The Real Estate (Regulation and Development) Act, 2016 (RERA)

RERA was enacted for regulation and promotion of the real estate sector. Further, to ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector.

Many states have established regulatory authority under the RERA wherein the mechanism for speedy dispute redressal has been established. Appellate authority has also been notified wherein the Appellate Tribunal has been established to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto.

Also Rerad- ‘Banning’ Real Estate Ad-campaigns: Consumer Protection law and RERA

The definition of advertisement reads in Section 2 (b)

“advertisement” means any document described or issued as advertisement through any medium and includes any notice, circular or other documents or publicity in any form, informing persons about a real estate project, or offering for sale of a plot, building or apartment or inviting persons to purchase in any manner such plot, building or apartment or to make advances or deposits for such purposes;

The first mention of the misleading  advertisement finds place in the effect of revocation of registration granted under RERA.

7. Revocation of registration.—

(1) The Authority may, on receipt of a complaint or suo motu in this behalf or on the recommendation of the competent authority, revoke the registration granted under section 5, after being satisfied that—

……

(c) the promoter is involved in any kind of unfair practice or irregularities.

Explanation.—For the purposes of this clause, the term “unfair practice means” a practice which, for the purpose of promoting the sale or development of any real estate project adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:—

(A) the practice of making any statement, whether in writing or by visible representation which,—

(i) falsely represents that the services are of a particular standard or grade;

(ii) represents that the promoter has approval or affiliation which such promoter does not have;

(iii) makes a false or misleading representation concerning the services;

(B) the promoter permits the publication of any advertisement or prospectus whether in any newspaper or otherwise of services that are not intended to be offered;

(d) the promoter indulges in any fraudulent practices

Secondly, the functions and duties of promoter casts an obligation to disclose the complete details of the project. The buyer comes across such instance they may withdraw from the project and shall be entitled to amount and prescribed interest.  Rate of interest has been prescribed by the states under their respective laws like for instance Gujarat, Rajasthan and Maharashtra has prescribed agreed rate or as per existing directives of Reserve Bank of India i.e. Marginal Cost of Lending Rate (MCLR) the State Bank of India Prime Lending Rate plus two percent.

11. Functions and duties of promoter.—

(2) The advertisement or prospectus issued or published by the promoter shall mention prominently the website address of the Authority, wherein all details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto.

12. Obligations of promoter regarding veracity of the advertisement or prospectus.—

Where any person makes an advance or a deposit on the basis of the information contained in the notice, advertisement or prospectus, or on the basis of any model apartment, plot or building, as the case may be, and sustains any loss or damage by reason of any incorrect, false statement included therein, he shall be compensated by the promoter in the manner as provided under this Act:

Provided that if the person affected by such incorrect, false statement contained in the notice, advertisement or prospectus, or the model apartment, plot or building as the case may be, 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 under this Act. 

Maharashtra Real Estate Regulatory Authority (Complainant) v. Sai Estate Consultant Chembur Pvt. Ltd. (Respondent)[1]

In the first case Maharashtra RERA took suo moto cognizance of the fact that the respondent was advertising without  RERA number and ordered to apologize and imposed penalty of Rs.1,20,000 (per day Rs.10,000)

Advertising Standards Council of India – ASCI

Another important body is The Advertising Standards Council of India (ASCI), established in 1985, which is a self-regulatory voluntary organization of the advertising industry in India. It is a non-Government body. .ASCI has adopted a Code for Self-Regulation in Advertising and is Self-Regulatory organisation. It is a commitment to honest Advertising and to fair competition in the market-place. It stands for the protection of the legitimate interests of consumers and all concerned with Advertising – Advertisers, Media, Advertising Agencies and others who help in the creation or placement of advertisements. This was into force before RERA and also operates now.

The purpose of the Code is to control the content of advertisements, not to hamper the sale of products which may be found offensive, for whatever reason, by some people. Provided, therefore, that advertisements for such products are not themselves offensive, there will normally be no ground for objection to them in terms of this Code.

Ruling in the matter of Godrej Properties Limited[2] (Godrej Air):

The advertisement’s claim, “Homes with 10X Enhanced Air Quality” was inadequately substantiated. The test report that was submitted was for the site office and not for a typical flat, where variables like windows and height and wind may affect the results; there could be seasonal variations as well in terms of outdoor and indoor air quality. It was unclear if these were factored in while arriving at the specific numerical claim. The CCC was of the opinion that a site office data cannot be extrapolated to a typical flat or under real life conditions. The advertisement had visuals of outdoor spaces, but no data was provided as regards to outdoor air quality of jogging tracks, garden roof and terrace gardens.

The air quality comparison is misleading by ambiguity and implication and the advertisement also contravened ASCI Guidelines for Disclaimers in advertising.

Shree Kuberji Builders MEDIUM: Colors(*) Gujarati channel, (Gujarati) 20:16:57 for 20 sec (01.05.2017) [3]

Claim Objected To: “India s biggest textile market making company.”

Consumer Complaint Council (CCC) recommendation: Exparte

The ASCI approached the advertiser for their response in addressing the objection raised in the complaint. The Advertiser was offered an opportunity for Personal Hearing with the ASCI Secretariat. The advertiser had, however, not responded to ASCI’s request. The CCC noted that no response was received from the advertiser prior to the prescribed due date for this complaint. The CCC viewed the TV Commercial (TVC) and upon careful consideration of the complaint, and in the absence of any comments or response from the advertiser, the CCC concluded that the claim, “Indias biggest textile market making company”, was not substantiated with any data such as market survey, and is misleading by exaggeration. The TVC contravened Chapters I.1 and I.4 of the ASCI Code. The complaint was accordingly UPHELD.

The relevant clauses of Chapters are reproduced as below :

“1.1. Advertisements must be truthful. All descriptions, claims and comparisons which relate to matters of objectively ascertainable fact should be capable of substantiation.  Advertisers and advertising agencies are required to produce such substantiation as and when called upon to do so by The Advertising Standards Council of India.

1.4. Advertisements shall neither distort facts nor mislead the consumer by means of     implications or omissions. Advertisements shall not contain statements or visual     presentation which directly or by implication or by omission or by ambiguity or by exaggeration are likely to mislead the consumer about the product advertised or the advertiser or about any other product or advertiser.”

Conclusion

The legal system which was once considered as time trapped in terms of relief and the buyers were left at lurch of builders has been sea changed. The new law and interplay with existing framework affords opportunity to buyers to mend the willful disobedient builders and get them to task. Much needed ‘Say what you mean, else face music’ is the learning. This article restricts itself to RERA and ASCI measures but the buyers have bountiful now from Insolvency Code to Consumer Protection based on factual case basis. These measure have now enshrined new hopes and faith in the real estate sector.

Authors

CA.Mahadev Birla is RERA consultant and has been ex-senior executive for real estate company for 6 years. He can be reached at md.birla@gmail.com                         

Adv.(CA.) Nipun Singhvi is practicing advocate at various Tribunals, High Courts and Supreme Court. He can be reached at nipunsinghvi@yahoo.com

————————————————————

[1] Suo-Moto Case No. 1 of 2017, dated 5th  June, 2017

[2] ASCI March press release dated May 22, 2019: accessed at https://ascionline.org/images/pdf/asci%20march%202019%20ccc%20recom.pdf

[3] 370.@1706-C.511 Annual report of ASCI 2017-18 accessed on https://ascionline.org/AGM-2017-18/CCC_Recomm_17-18.pdf

Tags:

More Under Corporate Law

2 Comments

  1. vswami says:

    Apropos of related Pr. Posts ( In continuation of) (:
    RERA, as notified, has come into effect, and been in force, from the specified date of – 1-5-2017.
    GST Levy on realtor has been notified to have come into effect on April 1, 2019.
    The term ‘Ongoing Projects’ is of crucial relevance and significance for the purposes of both RERA and GST .
    However, the same term has been differently defined.
    Further, GST levy has been made applicable to all ongoing projects; that is, regardless of whether or not any given project has been duly registered and allotted a Regn. No. by the RERA.
    In view of the forgoing aspects, ostensibly, there is an inconsistency between the two enactments. The noted incompatibility of a material nature , on the first blush, seem to have added inherent potentials, so as to put spokes in the wheels of machinery,- as presently in place, – for implementation and enforcement of GST levy on realtor.
    In this context, attention needs to be prudently drawn to the following RERA provisions:
    Sec 88 : Application of other laws not barred.- the provisions of this act shall be in addition to , and not in derogation of , the provisions of ANY OTHER LAW FOR THE TIME BEING IN FORCE.
    Sec 89, ACT TO HAVE AN OVERIDING EFFECT. – The provisions of this Act shall have effect, NOTWITHSTANDING ANYTHING INCONSISTENT THEREIN CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE.
    (FONT supplied, for due emphasis, requiring to be made a conscious note of)
    Equally to be made a conscious note of is the fact that the notified enactment, in terms of which GST levy on realtor is sought to be imposed (w.e.f. the specified date of April 1, 2019) ) was not a law ‘for the time being in force’, as envisaged – i.e. 01-05-2017 – on which the RERA came into force.
    OVER to the RERA and /or (?) GST Law EXPERTS at large, infield practice, in the fond hope of their taking on suitably with the Govt./ its Authorities, and successfully pursuing to the end of finding a proper solution /resolution, for the COMMON GOOD.
    courtesy

  2. vswami says:

    OFFHAND
    The write-up, to say the least , touches the proverbial ‘tip of the iceberg’,. For the .several areas over which there has been- and continues to have invited- a raging controversy in legal and other circles , authors are invited to look through the host of material, in the form of published Articles, Posts on FB and LInkedin, so on . Also may search for, in the personal Blogs (@swamilook) and the related Articles as displayed on this website.
    courtesy

Leave a Comment

Your email address will not be published. Required fields are marked *