India: Salient Features Of The Government Of Maharashtra Notified Rules Under RERA

The Real Estate (Regulation and Development) Act, 2016 (Act) was enacted on 25 March 2016. A total of 59 sections were notified by the Central Government on 27 April 2016, which came into force on 1 May 2016. The remainder sections of the Act were notified on 19 April 2017 and will come into force from 1 May 2017. Additionally, the Government of Maharashtra has notified and published the Maharashtra Real Estate (Regulation and Development) (Registration of real estate projects, Registration of real estate agents, rates of interest and disclosures on website) Rules, 2017 and the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine payable, Forms of Complaints and Appeal, etc.) Rules, 2017 under Section 84 of the Act on 20 April 2017 (Rules).

The Act and Rules are only applicable to new and ongoing residential and commercial projects. Ongoing projects are those projects which have not received an occupation certificate or a completion certificate on the date of commencement of the entire Act (i.e. on 1 May 2017) (Date of Commencement). The Act prescribes the establishment of a Real Estate Regulatory Authority (Regulatory Authority) and Real Estate Appellate Authority (Appellate Authority) for a fast track adjudication of consumer grievances.

This Newsflash sets out the salient features of the Rules in relation to - the registration of new and ongoing projects, promoter's disclosure requirements as to projects on the website of the Regulatory Authority, consequences of revocation of registration of projects and penal provisions.

Registration of Projects (New and Ongoing)

  • From the Date of Commencement, in case of new projects, a promoter cannot advertise, market, book, sell or offer for sale, or invite persons to purchase any apartment unless he registers his project with the Regulatory Authority.
  • However, in case of ongoing projects, the promoter has to make an application for registration to the Regulatory Authority, within 3 (three) months from the Date of Commencement. The Rules further clarify that at the end of 90 days from the Date of Commencement, the promoter cannot advertise, market, book, sell or offer for sale or invite persons to purchase (in any manner) any plot, apartment or building (in respect of such land parcel) unless this independent phase has been registered as a separate real estate project.
  • Projects where the land area is less than 500 square meters or comprises of less than 8 (eight) apartments are exempted from applying for registration under the Act.
  • Where the project is to be developed in phases, every such phase shall be considered a standalone project, and the promoter shall obtain registration under the Act for each phase separately.

Additional Requirements with Respect to the Time Period for the Completion of Construction of the Project

  • In case of new projects, the promoter is required to declare the time period within which he intends to complete the construction of the project, failing which, the registration will lapse.
  • In case of ongoing projects (specifically buildings), the promoter is required to mention the extent of:

    • the construction work completed as per the last approved sanctioned plan of the project; and
    • the development of common areas, amenities etc.
    along with expected period of completion of on-going project, which has to be commensurate with the extent of development already completed.
  • Under the Act, the period of registration may be extended by the Regulatory Authority due to specified force majeure events. In certain cases, it may be extended on account of reasonable circumstances but such an extension shall not exceed 1 (one) year in aggregate. In addition to this, the Rules provide that the registration period may be extended, where actual work (as per the sanctioned plan) could not be carried by the promoter due to:

    • specific orders relating to the project from any court of law or tribunal, competent authority, statutory authority, high power committee inter alia; or
    • due to such mitigating circumstances, as may be decided by the Regulatory Authority.

Additional Information to be Furnished at the Time of Registration

The promoter is also required to furnish the following additional information and documents at the time of registration of the project with the Regulatory Authority:

  • Legal title report by a practising advocate;
  • Where the promoter is not the owner of the land: consent of land owner along with a copy of the collaboration agreement, development agreement, joint development agreement or any other agreement, entered into between the promoter and such owner;
  • Details of proceedings which are sub judice in respect of the land;
  • Sanctioned plan along with proposed floor space index (FSI) / transferable development rights (TDR) to be utilised in accordance with the Development Control Regulation, 1991 (DCR);
  • Details of amenities and common facilities (including common areas, parking space) as per the sanctioned plan;
  • Sanctioned number of building(s) or wing(s) plus proposed number of building(s) or wing(s);
  • Sanctioned number of floors in respect of each building or wing plus proposed number of floors;
  • Proposed plan and proposed layout plan of the whole project;
  • Aggregate area in square meters of recreational open space;
  • Architecture and design standard, type of construction technology, earthquake resistant measures; and
  • Nature of the organisation of the allottees to be constituted.

Information and Certificates to be Submitted by the Promoter in case of Ongoing Projects

In case of ongoing projects, the promoter is required to submit the following information and certificates with the Regulatory Authority:

  • In respect of buildings, the extent of: (a) the construction work completed as per the last approved sanctioned plan of the project; and (b) the development of common areas, amenities etc., along with expected period of completion of on-going real estate project;
  • An architect's certificate certifying the percentage of completion of construction work of each of the building / wing of the project;
  • An engineer's certificate certifying the estimated balance cost to complete the construction work of each of the building / wing of the project;
  • Chartered accountants' (CA) certificate certifying: (a) the estimated balance cost to complete the project; (b) the balance amount of receivables from the apartment(s) / flat(s) / premise(s) sold or allotted, in respect of which agreements have been executed; and (c) the estimated amount of receivables in respect of unsold apartment(s) / flat(s) / premise(s) calculated at the prevailing annual statement of rates (ASR) on the date of certificate.

Withdrawal of 70% of Realisation to be Deposited in a Separate Account

  • As per the Act, it is mandatory for the promoter to deposit 70% of the amounts realised from the allottees, from time to time, in a separate bank account maintained with a scheduled bank (Separate Account) in order to cover the construction cost and the land cost.
  • The promoter shall be entitled to withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the project. Such a withdrawal shall be permitted only after it is certified by an engineer, an architect and chartered accountant in practice and such certificates are submitted to the scheduled bank. The certificates should provide for the following:

    • An architect's certificate certifying the percentage of completion of construction work for each of the building(s) / wing(s) of the project;
    • An engineer's certificate certifying actual cost incurred on the construction work of each of the building(s) / wing(s) of the project;
    • CA's certificate certifying: (a) cost incurred on construction cost and land cost; and (b) the proportion of the cost incurred on construction cost, land cost to the total estimated cost of the project.
  • The maximum amount which can be withdrawn by the promoter from the Separate Account is determined on the basis of total estimated cost of the project multiplied by the abovementioned proportions. The promoter shall be required to follow the aforementioned procedure for each withdrawal until occupation is obtained. Upon the receipt of occupation certificate, the entire balance amount lying in the Separate Account can be withdrawn by the promoter.
  • In case of ongoing projects, the Rules clarify that amounts to be realized from the allottees after the commencement of the Act will be required to be deposited in the Separate Account. However, in case the estimated receivable is less than estimated cost of completion of project, then 100% of amount to be realized from the shall be deposited in the Separate Account. The Rules further provide a comprehensive list of factors to be considered while computing land cost and construction cost, which are as follows. As per the Rules, land cost would include:

    • Acquisition cost, lease charges overhead cost, marketing cost, legal cost and supervision cost;
    • Premium paid to obtain development rights, FSI, additional FSI, fungible FSI, and any other incentive under DCR;
    • Acquisition of TDR;
    • Consideration payable to outgoing developer;
    • Amounts payable to State Government or competent authority or any other statutory authority of the State or Central Government, towards stamp duty, transfer charges, registration fees etc.; and
    • Premium payable as per the ASR for redevelopment of land owned by public authorities.
  • In case the promoter does not incur any cost towards acquisition of the land due to inheritance, gift or otherwise, the cost of land shall be reckoned on basis of the value of the land as ascertained from the ASR prepared under the provisions of the Maharashtra Stamp Act, 1958 as on the date of registration of the project.
  • As per the Rules, construction cost would include:

    • On-site and off-site expenditure for development of project;
    • Payment of taxes, fees, charges, premiums, interest etc.;
    • Principal sum and interest payable to financial institutions, scheduled banks, non-banking financial institutions (NBFCs) or money lenders; and
    • Rehabilitation scheme i.e. expenditure incurred towards clearance of land or encumbrances for temporary transit accommodation, construction of rehabilitation building, overhead cost, ASR linked premium, fees, charges and security deposits to authorities.
  • With reference to point (iii) above, the Rules provide that construction cost shall however not include the sum which the promoter has raised and incurred by way of loan obtained from such banks, NBFCs or money-lenders, for the purpose of purchase of land for the project or for obtaining the development rights over such land.

Restriction on Addition and Alteration of Sanctioned Plan

  • As per the Act, the promoter cannot make any addition or alteration in the approved and sanctioned plans, structural designs, specifications and amenities of the apartment without the previous consent of the allottee. Further, the promoter cannot make any addition or alteration in the approved and sanctioned plans, structural designs and specifications of the building and common areas within the project without the previous written consent of at least two-thirds of the allottees (other than the promoter) who have agreed to take apartments in such building.
  • The Rules have further clarified in this context that the promoter need not obtain written consent of two-thirds of the allottees: (i) for implementation of the proposed plans / specifications which have been disclosed by the promoter in the agreement executed with the allottee, prior to registration of the ongoing project, and (ii) for any alterations or additions or modifications in the sanctioned plans, layout plans and specifications of the buildings or common areas in the real estate project which are made by promoter while complying with any direction or order, etc. issued by the competent authority or statutory authority under any law.

Revocation or Lapse of Registration

  • Under the Act, the registration of a project will lapse in case the promoter does not complete the project within the timelines so declared to the Regulatory Authority.
  • Further, the Regulatory Authority may revoke the registration of a project granted on the basis of:

    • receipt of a complaint;
    • suo moto; or
    • on the recommendation of the competent authority,
    in case the promoter, (a) defaults as to his duties the Act or the rules or regulations made thereunder; (b) violates any terms of the approvals granted for the project; and (c) is involved in any kind of unfair trade practice.
  • In the event the registration lapses or is revoked by the Regulatory Authority, 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 with the assistance of the competent authority / the association of allottees (Association) or in any other manner as may be determined by the Regulatory Authority. However, in case of revocation of registration, the Association shall have the first right of refusal for carrying out the remaining development works; and
    • 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 in the manner mentioned above in point (ii).
  • In addition to the consequences of revocation of registration of a project as prescribed under the Act, the Rules prescribe the following additional consequences:

    • Prior to revocation, the Regulatory Authority shall give notice to the competent authority under the Act / Rules as well as to the Association; and
    • While facilitating the remaining development work, the Regulatory Authority shall take such measures as may be required to protect the interest of mortgagees and investors who have been disclosed by the promoter to the Regulatory Authority and are also displayed on its website.
  • The Regulatory Authority shall also give adequate opportunity to be heard to debt and equity investors in the project. Such investors include scheduled banks, housing finance companies, insurance companies, NBFCs operating as asset finance companies, investment companies, loan companies, investment finance companies, infrastructure debt funds, micro finance Institutions, foreign direct investors, private equity funds, REITs inter alia.

Registration Fee

The fee for registering a project is set at INR 10 (ten) per square meter subject to a minimum of INR 50,000 and maximum of INR 1000,000.

Important Definitions

The Rules provide for additional important definitions such as 'Phase of a Real Estate project' and 'Covered parking space' in the follow:

  • "Phase of a project" may consist of a building or a wing of the building in case of building with multiple wings or defined number of floors in a multi-storeyed building/wing.
  • "Covered parking space" means an enclosed or covered area as approved by the Competent Authority as per the applicable Development Control Regulations for parking of vehicles of the allottees which may be in basements and/or stilt and/or podium and/or space provided by mechanised parking arrangements but shall not include a garage and/or open parking.
  • The Rules also permit a promoter to sell covered parking space to an allottee.

Rate of Interest Stipulated

The rate of interest payable by the promoter to the allottee or vice versa, shall be State Bank of India's highest marginal cost of lending rate plus 2%.

Application for Formation and Registration of Association of Allottees by Promoter

The promoter is required to observe the following timelines for filing an application for registration of the Association (being a society, company or any other legal entity) or an apex body in the form of a federation or holding entity (Apex Body):

  • In case of a single building: the promoter is required to submit an application for formation of an Association within 3 (three) months of 51% of total allottees having booked an apartment in such a building or a wing; and
  • In case of various buildings in a large layout: the promoter is required to submit an application for formation of an Apex Body of separate and independent associations within 3 (three) months from receiving the occupancy certificate for the last building constructed in the layout.

If the promoter fails to comply with the aforesaid timelines, then the Regulatory Authority can order the promoter to apply for registration or authorise the allottees to apply for registration.

Conveyance of Title

The promoter is required to observe the following timelines for conveyance of land and building in favour of an Association (being a society, company or any other legal entity) or an Apex Body when no time period has been agreed upon:

  • In case of single building: within 3 (three) months from, (i) the date of issue of occupation certificate; or (ii) having 51% of total number of allottees pay the full consideration to the promoter, whichever is earlier (subject to promoter's rights to dispose of the remaining apartment(s));
  • In case of a building/ wing in a layout:  within, (i) 1 (one) month from the date of registration of association; or (ii) 3 (three) months from the date of receipt of occupation certificate, whichever is earlier (subject to promoter's rights to dispose of remaining apartment(s) and except basements and podiums); and
  • In case of a layout: (where the conveyance pertains to the  entire undivided or inseparable land underneath all buildings along with structure of basement and podiums) within 3 (three) months of, (i) registration of an Apex Body; or (ii) from the receipt of occupation certificate for the last building or wing in the layout, whichever is earlier.

In case of failure by promoter to comply with the aforesaid time lines the Regulatory Authority shall by an order direct the promoter to convey the title to the Association or the Apex Body, as the case may be. The Association shall also be entitled to have a unilateral deemed conveyance in its favour under the provisions of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963.

Compounding of Offence

The Rules also prescribe for compounding of offences committed by the promoter, real estate agent or allottee which are as follows:

  • Promoter:

    • If the promoter fails to comply with order of Regulatory Authority in relation to non-registration of project then instead of an imprisonment term extending up to 3 (three) years, a compounding fee amounting to 5% of the estimated cost of real estate project is applicable, which may extend up to 10%;
    • If the promoter fails to comply with the order of Appellate Authority then  instead of an imprisonment term extending up to 3 (three) years, a compounding fee amounting to 5% of the estimated cost of real estate project is applicable, which may extend up to 10%;
  • Real Estate Agent: If the real estate agent fails to comply with the order of the Appellate Authority then instead of an imprisonment term extending up to 1 (one) year, a compounding fee amounting to 5% of the estimated cost of the plot, apartment or building for which sale or purchase has been facilitated, is applicable, which may extend up to 10%; and
  • Allottee: In case the allottee fails to comply with order of Appellate Authority then instead of an imprisonment term extending up to 1 (one) year, a compounding fee of 5% of the estimated cost of the plot, apartment or building, is applicable, which may extend up to 10%.

Khaitan Comment

Starting 1 May 2017, the Act and the Rules will effectively come into force thus heralding a new era in Maharashtra's real estate and construction sector. The Act and the Rules prescribe stricter timelines with regard delivery and completion of projects, increased onus on promoters to make disclosures as well as provide for a speedy redressal mechanism for consumer grievances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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