen that most of the developers indulge in a common practice of exhibiting “pre-launch offers”. Such projects may not have all the required legal approvals. Even the buyers are lured by such opportunities. This is of great risk to the buyers. To fix such problems or to prevent cropping of such problems, the developers have to get their projects mandatorily registered with the respective real estate authority of that state (Real Estate Regulatory Authority). A project shall be allowed to get registered only if it has complied and received the required approvals.

rera registration

Thus, the buyer’s interest is protected. In case the builder or developer has not obtained such registration, such developer of a real estate project shall not be permitted to market, advertise, sell, book, or offer for sale, or in any manner in any real estate projects or part of it. It is to be noted that the term builder or developer in this regard under this Act is known as “Promoter”. Where the projects were ongoing as on the date of this Act, and completion certificate was not issued to the promoters of such projects, the said promoters had to get such projects registered with their respective Real Estate Authority within 3 months from when this Act was commenced.

A. Projects outside the scope of this Act(Section 3)

  • Area of land where development is to be carried on, is not more than 500 Sq. Meters or, The total number of flats or apartments is not more than 8.
  • The total number of flats or apartments is not more than 8.
  • The promoter, i.e. the developer of such projects has received the certificate of completion before the commencement of this Act and
  • The project so concerned is regarding any renovations or redevelopments, not involving any kind of advertising or marketing of such land or apartment thereto.

B. Application for registration and grant of registration  (Section 4 & 5)

  • The promoter   shall submit an application for registration to such authority along with prescribed documents and fees.
  • The authority shall give its approval or rejection within  30 days of promoter making the application.
  • On registration being approved, the promoter is provided Login id and password for accessing the web page of the authority and thereafter he is supposed to provide the project related details. However, in case of rejection, applicant must be given a reasonable opportunity of hearing.

Note: At the time of application, the promoter has to submit a declaration saying he has legal title to such land along with the legal documents, such land is free from all encumbrances, time period to be taken for completion of project and 70% of amounts received from the buyers, from time to time, shall be deposited in a separate bank account maintained with a scheduled bank, and such amounts shall be utilized to cover the cost of construction of projects.

C. Validity or time period of registration (Section 6)

  • The registration is valid for a period, as stated by the promoter during his application.
  • If due to extreme conditions, not within the control of the promoters, there is a delay in completion of such real estate projects, the authority shall give an extension, not exceeding a period of 1 year in aggregate.

Note: Application in prescribed form and fees is mandatory for grant of extension.

D. Revocation of registration and consequences  thereupon (Sections 7 & 8)

  • If the authority receives any complains or if it itself finds out that the promoter of such projects is indulged in unfair trade practices, or he is violating the provisions of this Act and Rules, or if the promoter makes a default in doing any act which is required to be done in accordance with the act, his registration shall be revoked.
  • Note: A 30 days notice is to be served upon the promoter before revocation, stating the reasons, and a reasonable opportunity of hearing should be given.
  • The authority may consider the buyers interest and not revoke the registration, but impose certain obligations on the promoter and issue such directions as may be necessary.
  • The authority may, after consultation with the Appropriate Government, state that the project shall be continued by other competent authority, in buyers interest. However, if the association of buyers refuse it, the project shall not be considered for development.

e) Real estate agents and their registration (Section 9 & 10)

  • There are a number of real estate agents and there have been cases where their services are not satisfactory or provide false claims.
  • Hence, the RERA Act has made it mandatory for real estate agents to get themselves registered without which they shall not permitted to act as agents and perform their respective duties.
  • The application is supposed to be made in prescribed form along with fees and thereby if the authority deems fit, shall provide registration to such, for a particular period.
  • The registration can be revoked if the agents act in a way to deceive buyers or if there  is a violation of the Act and Rules.

Note: agents who deal in secondary market or resale of property or dealing in rental properties  are not liable to get themselves registered.

Provisions of the RERA Act regarding “Promoters”

As discussed above, the term “Promoter” in layman’s term is called a builder or developer, and the Act has framed provisions regarding his obligation towards the buyers.

a) The web page created after registration shall include details of registration, quarterly updated

  • number and types of apartments, garages booked,
  • Approvals granted and pending after receipt of commencement certificate,
  • Status of projects.

b) The prospectus of the project shall have the details of the website and the registration number.

c) Provide the buyer information regarding projects which are sanctioned,  time period of project and the stages in which such time is divided,

d) Obtain Occupancy certificate and Completion Certificates.

e) Execute conveyance deed and sale agreement in the favor of buyers.

f) Where a buyer makes payment on the basis of information provided to him and he suffers loss due to such information being incorrect or fraudulent, he shall be compensated by the promoter.

g) The promoter cannot accept a sum of money more than 10% of the cost of property as advance, without entering into a valid sale agreement with the buyer. Such agreement shall contain the dates on which further payments are to be made by the buyers and the date on which procession of property shall be granted to him and the rate of interest in case of default by the promoters.

h) Promoter shall not make any alterations in the sanctioned plans without prior consent of the authority. However he may make any minor alterations required by the buyer or any changes due to structural or architectural reasons after informing the buyers.

i) If there are defects in the quality or services provided by the promoter as per the agreement and if such defects are informed to him by the buyers within 5 years from granting procession, the promoter is liable to fix the defect without any charges from buyers within 30 days of such information.

j) In case the promoter is not able to give the possession of the property to the buyer, as per the agreement, he is liable, if the buyers so demand, to refund the amount received by him from buyers at an interest rate as specified by the respective governments and also provide for the compensation. If the buyer still wants to be in the project, he shall have the right to receive interest for every month of delayed period.

Real Estate Regulatory Authority (Section 20)

a) It is mandatory for every state and union territory, to establish a Real Estate Regulatory Authority, to enforce and govern the provisions of the RERA Act. It is also provided that 2 states can have 1 single authority and also 1 state can have more than one authority in this matter.

b) It shall consist of a chairman and minimum 2 members appointed by the government on the recommendations made by the Selection Committee. Such persons shall hold office for a term of 5 years or upto 65 years of age, whichever event occurs before.

Appeals

The appropriate Government shall, by notification, establish an Appellate Tribunal to be known as the  (name of the State or Union territory) Real Estate Appellate Tribunal (REAT). If any  party  is aggrieved by the order of Real Estate Regulatory Authority, they can appeal before REAT, which is supposed to adjudicate such cases within 60 days. If any of the parties is not satisfied with the order of REAT, they can appeal  to the High Court within 60 days.

Offences and Penalties

OffencesPenalties
Promoter fails to register his project under section 3 (Section 59)
Non compliance of orders or further violation of section 3.
Upto 10% of the cost of his project
Imprisonment upto 3 years or further 10% penalty or both.
Penalty for contravention of other provisions excluding section 3 & 4. (Section 61)Penalty which may extend up to five per cent. of the estimated cost of the real estate project
Offences by real estate agents in contravention of section 9 & 10. (Section 62)Penalty which may extend up to five percent. of the estimated cost of the real estate project
If any promoter fails to comply with, or contravenes any of the orders or directions of the:
Authority. (Section 63)

Appellate Tribunal. (Section 64)
5% of the estimated cost of the real estate project, for every day during which such default continues.

Imprisonment for a term which may extend up to 3 years or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the estimated cost of the real estate project, or with both.
If any real estate agent fails to comply with, or contravenes any of the orders or directions of the:
Authority. (Section 65)

Appellate Tribunal. (Section 66)
5% of the estimated cost of plot, apartment or building, as the case may be, of the real estate project, for which the sale or purchase has been facilitated, for every day during which such default continues.

Imprisonment for a term which may extend up to 1 year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of plot, apartment or building, as the case may be, of the real estate project, for which the sale or purchase has been facilitated, or with both.
If any buyer fails to comply with, or contravenes any of the orders or directions of the:
Authority. (Section 67)

Appellate Tribunal. (Section 68)
5% of the estimated cost of the plot, apartment or building cost, as the case may be, for period during which such default continues.

Imprisonment for a term which may extend up to 1 year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of plot, apartment or building cost, as the case may be, or with both.

Realty Check post RERA Act

As seen above, the state of realty sector used to pose a greater risk to the home buyers before the RERA was enacted by the parliament. It is also seen that the provisions of the Act discussed above are framed in such a manner which brings accountability and transparency, ensures systematic work and protects the home buyers interest. However, let us see what the scenario post implementation of these legislations:

1. Around 90% of the complaints registered with the Maharashtra RERA are regarding delay in execution of projects. The Maharashtra Real Estate Authority decided to give developers a second chance to complete the delayed projects after the usual extension of a year, provided more than 50% customers of the property have given their consent.

2. Karnataka RERA Act- 1,076 projects have been identified by RERA for not having registered with the RERA. Even after notices being served on them, they have not explained the reasons for not registering with RERA. A majority of them are in Bengaluru.

3. Maharashtra Real Estate Regulatory Authority directed promoter of project Kohinoor to pay simple interest at rate of 10.55% on a home buyer’s investment of Rs 1.25 crore from January 1, 2017 for every month of delayed possession. MahaRERA also imposed a penalty of 1 lakh on the developer for violating section 13 of Real Estate (Regulation and Development) Act by not registering an agreement for sale despite the buyer paying 87% of the flat cost. The developer was also directed to execute a registered agreement for sale as per the terms and conditions in the allotment letter with a mutually agreed date of possession.

4. Maharashtra Real Estate Regulatory Authority had issued a warrant in the year 2018,   against the developer and was supposed to refund the amount with interests within 3 months. However, the complainant said he did not receive his refund even after 6 months despite several communications with the office and the home department.

5. The builders in Noida said about 25000 flats were ready however the buyers were not given possession due to non receipt of completion certificates, fire and structural safety certificates and pending dues with the authority.

6. According to Ministry of Housing and Urban Affairs, around 34893 projects and 27073 real estate agents have been registered across the country as of 31st December, 2018.

7. The MahaRERA provided that any alert citizen can register complaint against the unregistered real estate projects on its website without charging fees, provided such a complainant is not in need of any hearing. The officers appointed by the authority shall look into the complaint by gathering information from promoter and through site visits.

Conclusion

Thus, we have seen the Act has provided provisions to safeguard the interests of home buyers. However, there are many promoters who don’t comply with the provisions and the buyers have to suffer. The government is trying its best and improving its functioning with every new case put before the authority.