The Real Estate (Regulation and Development)
Act, 2016 is an Act of the Parliament of India which seeks to protect
home-buyers as well as help boost investments in the real estate industry. The
bill was passed by the Rajya Sabha on 10 March 2016 and by the Lok Sabha on 15
March 2016.
What
are objectives of Real Estate (Regulation and Development) Act, 2016?
The main objectives of RERA are:
- To protect
interest of consumer in real estate sector;
- To establish a
process for speedy dispute redressal.;
- To ensure sale
of plot, building or apartment, or real estate project, in an efficient and transparent manner;
- To establish a
tribunal to hear appeals from decisions, directions or orders of Real Estate
Regulatory Authority and adjudicating officer;
When
is this Act expected to commence? Is there any specific date?
The RERA Act was assented by the president
of India on 25th March, 2016 and was notified in Gazette of India for public
information on 26th March, 2016. However, commencement of specific sections of
the ACT will be done in step by step manner. The entire process will take
around 12 to 18 months.
What
are the key terms that have been defined in the Act?
A number of key terms have been defined.
Some of them are:
Advertisement, Agreement for Sale, Allottee,
Apartment, Architect, Building, Carpet Area, Commencement Certificate, Common
Areas, Completion Certificate, Development, Development Works, Engineer,
Estimated Cost of Real Estate Project, External Development Works, Family,
Garage, Immovable Property, Interest, Internal Development Works, Local
Authority, Occupancy Certificate, Person, planning area, Project, Promoter,
Prospectus, Real Estate Agent, Real Estate Project, Sanctioned Plan
What
are all situations in which registration of Real Estate Project is not required?
There are three situations:
- Where area of
land proposed to be developed does not exceed 500 sq m or number of apartments
proposed to be developed does not exceed 8 inclusive of all phases
- Where promoter
has received completion certificate for Real Estate Project prior to
commencement of Act
- For purpose of
renovation or repair or re-development which does not involve
marketing,
advertising, selling or new allotment of any apartment, plot or building, under
real estate project
How
does a promoter make an application – manual or electronic form?
It is stated that RERA shall
operationalise a web based online system for submitting applications for
registration of projects within a period of 1 year from date of its
establishment. RERA is yet to be established. Until a web based online system
is established, all applications shall be made in paper format.
Important
information to be enclosed by the promoter while making an application to RERA:
- Details of the
company
-
Detail of
projects launched by developer in the past five 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
- 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
- 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
- Names and
addresses of contractors, architect, structural engineer and other persons
concerned with development of proposed project
-
a declaration,
supported by an affidavit, which shall be signed by the promoter or any person authorized
by the promoter, stating:—
· that he has a legal title to the land on
which the development is proposed along with legally valid documents with
authentication of such title, if such land is owned by another person;
· that the land is free from all encumbrances,
or as the case may be details of the encumbrances on such land including any
rights, title, interest or name of any party in or over such land along with
details;
· the time period within which he undertakes
to complete the project or phase thereof, as the case may be;
· that seventy per cent. of the amounts
realized for the real estate project from the allottees, from time to time,
shall be deposited in a separate account to be maintained in a scheduled bank
to cover the cost of construction and the land cost and shall be used only for
that purpose:
- Declaration to be provided by the promoter
in his affidavit while making an application to RERA.
What
percentage of amounts for real estate project from allottees should be
deposited in a separate account?
The developer shall deposit 70%
of amounts realized for real estate project from allottees, in a separate
account to be maintained in a scheduled bank to cover cost of construction and
land cost and shall be used only for that purpose.
What
are the rules for withdrawal by developer from such account?
The developer shall withdraw amounts from
separate account, to cover cost of project, in proportion to percentage of
completion of project
What
is the time limit for grant of registration by RERA?
Registration by RERA shall be granted within
30 days from date of application. RERA shall also provide registration number,
Login ID and password to applicant for accessing website of Authority and to
create his/her web page and to fill details of proposed project.
What
is the time limit for rejection of application by RERA?
RERA shall communicate in writing the
reasons for rejection of application within 30 days from date of application.
What
if RERA fails to grant registration or reject application?
If RERA fails to grant registration or
reject application, project shall be deemed to have been registered. RERA shall
also within 7 days (from expiry of 30 days) provide registration number, Login
ID and password to applicant for accessing website of Authority and to create
his web page and to fill details of proposed project.
What is the validity of the
registration granted by RERA?
Registration shall be valid for a period
declared by promoter for completion of project or phase.
Is
the Real Estate Act applicable to Ongoing/Existing Real Estate projects?
Yes, as per section 3(1) of the
Act, ongoing / existing projects, which have not received completion
certificate are covered under the Act. The said section is reproduced below:
“……Provided
that projects that are ongoing on the date of commencement of this Act and for
which the completion certificate has not been issued, the promoter shall make
an application to the Authority for registration of the said project within a
period of three months from the date of commencement of this Act……” (RERA ACT
& LAW)
Can
the registration once granted by RERA be revoked?
Yes, RERA can revoke registration on receipt
of a complaint or on recommendation of competent authority.
What
acts lead to revocation of registration by RERA?
The following four acts are lead
to revocation of registration by RERA:
1.
Promoter makes
default in doing anything under Act / Rules / Regulations
2.
Promoter
violates any terms or conditions of approval given by competent authority
3. Promoter is involved in any kind of unfair
practice or irregularities
Promoter indulges in any fraudulent practices
What
is the role of RERA after revocation of registration?
-
RERA shall debar
promoter from accessing its website in relation to that project and specify his
name in list of defaulters and display his photograph on its website and also
inform other Real Estate Regulatory Authority in other States and Union
territories about such revocation or registration
- RERA shall
facilitate remaining development works to be carried out in accordance with
provisions of section 8
- RERA shall
direct the bank holding the project back account, to freeze account, and take
necessary actions, including consequent de-freezing of said account, towards
facilitating remaining development works in accordance with provisions of
section 8
- RERA may, to protect interest of allottees
or in public interest, issue such directions as it may deem necessary
If
the registration is revoked, it is the allottees who will suffer? How does RERA
tackle such a situation?
RERA may, instead of revoking registration,
permit registration to remain in force subject to such further terms and conditions
as it thinks fit to impose in interest of allottees and any such terms and
conditions so imposed shall be binding upon promoter.
What
is the obligation of RERA consequent upon lapse of or on revocation of
registration?
- Upon lapse of or
on revocation of registration, RERA may consult Appropriate Government to carry
out remaining development works by competent authority or by association of
allottees or in any other manner, as may be determined by RERA
-
In case of
revocation of registration of a project, who shall have the first right of
refusal for carrying out of remaining development works?
- In case of revocation of registration of a
project, association of allottees shall have first right of refusal for
carrying out of remaining development works
Does
the Act impose restriction on period of extension to be granted by RERA?
Yes, RERA may in reasonable circumstances,
without default on part of promoter, based on facts of each case, extend
registration granted to a project for such time as it considers necessary,
which shall, in aggregate, not exceed a period of 1 year.
Does
this Act need consent / ratification from State Governments to be applicable in
states?
No,
as RERA is not a Constitutional Amendment Act affecting the States, no consent
/ ratification, by whatever name called is required. States are bound to
implement the Act according to the timelines provided therein.
What
if the promoter is unable to complete the project as stipulated in the
affidavit? Does the promoter have to file a fresh application for registration?
Registration granted may be extended by RERA
on an application made by promoter due to force majeure. Also, RERA may in
reasonable circumstances, without default on part of promoter, based on facts
of each case, extend registration granted to a project for such time as it
considers necessary, which shall, in aggregate, not exceed a period of 1 year.
Is
there a time limit imposed under the Act for getting the accounts of promoter
audited?
Yes, the promoter shall get his accounts
audited within 6 months after end of every financial year by a chartered
accountant in practice, and shall produce a statement of accounts duly
certified and signed by such chartered accountant and it shall be verified
during audit that amounts collected for a particular project have been utilized
for project and withdrawal has been in compliance with proportion to percentage
of completion of project.
I
am a promoter and I have an existing project on date of commencement of this
Act but completion certificate has not been issued. Is registration still
mandatory?
Yes, the promoter shall make an application
to RERA within 3 months from date of commencement of Act.
When can Developers Advertise their Project
“Unless
the promoters do not register their projects they cannot advertise, whether
ongoing or future.” This is in line with Section 3 & 4 of the Act which
mandates registration of projects by developers comes into effect from 1st May.
These are discussed in more detail below. Section 3 deals with Registration of
real estate projects and agents. It states that:
No
promoter shall advertise, market, book, sell or offer for sale, or invite
persons to purchase in any manner any plot, apartment or building, as the case
may be, in any real estate project or part of it, in any planning area, without
registering the real estate project with the Real Estate Regulatory Authority
established under this Act:
However,
if they have projects that have already obtained completion and occupancy
certificates, those can continue to be advertised and sold.
Rigidity in Change of a plan
He can
now only change a project’s plan that has been registered with a two-third
majority of the buyers of that project.
Functions of a Promoter
The functions of a promoter have been increased as they now have to
give the buyer every document that a buyer should have while signing an
agreement. He has to take the responsibility of the services he provides until
a local body is formed with the society. He will also have to get two-third
majority in case he thinks to transfer the project to someone else.