The month of March in year 2016 saw a new sunrise in the Real Estate sector in form of the Real Estate (Regulation and Development) Act, 2016,

The month of March in year 2016 saw a new sunrise in the Real Estate sector in form of the Real Estate (Regulation and Development) Act, 2016, establishing the Real Estate Regulatory Authority and Real Estate Appellate Tribunal for providing impetus to the interests of consumers and henceforth, regulating the real estate sector which makes major contribution in employment creation and GDP of our country. RERA has brought transparency to the sector, strengthened it and brought home a certain degree of professionalism.

RERA mandates each developer to ensure accountability in their dealing with consumers.

The Act deftly defines ‘Promoter’ as a ‘Builder’, Developer’Development Authority&rsquo Society’ or Holder of Power of Attorney from the land-lord of the construction/development site viz:

  • Person who constructs or causes construction of an independent building or a building consisting of apartments or converts existing structure into apartments to sold in open market.
  • Person who develops land into a project consisting of plots which may or may not comprise any structures, to be sold in full or parts.
  • Public body or Development Authority in respect of allottees of buildings or apartments constructed by them or plots on land either owned by them or placed at their disposal by the Government, for the purpose of being sold.  
  • Apex State level and primary co-operative housing finance society which construct apartments or buildings for its members or allottees.
  • Person who acts himself as a builder, coloniser, contractor, developer, estate developer or by goes by any other name or claims to be holder of power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale.
  • Any other person who constructs building or apartment to be sold to public in general.

For the purposes of RERA, in situation where developer/constructor is different from seller of the property, both shall be deemed to be promoters and as such jointly responsible under this Act.

‘Real Estate Project’ is defined as the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, for the purpose of selling all or some of the said apartments or plots or building and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto.

The Act, further, requires mandatory “Registration” with RERA of the Real Estate Projects coming under the planning areas by the Promoters with the State Real Estate Regulatory Authority sans which the Promoter is banned from advertising, marketing, booking, selling or offering for sale, or inviting anyone to buy any part of or the real estate project.

Moreover, Real Estate Agents are also obligated to be registered before they can facilitate sale / purchase of a real estate project or any part thereof.

Nevertheless, RERA is equally applicable to commercial projects as it is to residential ones.

However, the Act under Section 3 provides for some exceptions in terms real estate projects that are exempted from registration:

  • The land proposed to be developed does not exceed 500 square meters or the number of apartments do not exceed 8 (eight) in number;
  • In cases where ‘Completion Certificate’ for the project has been awarded to the promoters prior to commencement of RERA; and
  • The work is limited to re-development, repair or renovation and does not encompass marketing, advertising, selling or new allotment of any apartment, plot or building thereof.

Is RERA applicable to only registered projects??

In Simmi Sikka vs Emaar MGF (Haryana), it has been held that is not pointed anywhere in the RERA that certain projects are out of the ambit of the Act. Section 3(2) only provides for those categories of projects where no registration is required. It was further held that Authority’s ambit even extends to those projects which have not been registered, and also not exempted from registration. Accordingly, the projects which have not been registered, but must be registered can be proceeded against by the Authority if found in violation of the Act.

Section 4 of the RERA provides for Application for registration of real estate projects wherein every promoter is enjoined to apply for such registration along with a bunch of documents enumerated as follows:-

  • Brief details of the enterprise including name, registered address, enterprise type and particulars of registration of such enterprise along with promoter’s names and photographs.
  • Brief details of the projects launched by the promoter in last five years, whether completed or not including the current status of ongoing projects, delay in completion, details of pending cases, land type and any payments pending.
  • The authenticated copy of the approvals and commencement certificate from the competent authority, if applicable.
  • Sanctioned plan, layout plan and specifications of the proposed project or phase thereof and the entire project as sanctioned by the component authority.
  • Plan of development works to be executed in the proposed project and the proposed facilities to be provided including fire-fighting facilities, drinking water facilities, emergency evacuation services, use of renewable energy.
  • Location details of the project, with clear demarcation of land dedicated for the project along with its boundaries including the latitude and longitude of the end points of the project.
  • Proforma of the allotment letter, an agreement for sale, and the conveyance deed offered to be signed with the allottees.
  • Number, type and the carpet area of apartments for sale in the project along with the area of the private balcony or verandah areas and the exclusive open terrace area with the apartment, if applicable.
  • Number and areas of garage for sale in the project
  • Names and addresses of his real estate agents for the proposed project, if any.
  • Names and addresses of the contractors, architect, structural engineer and also other persons concerned with the development of the proposed project.
  • A declaration, supported by an affidavit, which should be signed by the promoter or any person authorised by the promoter stating that:
    • The promoter has a legal title on the land which the development is proposed along with the legally valid documents with authentication of such title, in case the land is owned by another person.
    • The land is free from all encumbrances or details of encumbrances on the land including any rights, title, interest or name of any person in or over the property.
    • Time period within which the promoter proposes to complete the project or phase, as the case maybe.
    • Promoter to take all the pending approvals on time from competent authorities.
    • Furnish other documents as required.
    • Seventy per cent of the amounts realised for the real estate project from the allottees shall be deposited in a separate account to be maintained in a scheduled bank to cover the land cost and cost of construction, which shall be only used for that purpose.

The promoter shall withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the project after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project

The promoter will also get his accounts audited within six months after the 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.  

  • Other information and documents as may be prescribed.

Grant of Registration

Registration of real estate projects is dealt with in Section 5 of the RERA. The Authority shall within a period of thirty days grant registration subject to the provisions of this Act and the rules and regulations made thereunder, and provide a registration number, including a Login Id and password to the applicant for accessing the website of the Authority and to create his web page and to fill therein the details of the proposed project.

The Authority can also reject the application for reasons to be recorded in writing, if such application does not conform to the provisions of this Act or the rules or regulations made thereunder unless the applicant has been given an opportunity of being heard in the matter

If the Authority fails to grant the registration or reject the application, the project shall be deemed to have been registered, and the Authority shall within a period of seven days of the expiry of the said period of thirty days provide a registration number and a Login Id and password to the promoter for accessing the website of the Authority and to create his web page and to fill therein the details of the proposed project.

Validity of Registration under RERA

The registration accordingly approved will be valid for a period declared by the Promoter for completion of the real estate project or for the phase as stated in the affidavit with the application form.

The registration granted may be extended by the Authority after receiving an application from the Promoter in case of ‘Force Majeure’ having major effect on the project.

The authority may also extend the registration for a maximum period of one year if the circumstances so warrant.

It is pertinent to note the Supreme Court’s decision in Bikram Chatterji vs. Union of India pronounced in 2019 where it was held that as RERA envisages timely completion of projects once registration is granted under section 5 and extension under section 6, it is only in the event of force majeure and no default on the part of the promoter that registration can be extended in aggregate for a period not exceeding one year. Force majeure shall mean a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature.

Cancellation of Registration

The registration so given may also be revoked by the Authority on receipt of a complaint o suo motu or on recommendation of the competent authority after giving thirty days’ notice in writing to the Promoter of such real estate project averring grounds of proposed revocation, after considering any cause shown by such promoter and after being satisfied that:-

  • The promoter has defaulted in performing anything required under RERA.
  • The promoter has violated any of the terms and conditions of approval granted by the Authority.
  • The promoter is involved in any unfair practice or irregularities (for e.g. falsely representing services are of a particular standard or grade or that the promoter has approval or affiliation which such promoter does not have and making false or misleading representations concerning the services along with publication of any advertisement or prospectus whether in any newspaper or otherwise of services that are not intended to be offered.)
  •  The promoter indulges in any fraudulent practices.

The Authority may, in the alternative of cancelling registration, permit it to remain in force subject to such further terms and conditions as it thinks fit to be imposed in the interest of the allottees which shall be binding upon the promoter.

Consequences of cancellation of Registration

Upon the revocation of the registration,

  • The promoter shall be barred from accessing its website in relation to the project and promoter’s project registration revocation shall be notified to other Real Estate Regulatory Authority in other States and Union territories and the name and picture shall be displayed as defaulter on the website.
  • The Authority shall direct the scheduled bank holding the project back account, to freeze the account, and thereafter take such further necessary actions, including consequent de-freezing of the said account, towards facilitating the remaining development works.

The Authority may also issue such directions as it deems necessary to preserve the interest of allottees or in public interest.

The Authority shall also facilitate the remaining development works to be carried out by way of consulting the appropriate Government to take such action as it may deem fit which may include carrying out of the remaining development works by competent authority or by the association of allottees or in any other manner, as may be determined by the Authority and only after the expiry of the period of appeal provided under the provisions of this Act further giving  the association of allottees the first right of refusal for carrying out of the remaining development works.

Penalties for Non-Registration

Where the real estate project is not registered, Section 59 of RERA comes into play which imposes a penalty of up to 10% of the estimated project cost and where the default is continuous an additional fine up to 10% of the estimated project cost or imprisonment up to three years or both can be imposed.

RERA has assigned the Authority with inclusive powers in cases of non-compliance on the part of the Promoter comprising  penalty provision as well as taking ameliorating steps as the Authority may deem fit for protecting interest of the consumers.  Any person aggrieved by violation of provisions of RERA by a promoter may also file a complaint with the Authority.

In conclusion, it can safely be said that registration of projects with RERA has brought upon a lot of benefits on the consumers. Primarily, because it reduces the risk of insolvency/bankruptcy of the builder and provides a timeline for real estate projects completion and timely delivery, balanced agreements and transparency on utilisation of money by the promoter. The promoters, on the other hand, have also got governance and transparency in bargain from the RERA, enhancing confidence of investors and a regulated environment. RERA has increased efficiency and consolidated the real estate sector with higher investments and surge in organised funding of real estate projects.