History of the Legislation

• After a lot of opposition, deliberation and several amendments, the Rajya Sabha has, on 10 March 2016, approved the Real Estate (Regulation and Development) Bill, 2016 (Bill/Act) which substantially amends the original Real Estate (Regulation and Development) Bill, 2013.
• However, only 13 states and UTs have so far notified the rules.
• The states that have notified the rules are Uttar Pradesh, Gujarat, Odisha , Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar.

Object of RERA

• To establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector.
• Under the Bill, instead of a regular forum of consumers, the purchasers of real estate units from a developer would have a specialised forum called the "Real Estate Regulatory Authority" which will be set up within one year from the date of coming into force of the Act. In the interim, the appropriate Government (i.e., the Central or State Government) shall designate any other regulatory authority or any officer preferably the Secretary of the department dealing with Housing, as the Regulatory Authority.
• To ensure efficient and transparent transactions and to protect the interest of consumers in the real estate sector.
• To establish an adjudicating mechanism for speedy dispute redressal of disputes.
• To introduce professionalism and reduce frauds & delay.
• To regulate and promote real estate sector.
• To establish balance of information with both the promoters and allottees;
• To Impose proper responsibility on the promoters and the allotees.
• To establish regulatory mechanism to enforce fast track dispute resolution;
• To promote good governance in the sector to establish investor confidence;

Basic features of RERA

• Every commercial and residential project (greater than 500 sq. mt. or having 8 units) to be registered with the Real Estate Regulatory Authority (RERA) to be set up in each State;
• Project Registration requirements apply to both on-going and new projects;
• Disclosures encompassing details of promoters and their commercial history, their project plans, details of supporting and executing agencies, status of land, drafts of the documents to be executed, approvals etc. need to be submitted at the time of project registration;
• Promoters shall deposit 70% of money collected from the buyers in an escrow bank account to be utilized only for the said project;
• Withdrawal from that account shall be in proportion to the percentage of completion of the project, after it is certified by an engineer, an architect and a CA in practice;
• Promoter shall get his accounts audited within 6 months after the end of every financial year by a CA in practice who shall verify during the audit that the amounts collected for a particular project have been utilized for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project.
• This law makes it mandatory for developers to post all information on issues such as project plan, layout, government approvals, land title status, sub contractors to the project, schedule for completion with the State Real Estate Regulatory Authority (RERA) and then in effect pass this information on to the consumers;
• Sale of units to be based on carpet area;
• No change in the approved plans without the consent of the Buyer.
• Developers and buyers to pay same rate of interest to each other on default;
• Developers to advertise and sale homes in projects only after approvals from local authorities and Regulatory Authority.
• State to frame Rules to establish the State Real Estate Regulatory Authority for regulation, adjudication and dispute resolution in the real estate sector.
• Huge fines and imprisonment prescribed for promoters / builders who violate the regulations prescribed under this Act and orders / directions issued by Original and Appellate authorities.
• Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days and Regulatory Authorities to dispose of complaints in 60 days;

Requirements for Registration

• Details of the company
• Detail of projects launched by developer in the past 5 years whether already completed or being developed, including current status of said projects, any delay in its completion, details of cases pending, details of type of land and payments pending
• Authenticated copy of approvals and commencement certificate from competent authority for real estate project mentioned in application
• Sanctioned plan, layout plan and specifications of proposed project or phase, and whole project as sanctioned by competent authority
• Location details of project, with clear demarcation of land dedicated for project along with its boundaries including latitude and longitude of end points of project
• Pro-forma of allotment letter, agreement for sale, and conveyance deed proposed to be signed with allottees
• Number, type and carpet area of apartments for sale in project along with area of exclusive balcony or verandah areas and exclusive open terrace areas apartment with apartment
• Names and addresses of his real estate agents for proposed project
• Declaration, supported by an affidavit, which shall be signed by promoter or any person authorized by promoter
• Declaration to be provided by the promoter in his affidavit while making an application to RERA.
• Plan of development works to be executed in proposed project and proposed facilities to be provided including fire fighting facilities, drinking water facilities, emergency evacuation services, use of renewable energy
• Names and addresses of contractors, architect, structural engineer and other persons concerned with development of proposed project.

Acceptance or refusal of registration

• Upon receipt of an application by the promoter, the Regulator Authority shall within a period of 30 days, grant or reject the registration.
• Upon granting a registration, the promoter will be provided with a registration number, including a login Id and password for accessing the website of the Regulatory Authority and to create his web page and to fill in the details of the proposed project.
• If the Regulatory Authority fails to grant or reject the application of the promoter within the period of 30 days, then the project shall be deemed to have been registered.
• The registration, if granted, will be valid until the period of completion of the project as committed by the promoter to the Regulatory Authority. This period shall be extended by the Regulatory Authority for a period not exceeding one year in aggregate, only due to force majeure and on payment of such fee as may be specified by regulations made by the Regulatory Authority.

Revocation or lapse of registration

• The Regulatory Authority may revoke the registration granted on receipt of a complaint or suo moto or on the recommendation of the competent authority in case (i) the promoter makes a default in doing anything required under the Act or the rules or regulations made thereunder; (ii) the promoter violates any terms of the approvals granted for the project; and (iii) the promoter is involved in any kind of unfair practice of irregularities. 
• In the event the registration is revoked by the Regulatory Authority or it lapses, the Regulatory Authority shall:
• debar the promoter from accessing the website in relation to the project, specify his name in the list of defaulters on its website and also inform other Regulatory Authorities in other States and Union territories about such cancellation;
• facilitate the remaining development works to be carried out by competent authority or the association of allottees or in any other manner as may be determined by the Regulatory Authority. However, the association of allottees shall have a first right of refusal for carrying out the remaining development works; or
• direct the scheduled bank holding the project bank account, to freeze the account and thereafter take such further necessary actions, including consequent de-freezing of the account, for facilitating the remaining development works in the manner mentioned above.

Website of the Regulatory Authority

The promoter shall, upon receiving his login Id and password, create his web page on the website of the Regulatory Authority and enter all details of the proposed project including:

• details of the registration granted by the Regulatory Authority;
• quarterly up-to-date list of the number and types of apartments or plots or garages, as the case may be, booked;
• quarterly up-to-date status of the project along with the list of approvals obtained and approvals pending subsequent to commencement certificate; and
• such other information and documents as may be specified by the regulations made by the Regulatory Authority.

Advertisement or prospectus issued by the promoter

• The advertisement or prospectus issued or published by the promoter should prominently mention the website address of the Regulatory Authority, where all details of the registered project have been entered and include the registration number obtained from the Regulatory Authority and other similar details;
• Where any person makes an advance or a deposit on the basis of the information contained in the notice, advertisement or prospectus and sustains any loss or damage because of any incorrect, false statement included in these, he shall be compensated by the promoter in the manner as provided under the Act. Also, if the person affected by such incorrect, false statement contained in the notice, advertisement or prospectus, intends to withdraw from the proposed project, his entire investment (along with interest at such rate as may be prescribed and compensation in the manner provided under the Act), will be returned to him.

Limit on receipt of advance payment

• A promoter shall not accept a sum more than 10% percent of the cost of the apartment, plot, or building, as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement of sale with such person and register the said agreement of sale, under any law for the time being in force.

Structural defect

• In case any structural defect or any other defect in the workmanship, quality or provision of services or any other obligations of the promoters is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, the promoter shall rectify such defect without any further charge, within thirty days. If the promoter fails to rectify such defect within such time, the aggrieved allottee shall be entitled to receive appropriate compensation in the manner as provided in the Act.  

Other relevant provisions

• The same rate of interest will be payable by the allottee and   the promoter in the event of their respective defaults.
• In the absence of any local laws, an association or society or cooperative society, as the case may be, of the allottees, shall be formed within a period of three months of the majority of allottees who have booked their plot or apartment or building, as the case may be, in the project.
• After the promoter executes an agreement for sale for any apartment, plot or building, no mortgage or charge can be created by the promoter on such apartment, plot or building. If any such mortgage or charge is created, then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building.
• The promoter may cancel the allotment only in terms of the agreement for sale. However, the allottee may approach the Regulatory Authority for relief, if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale, is unilateral and without any sufficient cause.
• The promoter shall obtain insurance as may be notified by the appropriate Government, including but not limited to the title of the land and building and construction of the project. The promoter shall also be liable to pay the premium and charges in respect of the insurance.

The promoter shall execute a registered conveyance deed in favour of the

• allottee in respect of the apartment, plot or building; and
• association of allottees of competent authority in respect of the undivided proportionate title in the common areas, and hand over possession of the same within the period as specified under the local laws. In the absence of any local law, such conveyance deed shall be carried out by the promoter within three months from date of issue of the occupancy certificate.
• The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land in the manner as provided under the Act, and such claim for compensation shall not be barred by limitation provided under any law for the time being in force.
• Every allottee shall take physical possession of the apartment, plot or building as the case may be, within a period of two months of the occupancy certificate issued for the said apartment, plot or buildings.
• The Regulatory Authority shall make a recommendation to the appropriate Government on
• creation of a single window system for ensuring time-bound project approvals and clearances for timely completion of the project; and
• creation of a transparent and robust grievance redressal mechanism against acts of omission and commission of competent authorities and their officials.

Real Estate Appellate Tribunal

• In addition to the establishment of the Regulatory Authority, the Bill also proposes to establish a Real Estate Appellate Tribunal (Appellate Tribunal) within one year from the date of commencement of the Act.
• Any person aggrieved by any direction or decision made by the Regulatory Authority or by an adjudicating officer, may make an appeal before the Appellate Tribunal within a period of 60 days from the date of receipt of a copy of the order or direction.
• The Appellate Tribunal shall deal with the appeal as expeditiously as possible and endeavour shall me made to dispose of the appeal within a period of sixty days from the date of receipt of appeal. 
• The Appellate Tribunal shall have same powers as a civil court and shall be deemed to be a civil court. An appeal against the order of the Appellate Tribunal may be filed before the jurisdictional High Court within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal.

Offences and Penalty

Stringent penal provisions have been prescribed under the Act against the promoter in case of any contravention or non-compliance of the provisions of the Act or the orders, decisions or directions of the Regulatory Authority or the Appellate Tribunal which are the following: 

• If promoter does not register its project with the Regulatory Authority – the penalty may be up to 10% of the estimated cost of the project as determined by the Regulatory Authority;
• If promoter does not comply with the aforesaid order of the Regulatory Authority -  imprisonment of up to three years and a further penalty of up to 10% of the estimated cost, or both; and
• In case the promoter provides any false information while making an application to the Regulatory Authority or contravenes any other provision of the Act – the penalty may be up to 5% of the estimated cost of the project or construction.

These penal provisions have also been prescribed for any contravention or violation committed by the real estate agent or the allottee.

If any allottee fails to comply with, or contravenes any of the orders, decisions or directions of the Regularity Authority, there may be a penalty for the period during which such default continues, which may cumulatively extend up to 5% of the cost of the plot, apartment or building, as the case may be, as determined by the Regulatory Authority. Further, if any allottee fails to comply with, or contravenes any of the orders or directions of the Appellate Tribunal, this may entail imprisonment up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the cost of the plot, apartment or building, as the case may be, or with both.

Applicability of RERA(Gujarat)

• Gujarat has excluded ongoing projects from the Act. As per officials it would help smoother implementation of the new law.
• Gujarat has exempted all projects launched before notification of the rules on November.
• Has not covered many aspects including requirement for registering projects.
• States have let off most ongoing real estate projects which have been delayed for long and remain a worry for thousands of home buyers awaiting delivery.
• “Gujarat has exempted all projects launched before notification of the rules again the consumers are suffering as there would be no one to listen to their plea”

RERA as per Gujarat Institute of Housing and Estate Developers

• “It is a major relief to the real estate sector in the state. In Ahmedabad alone, 500-600 projects having total 1.72 lakh units are at various stages of construction. All these projects will now not be termed as `ongoing' as the state government has decided to bring projects launched after first of November under the statute,“ said Dipak Patel, Gujarat Institute of Housing and Estate Developers (GIHED), and the Ahmedabad chapter of The Confederation of Real Estate Developer's Associations of India (CREDAI).

Conclusion

• The delay in possession of their homes has been the biggest concern for the buyers of the real estate properties. For many of the homebuyers, across locations and with almost the builders, the delay has extended to almost six years or more now, with no possession in sight.
• In the absence of a regulator and with no rules in place, the builder-buyer battle appeared one-sided. Hence to over come the above mentioned issues in the sector and to facilitate growth, government has come up with the Real Estate (Regulation and Development) Act, 2016.