India: Real Estate (Regulation And Development) Act : A Step Ahead From Existing Regime

Last Updated: 18 July 2017
Article by Gyanendra Kumar and Harsimran Singh

Most Read Contributor in India, July 2017

In continuation to our earlier write up on Real Estate (Regulation and Development) Act 2016 or RERA, covered in May 2017 issue (Volume X Issue V) of the Indian Legal Impetus, we hereby further discuss other crucial aspects of RERA which make this piece of legislation very important in the current times.

It is not wrong to state that the real estate sector was in a state of limbo since very long until the coming up of RERA as there were no authority who kept supervisory and administrative control on this industry. As a result, in most of the cases, the builders got undue benefits against the customers who held a very weak ground due to weak bargaining power and entanglement in onerous contractual documentation.

As discussed in the preceding article on RERA, the main object of this law is to establish a regulatory authority for promoting the real estate sector and ensure the sale of plot, apartment or building in efficient and transparent manner and also, protect the interest of the consumers.

Prior to RERA, the customers were confused firstly about investing in a project and thereafter, if any disputes arose then which door to knock on for seeking justice. Now consumers have no need to worry and they can invest in projects which are registered with the authority and if any disputes arises in future then they can approach the authority1 or adjudicating officer2 for speedy dispute redressal.

The Act makes it mandatory that every residential and commercial project should be registered with the RERA before launching it in market - if the area of the land exceeds five hundred square meter or the number of apartments exceeds eight.3 The promoter has to apply for registration of the real estate project supported by an affidavit stating that he has a legal title of the land, land is free from all encumbrances, time period for completion of project, and 70% of the amounts collected from the allottees shall be deposited in a separate account maintained in a scheduled bank.4 Thereafter, within a period of 30 days the Authority shall grant or reject the application for registration of the project.5 And extension of registration can be possible on the ground of force majeure only.

So, the promoter/builder has to strictly comply with the time frame otherwise it leads to revocation of registration or penalty. And not only the promoter but Real Estate agents also have to obtain registration from the concerned authority established under the provisions of RERA, otherwise they can't facilitate in any manner for sale or purchase of any plot, apartment or building.6 After registration the promoter will get a Login Id and password for creating a webpage on the website of authority for public viewing and he has to upload all the details of the project on the website and also that he has obtained all the certificates and clearances from relevant authorities including details of registration granted by the authority and status of the project and the obligations will be on promoter regarding veracity of the advertisement or prospectus.

The other most important feature of RERA is that the consumer is not required to pay more than 10% of the cost of the apartment, plot or building as an advance payment without first entering into a written agreement for sale.7 It is normally seen that the developers never execute the builder buyer agreement with the customers and keep prolonging the same even after receiving the 40-50% of amount and delay in giving the possession of property on time. Now the developer cannot delay in executing the agreement after receiving 10% of total amount nor deviate from the sanctioned plans, layout plans and specifications as approved by the competent authorities and if the promoter fails to complete or is unable to give possession of an apartment then he shall be liable to return the amount with interest if customer wishes to withdraw from the project; otherwise if customer does not intend to withdraw then promoter will pay interest for every month of delay till the handing over of the possession.8 But it is important to note that this act not only talks about the rights of the allottees but also describe the duties of the allottees.

According to section 19(6) RERA, "every allottee who has entered into an agreement for sale to take an apartment shall be responsible to make necessary payments in the manner and within the time as specified in the said agreement for sale and shall pay at the proper time and place and tax, if any." And allottee shall be liable to pay interest, at such rate as may be prescribed, for any delay in payment towards any amount or charges.9 So, allottee too has to strictly comply with the provisions of the agreement entered into with the builder otherwise any default on the part of the allottee (including non-fulfillment of duties enshrined under section 19 of RERA) may result in adverse effect on the rights available to an allottee under RERA.

Earlier, there was no exclusive authority or court or tribunal where aggrieved allottees could approach and seek justice within short time frame and they had to run from one forum to other. The allottees used to file the complaint before Hon'ble Consumer Dispute Redressal Forum or winding up petition before the Hon'ble High Court of respective jurisdiction and they had to wait for longer periods as large numbers of cases were pending before the Courts. Now according to section 31 of RERA "any aggrieved person may file a complaint with the Authority or the adjudicating officer for any violation or contravention of the provisions of this Act against any promoter or real estate agent." The authority has a power to issue interim orders until the conclusion of the inquiry without giving notice to such party and also has powers to impose penalty or interest in regard to any contravention cast upon the promoters, the allottees and real estate agents.10 However, if any person aggrieved by any direction or order or decision of the authority or adjudicating officer may prefer an appeal to the Appellate Tribunal11 under section 44 of the Act within 60 days from receiving the copy of the order. Furthermore, any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within a period of 60 days from the date of communication of the order.12

In essence, this act has been a step forward from the existing laws in real estate industry and it will increase transparency in the real estate market. The developers, in absence of specific real estate laws, had misused their dominant position and availed large scale benefits. Large numbers of pending litigations are still going on in different fora. RERA has also laid down the provisions of compounding of offences where party can settle their dispute on such terms and on payment of such sums as may be prescribed provided the sum prescribed shall not exceed the maximum amount of the fine. It is important to note that if any pending litigation is going on before the Consumer Disputes Redressal Forum on or before the commencement of RERA, the aggrieved may with the permission of such forum or commission withdraw the complaint pending before it and file an application before the adjudicating officer under RERA.13

Footnotes

1 Real Estate Regulatory Authority as established u/s 20 of the Act, 2016.

2 Judicial officer, who is or has been a District Judge appointed under sub section (1) 0f Section 71.

3 Section 3, RERA

4 Section 4, RERA

5 Section 5, RERA

6 Section 9, RERA

7 Section 13

8 Section 18

9 Section 19(7)

10 Section 38

11 Real Estate Appellate Tribunal established under section 43 of the Act,2016

12 Section 58

13 Section 71

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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