Real Estate (Regulation and Development) Act, 2016 – Key Provisions

Shivangi Mathur

Published on: 28 August 2022 at 20:37  IST

Introduction

The Bill for the Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as RERA Act) was passed by the Rajya Sabha on 10^th March 2016 and was subsequently passed by the Lok Sabha on 15^th March 2016. The Act came into force on 1^st May 2016 partially, i.e., 52 of the 92 sections came into force while the remaining provisions came into force on 1^st May 2017.

What is the aim of the Act?

This Act was passed in order to establish the “Real Estate Regulatory Authority” which would regulate and promote the real estate sector. It aims to ensure the sale of a plot, a building, or sale of any real estate project in an efficient and effective manner while also maintaining the transparency of the procedure so as to protect the interests of the consumers in the real estate sector.

A real estate project as defined under Section 3(zn) of the RERA Act is the

“Development of a building or a building consisting of apartments, or converting an existing building or part thereof into apartments, or the development of land into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto”

The RERA Act also establishes an adjudicating mechanism which ensures the speedy redressal of disputes and sets up an Appellate Tribunal which is empowered to hear appeals from decisions, directions and orders of the RERA and the adjudicating officers and any other matters that are connected or incidental to the aforementioned.

What are the provisions regarding Registration under the RERA Act?

There are two types of registration under the Act:

1. Registration of Real Estate Projects
2. Registration of Real Estate Agents

Every Real Estate Project must be registered with the RERA unless:

• The area of land proposed to be developed is less than 500 sq. meters
• The number of apartments proposed to be developed is less than 8 inclusive of all phases
• The promoter has received the completion certificate for a real estate project prior to commencement of this Act
• If the purpose is to renovate or redevelop and no marketing or sale is involved.

A completion certificate is one which is issued by the competent authority certifying that the real estate project has been developed in accordance with the sanctioned plan, layout plan and specifications as they have been approved by the competent authority.

An application for the registration of a real estate project must contain the following:

• The name, registered address, type of enterprise and, names and photographs of the promoter in brief
• In brief, the projects that have been undertaken by the promoter in the past 5 years including their current status
• An authenticated copy of the approvals and commencement certificate issued by the competent authority
• The sanctioned plan, layout plan and specifications of the proposed project or is phase
• An affidavit signed by the promoter or any other authorised person stating the following should be included:
  • That he has a legal title to the land on which development is taking place
  • The land is free from all encumbrances
  • The time period within which he will complete the real estate project
  • That 70% of the amounts realised for the real estate project shall be deposited in a separate account

The Authority is also empowered to revoke the registration on receipt of a complaint or suo moto. However, the promoter must be given a 30 days notice in writing which specifies the grounds on which it is revoked. The authority must be satisfied that:

• The promoter defaulted in doing anything that is required under this Act
• The promoter violated the terms or the conditions of the approval given by the competent authority
• The promoter is involved in unfair or fraudulent practices

Real Estate Regulatory Authority

Section 20 of the RERA Act provides for the establishment and incorporation of the Real Estate Regulatory Authority within a period of one year from the date of commencement of this Act. This body will consist of members who have adequate knowledge and professional experience in matters of urban development, housing, real estate development, infrastructure, economics, technical experts from relevant fields, planning, law, commerce, accountancy, industry, management, social service, public affairs or administration.

The members shall be appointed for a period of 5 years or until they attain the age of 65, whichever is earlier and are not eligible for reappointment. The members are:

• Chairperson: Professional experience of at least 20 years
• At least 2 full-time members: Professional experience of at least 15 years

These members shall be appointed by the appropriate Government on the recommendation of the Selection Committee which will consist of the Chief Justice of High Court or his nominee, the Secretary of the Department of Housing and the Law Secretary.

Functions of the RERA

Any aggrieved person can file a complaint for any violation or contravention of the provisions of this Act or any rules or regulations made thereunder against any promoter, allottee or real estate agent.

Section 32 of the RERA Act defines “the Functions of the Authority for the promotion of the Real Estate Sector.” The Authority should in order, to facilitate the promotion and growth of an efficient, competitive and transparent real estate sector make recommendations regarding the following:

• “protection of interest of the allottees, promoter and real estate agent;
• creation of a single-window system for ensuring timely completion of the project;
• creation of a robust grievance redressal mechanism
• measures to encourage investment in the real estate sector
• measures to encourage the construction of environmentally sustainable and affordable housing, and promoting standardisation
• measures to encourage grading of projects on various parameters of development including grading of promoters;
• measures to facilitate amicable conciliation of disputes between the promoters and the allottees”.

Under Section 34 the functions of the authority include:

• “to register and regulate real estate projects and real estate agents registered under this Act;
• to publish and maintain a website of records, for public viewing, of all real estate projects for which registration has been given
• to maintain a database, on its website, for public viewing, and enter the names and photographs of promoters as defaulters including the project details
• to fix through regulations for each area under its jurisdiction the standard fees to be levied on the allottees or the promoter or the real estate agent
• to ensure compliance with the obligations cast upon the promoters, the allottees and the real estate agents”.

The Authority has the same powers as those vested in a civil court under the “Code of Civil Procedure, 1908” while trying a suit. The Authority shall be guided by the principles of natural justice and has the power to regulate its own procedure. The authority has the power to take up cases suo moto and may refer the cases to the Competition Commission of India if it deems them so fit.

Real Estate Appellate Tribunal

Section 43 of the RERA Act provides for the establishment of the Real Estate Appellate Tribunal. Any person who is aggrieved by a decision or direction of the RERA under this Act may prefer an appeal before the Appellate Tribunal.

The appeal preferred shall be dealt with by the Tribunal as expeditiously as possible and should be disposed of within 60 days from the date of the receipt of the appeal.

The Appellate Tribunal has the same powers as those of a civil court in respect of the following matters:

• “summoning and enforcing the attendance of any person and examining him on oath
• requiring the discovery and production of documents
• receiving evidence on affidavits
• issuing commissions for the examinations of witnesses or documents
• reviewing its decisions
• dismissing an application for default or directing it ex-parte
• any other matter which may be prescribed”.

Penalties under the RERA Act

• The promoter shall be liable to a penalty that may amount to 10% of the estimated project cost if he fails to register the real estate project. He may also be subject to imprisonment which may extend upto 3 years or with a fine which may extend up to a further 10% of the estimated cost of the project if he fails to comply with the orders, directions etc. given by the state RERA.
• Real Estate Agents must register themselves, and will be issued a single registration number for each State or UT, which must be specified by the agent in every sale facilitated by him. If he fails to register, he shall be liable to pay Rs. 10,000 for every day during which such default continues, which may cumulatively extend upto 5% of the cost of the real estate project
• In case of severe non-compliance with RERA, promoters also need to pay a daily penalty of up to 5% of the project’s estimated cost
• The penalty is imprisonment for up to 1 year, or 10% of the project’s probable cost, or both, in case of non-compliance with the Appellate Tribunal.
• Buyers will have to pay a daily penalty of up to 5% of the cost of the real estate project in case of non-compliance with RERA. Non-compliance with the Appellate Tribunal has a penalty of imprisonment for up to 1 year, or 10% of the project’s probable cost, or both.

What are the benefits of the RERA Act?

• Increases transparency and accountability in the real estate sector
• Protects buyers from unfair and fraudulent trade practices
• Builders can only charge for the carpet area, i.e., the area enclosed by walls and not for the super built-up area that includes balconies, lifts and stairs.
• Promoters have to put 70% of the money collected from homebuyers into a separate bank account which can only be used for the purpose of construction
• A buyer can report any defect in the construction for a period of 5 years and have the promoter rectify them
• A promoter cannot make any change to the project without the consent of the buyer
• Promoters cannot take more than 10% from the buyers
• Applies to both residential and commercial properties
• If a promoter leaves the project when it is incomplete, the association of allottees have the right to refuse and get their money back along with interest.
• Helped to attract higher investments and funding into the real estate sector
• Creates fair and equitable transactions between the parties involved

What are the Shortcomings of RERA?

Though the Act came into force in 2016, it has not been implemented in all states and suffers from a few problems such as:

• Delay in obtaining clearances from the Government, and no redressal for this problem is available
• The registration process is cumbersome and complex
• Since the registration process is technology-based, people who lack technical knowledge cannot avail the benefit of this Act.
• There will be a conflict in prices, where some units have already been sold on the basis of super built-up area
• There is a lack of state-specific content. For instance, the states can alter the 70% amount.

Conclusion

With the coming of this Act, 22 Indian States and 6 Union Territories have setup their own regulators under the Act, so as to facilitate the resolutions of disputes that arise from the states’ real estate sector. Not only this, it aims to create a regulated and consolidated industry in the long run which provides benefits not only to buyers but also to the promoter and the industry as a whole. It will help in weeding out fraudulent and uncomprehensive plans.

References

1. Real Estate (Regulation and Development) Act, 2016