India: Recent Trends Under The Real Estate (Development And Regulation) Act, 2016

The Real Estate (Development and Regulation) Act, 2016, hereinafter referred to as "RERA", is a central legislation which aims to bring the real estate sector under its ambit thereby aligning the interests of the allottees and the promoters. RERA was enacted under Entry 6 and 7 (dealing with contracts and the transfer of property) of the Concurrent List of the Constitution of India. It was enacted in March, 2016 and came into effect from May, 2017.

RERA was enacted to regulate the largely unregulated sector of real estate and to provide an appropriate grievance redressal mechanism. There were a lot of contentious issues such as delays, price, and quality of construction along with numerous instances wherein promoters cheated the allottees. This culminated into the generation of a large amount of black money in the real estate sector which ultimately eroded the public wealth of the country and damaged the economy.1

Prior to the enactment of RERA, there existed a redressal mechanism under the Consumer Protection Act, 1986, hereinafter referred to as "CPA". Under the CPA, in respect of a real estate project, a consumer as defined under Section 2(d) could approach the State Consumer Disputes Redressal Commission or the National Consumer Disputes Redressal Commission depending on the pecuniary jurisdiction as provided under Section 11 and Section 22 of the CPA. Though the CPA adopted a summary procedure, there have been instances wherein the consumer complaints have lingered on for a long duration completely defeating the intention of legislature. Although the CPA has been widely criticized for inordinate delay in granting relief to the consumers, the same cannot be solely attributed to the mechanism as has been provided under the CPA. Barring the consumer complaints pertaining to the Real Estate Projects, the consumer forums are also by statute bound to entertain various other consumer complaints as well thereby creating a huge burden on the consumer forums.2

The enactment of RERA is considered to be a step in the right direction as it exclusively deals with the real estate sector which is presently attracting a lot of heat due to the inordinate delay by the promoters in handing over the possession of the apartments to the respective allottees.

While RERA was supposed to be a beneficial legislation for the allottees and the promoters, it suffers from certain drawbacks as enumerated here:

  • Dilution of the Central Act of RERA by State legislatures and failure of certain states to enact RERA:
  • RERA was enacted under Entry 6 and 7 (dealing with contracts and the transfer of property) of the Concurrent List. This accorded power to states to make changes to the provisions of Central RERA which had been enacted on March, 2016. But as per Article 254 of Indian Constitution, presidential assent is required for bringing changes in a central act. However, the Act which was intended to be a beneficial legislation has had different implications in different states because of dilution of the Central Legislation by State Acts.
    • One of the most recent examples is that of West Bengal Housing & Industrial Regulation Act, 2017(WBHIRA) whose constitutional validity has been challenged in Supreme Court on the grounds of dilution of Central Act without presidential assent. There is a direct conflict between Central RERA and WBHIRA, for instance - whether Registration will be under RERA or WBHIRA.
    • The West Bengal Housing & Industrial Regulation Act has also amended the definition of Force Majeure, which in turn has led to a situation where the builder can avoid paying compensation for non-fulfillment of the conditions stipulated under the contract by claiming force majeure which runs contrary to the intention of legislature while drafting the Central Act.
    • Another instance is the amendment of the definition of Garage to include open parking space which has strictly been excluded by Central Legislation.
  • The same situation is also prevalent in several other states. The state law in Maharashtra was earlier repealed despite a presidential assent and Kerala too did not implement its own Act.3 Moreover, certain states such as4 Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura are yet to notify rules.5
  • Issues pertaining to the compensation as provided under Section 71 of RERA:
  • Section 71 provides for appointment of a judicial officer for awarding compensation in addition to the refund granted by the Real Estate Regulatory Authority. Though the intent of the Legislature was to provide some additional relief to the allottees via the said provision, the same has yet to be complied with by majority of the state governments. Therefore, unless the respective state governments appoint the requisite judicial officer, the compensation as enumerated under Section 71 of RERA shall not be awarded to the allottees thereby, defeating the intention of the Legislature altogether.6
  • Issues pertaining to refund as enumerated under Section 37 of RERA7:
  • Though the Real Estate Regulatory Authority, under the said provision, has been vested with the power to issue directions regarding refunds to the promoters or the real estate agents as may be necessary, a peculiar stand has been taken up by the authorities of certain state governments. A recent example is the stand taken up by the Haryana Real Estate Regulatory Authority (HARERA) which stipulates that if a project is completed up to the extent of 40% or more then the authority shall not award refund of the amount already deposited to the allottees as that would hinder the construction of the already delayed real estate project. Though the stand taken by HARERA is a pragmatic one, it fails to take into account that there are certain allottees who have not been handed over possession of their respective apartments for years and years beyond the agreed due date of possession and so are no longer interested in the prospect of owning the apartment solely due to the financial and mental stress that has been caused to them. It is also pertinent to mention here that RERA itself does not lay down any provision that prima facie talks about the percentage or slab of completion of construction which if satisfied would not entail refund of the amount deposited by the allottees.8

CONCLUSION

The Real Estate (Development and Regulation) Act, 2016, was enacted to provide an effective grievance redressal mechanism and provides regulations in a highly unregulated sector. Though the Act has addressed the issues of the allottees to a certain extent still there remain a number of lacunas that remain unanswered. There still exist opaque enforcement mechanisms under the Act coupled with ambiguity with regards to the application of the Act.

The decision rendered in Simmi Sikka v/s Emaar MGF Ltd9 has attempted to broaden the ambit of the Act by bringing the unregistered projects under its fold; the Act is still in its nascent phase and certainly requires some refinement in order to handle the prevailing trends in the real estate sector.

Footnotes

1. Indiankanoon.org. (2019). Neelkamal Realtors Suburban Pvt .Ltd vs The Union Of India And 2 Ors on 6 December, 2017. [online] Available at: https://indiankanoon.org/doc/82600930/ [Accessed 7 Feb. 2019].

2. Wipo.int. (2019). [online] Available at: Wipo.int. (2019). [online] Available at: https://www.wipo.int/edocs/lexdocs/laws/en/in/in076en.pdf [Accessed 8 Feb. 2019].

3. ForumIAS Blog. (2019). Real Estate Regulation Act (RERA): A Critical Evaluation. [online] Available at: https://blog.forumias.com/real-estate-regulation-act-rera-a-critical-evaluation/ [Accessed 10 Feb. 2019].

5. Moneycontrol. (2019). Supreme Court admits homebuyers' petition challenging constitutional validity of WBHIRA. [online] Available at: https://www.moneycontrol.com/news/business/real-estate/supreme-court-admits-homebuyers-petition-challenging-constitutional-validity-of-wbhira-3512861.html [Accessed 6 Feb. 2019].

6. Up-rera.in. (2019). [online] Available at: Up-rera.in. (2019). [online] Available at: http://up-rera.in/pdf/reraact.pdf [Accessed 10 Feb. 2019].

7. Ibid

8. Moneycontrol. (2019). Refund may not be allowed if project is 40 percent complete: HARERA Gurugram chief. [online] Available at: https://www.moneycontrol.com/news/business/real-estate/refund-may-not-be-allowed-if-project-is-40-percent-complete-harera-gurugram-chief-2889041.html [Accessed 12 Feb. 2019].

9. Credai.org. (2019). [online] Available at: Credai.org. (2019). [online] Available at: https://credai.org/assets/upload/judgements/resources/haryana-real-estate-regulatory-authority----ms-simmi-sikka-vs--ms-emaar-mgf-land-limited.pdf [Accessed 9 Feb. 2019].

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