I received a Call from Mr.Rahul, he introduced himself that he is from Happy Living Realtors, One of the Professional Real Estate Agencies promoting most of the class 1 real estate projects in Bengaluru. He wanted to share an exciting offer for the upcoming Real Estate Project in East Bengaluru, the High-rise luxury apartment project, developed by one of India’s Reputed Builders. Generally, I interact with such conversations, I continued. Mr. Rahul is very passionate about the project and explained the complete specification of the project, i.e., Promoter name, Location, Extent of project land, Number of floors, Dimensions, Facilities, amenities, Approximate Cost per sft etc. I also heard with the same interest. I have seen this land while I travel in that location etc. very strategically located etc.,
Further, Mr.Rahul continued his conversation that they are collecting the Expression of Interest (EoI) from prospective customers. I continued to ask, why EoI, can’t I book the apartment now. He replied to me stating that the builder has applied for the Building Sanction plan and is waiting for the Approval. I was surprised and shocked to know that India’s Leading Real Estate Promoter is collecting EoI (promoting) for the real estate project without RERA (even the building sanction plan in hand). He continued and told me that he needed simple information about me and a Cheque in the name of the builder for Rs.5.00 Lac as an EoI. Further he said,
Rahul: It’s a simple process. You submit a refundable token amount along with your preferred apartment configuration. This gives you priority access to unit selection when we officially launch. If you decide not to proceed, the amount is fully refundable.
Rahul: The EoI token starts from ₹5 lakhs, depending on the unit type. Would you like me to share the further and payment details, if so, will send it through What’s App
Rahul: Absolutely! I’ll WhatsApp you the complete details. I can also schedule a site visit or a virtual tour at your convenience so that you can experience the show flat.
Rahul: Perfect! Let me know if you have any questions. Looking forward to assisting you!
After hearing all, I replied to him, “How are you promoting the project without obtaining RERA registration” etc., he continued to converse passionately and confidently that, we are collecting only EoI and we will bank the cheque only after RERA registration etc., I replied to him “do you know whatever your company is doing is against the RERA and violation of section 3 of the RERA Act 2016”, but he is super confident that we are only collecting EoI and not doing anything beyond. He further told me that the Builder has already installed the Billboards in many locations stating that the builder is coming with new projects etc., post his conversations, I google it, to my surprise there are 20 plus posts and a Video in you tube describing the entire project specification.
After the telephonic call, Mr.Rahul sent the EoI document and the description of the project along with the price etc. He continuously calls me week on week to collect the EoI, surprisingly to this date, the project has not received the RERA Registration.
With this, background, I thought of writing this Article in the interest of the promoter and the professionals highlighting the provisions of RERA –
Google description of – An expression of interest (EOI) in real estate is a non-binding document that lets a potential buyer show interest in a unit (Apartment, Plot) in a real estate project. Generally, the promoter (Builder or developer or landowner) directly or through their agents invites the interested buyers to express their interest in booking the Apartment, Plot in a real estate project.
Few ingredients or characteristics of Expression of Interest –
1. EOI is commonly used in scenarios where the seller wants to gauge the level of interest in the project.
2. Early access to real estate opportunities, they may do so before setting a price.
3. EOI refers to an expression of interest by a potential buyer to purchase a property.
4. It serves as a preliminary step that allows buyers to express their interest in a property.
5. Buyers do not have to commit to buying it or builder to sell it
6. EOI provides a platform for buyers to showcase their seriousness.
7. It also initiates negotiations with the seller or real estate agent.
8. EOI allows buyers to gain early access to properties before they are officially listed on the market.
9. This provides a competitive advantage by giving buyers a head start in securing their desired property.
Provisions of RERA – Prior registration of real estate project with Real Estate Regulatory Authority-
| Section 3(1) No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act:
Provided that projects that are ongoing on the date of commencement of this Act and for which the completion certificate has not been issued, the promoter shall make an application to the Authority for registration of the said project within a period of three months from the date of commencement of this Act: Provided further that if the Authority thinks necessary, in the interest of allottees, for projects which are developed beyond the planning area but with the requisite permission of the local authority, it may, by order, direct the promoter of such project to register with the Authority, and the provisions of this Act or the rules and regulations made thereunder, shall apply to such projects from that stage of registration. |
The Act clearly mention the words PRIOR Registration of the real estate project, further the Act mandates the promoter to register the Real Estate Project before –
1. Advertise
2. Market
3. Book
4. Sell or offer to sell
5. invite persons to purchase in any manner
The sentence “invite persons to purchase in any manner” is vast and open to interpretation. One can interpret Promotions, Events & Sales Campaigns, Online Listings & Communication, Verbal or Written Assurances etc.,
Even though Collection of Expression of Interest (EoI) is not specifically mentioned in the RERA Act, however one can interpret that the EoI means and include either of the above action/activities of the promoter, agent, channel partners, brokers, employees etc
In view of the above we are of the opinion that the EoI without obtaining RERA registration is amounting to invite persons to purchase in any manner and accordingly contradict provisions of section 3 to the RERA Act and attract penal provisions of section 59 of the RERA Act.
1. If a promoter fails to register the project as required under Section 3, they are liable to a penalty of up to 10% of the estimated cost of the real estate project.
2. If the promoter continues the default even after the penalty, they may face imprisonment for up to 3 years or an additional fine of up to 10% of the project cost, or both.
Further during the RERA registration, the Promoters must submit an affidavit during the registration process, affirming that they have not engaged in any sales, advertising, or other activities that would violate Section 3 of the RERA Act. Additionally, professionals such as Chartered Accountants are required to issue a certification confirming that the promoter has not collected any funds from allottees and has complied with Section 3. Before granting RERA registration, authorities conduct due diligence by verifying available information from the internet and public domain.
To ensure compliance, it is strongly recommended that promoters provide comprehensive training, guidance, and clear instructions to their agents, channel partners, brokers, and employees, strictly prohibiting any activities that may contravene Section 3 of the RERA Act including indulging in Expression of Interest.
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The author, Vinay Thyagaraj, is partner at M/s.Venu & Vinay, Chartered Accountant, he can be reached at vinay@vnv.ca
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