The Ministry of Housing and Urban Poverty Alleviation has unveiled the model real estate (Regulation of development) Act. In order to promote planned and healthy real estate development of colonies and apartments with a view to protecting consumer interest on the one hand and to facilitate smooth and speedy urban construction on the other;
The draft bill seeks to establish a Regulatory Authority and an Appellate Tribunal to regulate, control and promote planned and healthy development and construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties, and to host and maintain a website containing all project details, with a view to protecting, on the one hand the public interest in relation to the conduct and integrity of promoters and other persons engaged in the development of such colonies and to facilitating on the other the smooth and speedy construction and maintenance of such colonies, residential buildings, apartments and properties and for matters connected therewith or incidental thereto.
Key provision of the model act
Establishment of a Real Estate Regulatory Authority
The Model Act provides for establishment of a Real Estate Regulatory Authority (“Regulatory Authority”), to comprise of a Chairperson and two members to be appointed from amongst persons having special knowledge and professional experience in the field of public administration.
Registration with Regulatory Authority
The Model Act provides for compulsory registration of all real estate projects where
- The area of land proposed to be developed exceeds one thousand square meters or
- The number of apartments proposed to be constructed exceeds four.
For obtaining registration, besides furnishing other details and information, the Promoter would have to furnish a bank guarantee equal to 5% of the estimated costs of development works to the local authority or other authority having power to give permission for construction or development of land. The registration is valid for three years. Where delay in completion of the project is for reasons beyond the control of the Promoter, he can seek 2 renewals of 1 year each.
Obligations of Promoter
The Model Act defines rather exhaustively who can be termed a “Promoter” and goes on to detail the obligations and responsibilities of the Promoter. The key obligations include
To make available to all intending to buy a plot or apartment, all information and documents relating to the property. This would include a full and true disclosure of the nature of the title which has to be duly certified be a revenue authority not below the rank of Sub-divisional Magistrate.
- File with the Regulatory Authority, copy of every advertisement or prospectus he intends to publish or issue for inviting person to purchase plots or apartments and make advances or deposits for the same.
- Upload on the website of the Regulatory Authority, all details of the project and the names of property dealers or brokers dealing in the project.
- Enter into a registered Agreement for Sale in a specified format, with the allottee intending to purchase the plot or apartment before accepting any deposit or advance.
- Not mortgage the plot or apartment without the consent of the person intending to purchase it after execution of the Agreement for Sale.
Transparency and Powers of the Regulatory authority
The Regulatory Authority shall host the website of records of all real estate projects in its jurisdiction and shall ensure compliance of the obligations cast upon the Promoters and allottees. The Regulatory Authority has the power to decide any dispute between a Promoter and an allottee regarding failure on either part to meet its obligations
Establishment of Appellate Tribunal
The Model Act provides for establishment of a Real Estate Appellate Tribunal (“Appellate Tribunal”) to adjudicate any dispute and hear and dispose of appeal against any direction, decision or order of the Regulatory Authority. The Model Act also outs the jurisdiction of civil courts to entertain any suit or proceeding in respect of any matter which the Regulatory Authority or Appellate Tribunal is empowered to determine.
Offences & Penalties
In order to give teeth to the provisions of the Act, penalties have been prescribed for violations of the provisions of the Act. The penalties range from up to three years imprisonment for not registering a project or for not complying with the orders of the Appellate Tribunal to monetary penalties which may be ascertained on a daily basis for non compliance or as a percentage of the development costs or sale price.
