This is Part 1 of 3 Part series of Real Estate Regulation and Development Act, 2016. In this part we will cover what is RERA, registration and revocation of Real estate projects, Functions, powers and duties of promoters & allottees.
RERA Act 2016 establishes a Real Estate Regulatory Authority (RERA) in each state for regulation and promotion of real estate sectors and to establish an adjudicating mechanism for speedy dispute redressal. The Act came into force on 1 May 2016 with 61 sections. At present there are 10 Chapters and 92 Sections under this Act. This Act was passed to correct the ambiguities in the real estate transactions which were highly in favor of developers.
Main objective or Need of this Act is to:
- Bring transparency in the real estate sector, thereby encouraging investments by foreign and domestic financial institutions,
- Protecting the interests of home buyers.
- To reduce the project delay and property fraud.
- To enhance the reliability of the sector and thereby increase confidence amongst the investors.
Registration of Real Estate Projects (Section 3-8):
It is necessary for the Promoters or builders to register the Real estate projects with the Real estate regulatory authority, before advertising, marketing, selling, offering for sale or inviting persons to purchase in any manner any plot, apartment or building.
For registering the project under RERA promoter needs to give brief details of projects launched by him in past 5 years, copy of approval and commencement certificate from competent authority, sanctioned plan, layout plans, location details of the project, number, type and carpet area of the apartments for sale in the project and declaration supported by affidavit and signed by promoters stating that he has a legal title of land on which development is proposed, land is free from all encumbrance, time period within which project will be completed and 70% of the amount realized for the real estate project to be maintained in a separate account, etc.
In case where there is an ongoing project on the date of commencement of this Act or where the completion certificate is not issued, promoters have to make an application to the regulatory authority under this Act for the registration of the project within three months of the commencement of this Act.
But there are certain exceptions where there is no need to register the project under RERA are:
- Where the area of land to be developed is less than 500 sq.m or the number of apartments is less than 8 inclusive of all phases.
- Where the completion certificate of a real estate project has been received by the promoter.
- For the purpose of renovation, repair or re-development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building.
On receipt of application for registration, authority may reject or accept an application within a period of 30 days giving reason for such decision in writing and no application can be rejected without giving an opportunity of being heard.
In case where an authority fails to grant or reject an application for registration of estate projects, 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, 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. Registration granted is valid only for a certain period of time declared by the promoter and can be further extended for a period, not exceeding a period of one year by the authority on an application made by the promoter due to force majeure.
Revocation (Sec 7):
The authority has power to revoke the registration granted by giving 30 days notice in writing stating the reasons for such revoaction, where the promoter:
- Makes default in doing anything required under the Act.
- Violates any of the terms or conditions of the approval given by the competent authority.
- Involved in any kind of unfair or fraudulent practices or irregularities, making false representations, etc.
Upon revocation, the authority shall debar the promoter from accessing it's website, facilitate the remaining development work after consulting with the appropriate government where the association of allottees have the first right of refusal for carrying out of the remaining development works and directs the bank to freeze the promoters bank account to protect the interest of the allottees.
Real estate agent also cannot sale or puchase any plot, apartment or building or part of it, being sold by promoters, without getting registered under this Act. For obtaining registration, real estate agents have to make an application to the authority within the stipulated time and with given fee.
Functions & Duties of Promoters (Sec 11-18):
- After receiving Login ID and Password, promoter has to create a web page on the website and enter all the details of the proposed project for public viewing.
- The advertisement or prospectus issued by the promoter must contain the website of the authority where all the details of registered project have been entered.
- At the time of booking and issuing allotment letter, Promoter to be responsible to make available to the allottee information such as sanctioned plan, layout plan, stage wise schedule of completion of project, etc.
- The promoter to be responsible:
- For all obligations, responsibilities and functions under the provisions of this Act till the conveyance of all the apartments, plots or buildings to the allottees, or the common areas to the association of allottees. But with respect to structural defect, responsibility of promoter shall continue even after the conveyance deed.
- To obtain the completion certificate or occupancy certificate from the relevant authority.
- To obtain the lease certificate where the project is developed on leasehold land specifying period of lease, all dues and charges has been paid, etc.
- Providing and maintaining essential services on reasonable charge till the maintenance of the project is taken over by the association of allottees.
- Enable the formation of an association or society or co-operative society to be formed within a period of three months of the majority of allottees having booked their plot or apartment or building.
- Execute a registered conveyance deed of the apartment, plot or building in favor of the allottee along with the undivided proportionate title in the common areas to the association of allottees or competent authority.
- Pay all outgoings until he transfers the physical possession of the real estate project to the allottee or the associations of allottees, which he has collected from the allottees, for the payment of outgoings. If promoter fails to pay any interest, outgoing, mortgage before the transfer of real estate to the allottee, he shall be liable to pay even after the transfer of such property.
- In case where promoter gives a false or an incorrect statement in the notice or prospectus and on that given notice or false information person makes an advance or a deposit, he shall be compensated by the promoter in the given manner. If a person affected by such incorrect or false statement intends to withdraw from the proposed project, he shall be returned his entire investment along with interest at such rate as may be prescribed and the compensation in the manner provided.
- Promoter cannot accept a sum more than 10% of the cost of apartment, plot or building as an advance payment from a person without first entering into a written agreement for sale with such person and register the said agreement for sale.
- Promoter has to develop and complete the proposed project in accordance with the said layout and sanctioned plans and specifications as approved by the competent authorities.
- He cannot make any major alteration in the sanctioned plans and layout plans without taking consent from that person but he can make minor additions or alterations which is necessary. In case promoter wants to make additions or alterations in common areas within the project, he has to take previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such building.
- If there is any structural defect or any other obligation of the promoter as per the agreement for sale relating to such project, the allottee has to send the notice to the promoter within a period of 5 years from the date of handing over possession. It is the duty of the promoter to rectify such defects within a period of 30 days.
- The promoter cannot transfer or assign his majority rights or liabilities in respect of project to any third party without taking previous written consent of two third of allottees and written approval from authority.
- It is the duty of the promoter to obtain all the insurance notified by the appropriate government and to pay the premium and charges with respect to the insurance.
Transfer of Title (Sec 17):
The promoter has to execute a registered conveyance deed in favor of the allottee along with the undivided proportionate title in the common areas to the association of the allottees as per sanctioned plans under local laws. In absence of any local law promoter need to execute the registered conveyance deed in favor of allottee or association of allottee within 3 months from the date of issue of occupancy certificate and other necessary documents and plans within 30 days after obtaining the completion certificate.
If promoter fails to complete or give possession of apartment, plot or building in accordance with the terms of the agreement for sale:
- Due to discontinue of his business as a developer on account of suspension or
- Revocation of registration
Promoter shall be liable to return the amount of allottee received by him in respect of such plot, apartment or building along with interest at such rate as prescribed, if allottee wants to withdraw from such project. But if allottee does not want to withdraw from the project promoter shall be liable to pay interest for every month of delay till handing over the possession at such prescribed rates.
In case if there is a defect in the title of the land on which project is being developed, promoter need to compensate the allottee in the manner as provided under the Act and it will not be barred by limitation under any law for the time being in force.
Rights & Duties of Allottees (Sec 19):
- Allottee is entitled to obtain the information relating to sanctioned plans, along with specification approved by competent authority made in agreement for sale.
- To know the stage-wise time schedule of completion of project including provision for water, sanitation, electricity, etc.
- To claim the possession of plot, apartment or building and the common area to the association of allottees.
- In case promoter fails to comply or is unable to give the possession of plot, apartment or building, allottee is entitled to claim the refund of amount along with interest and compensation as provided in the Act.
- After taking the physical possession of the apartment, allottee is entitled to have the necessary documents and plans including that of common area.
- To make necessary payments in the manner and within the time as provided in the agreement for sale.
- Liable to pay interest for any delay in payment towards any amount or charges.
- The obligation and the interest of the allottee may be reduced when mutually agreed to between the promoter and such allottee.
- Every allottee of apartment, plot or building have to participate in the formation of an association or society or cooperative society of the allottees.
- To take the physical possession of plot, apartment or building within a period of two months of the occupancy certificate.
- To participate towards the registration of the conveyance deed of apartment, plot or building.
- In the case of Vishal Arya vs Unitech (2013)1, there was an agreement between the allottee and builder and in the given agreement there was a clause of Force Majeure which means that due to external and unavoidable circumstances, the agreement cannot be executed. In the present case petitioner has already paid the price but the construction work had not begun. So, when asked with respondent regarding the same stated the reason of Force Majeure. This was contested in consumer forum. State Consumer Dispute Redressal Commission held that the clause of force majeure cannot be claimed unless some part of the agreement has already been fulfilled.
- In the case of Vinod Kumar Aggarwal v. Jaipur Development Authority2 (2020), The bone of contention was that whether the local law will prevail or the RERA Act. Court held that the RERA Act would prevail over the local law regarding real estate transactions.
- In the case of M/S Emaar Mgf Land Limited vs Aftab Singh3 (2018), the petitioner failed to fulfill his promise of completing and giving the flats to the allottees within the stipulated time. With reference to an arbitration clause in their agreement builder wanted to settle the matter in a court of Arbitration. The respondent did not agree and filed a complaint under the Consumer Protection Act. The contention of builder was that it is regarding real estate so it will fall under the RERA Act and not under Consumer Protection Act. SC held that Persons who consume the services of builders have the right to seek redressal under the Consumer Protection Act and also under the RERA Act.
- In the case of M/S. Geetanjali Aman ... vs Hrishikesh Ramesh Paranjape and Anr4. (2021), bone of contention in the present case is the interpretation of Section 3 (2) of RERA Act which states that registration under RERA is not required when ‘a plot which does not exceed 500 sq. ft. or the building does not exceed eight apartments.' The question of interpretation came into picture as there was a disputed estate with 9 floors. Bombay High Court held that the interpretation of clauses regarding conditions to be fulfilled must be read in their truest form.
- In the case of Sanjeev Dhakar Vs. M/s. Arkanade Realty (MahaRERA), the petitioner in the present case had paid the builder for the house in an apartment complex. The agreement was signed and executed by both of them. The issue here is the parking space which was to be allotted to the petitioner. The parking space was not provided and the same was actually sold to another allottee. Court held that when a builder takes up a project to provides apartment complexes, the allottees must also receive their assigned parking spaces, it would fall under the ambit of the RERA Act.
Housing is one of the basic human needs. Access to adequate housing can be a prerequisite for the enjoyment of several human rights, including the right to work, health, social security, the right to vote, privacy or education. Safe, secure and adequate housing is a basic need of human beings. RERA Act is a step in the direction of regulation of Real Estate sector in India. The Act provides for the registration of the Real Estate projects, revocation, transfer of title, responsibility of the builder among other things. The good thing about this Act is that property buyers can take advantage of this pioneering act and can get compensation in case of delayed projects.
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.