Importance of end date / completion date under the Real Estate (Regulation and Development) Act, 2016
The Real Estate (Regulation and Development) Act, 2016 (Act) came into effect on 25th of March, 2016 after which till date 07 union territories and 19 states have framed and notified the Rules governing the real estate projects. The Promoters now has to compulsorily register their Real Estate Projects with the concerned jurisdictional Real Estate Regulatory Authorities.
At the time of filing application for registration, Promoter must disclose the end date within which he shall be able to complete the development of the Project. Further, as mentioned in the application, the development of the real estate project should be completed in all means within the stipulated end date. If the Promoter fails to complete the development of the Project within the end date then as per the terms of the Act then the Promoter can extend the end date for a further period of 1 (one) year as per Section.6 of the Act.
After registration of a real estate project between the start date and the end date, the Promoter has to mandatorily undertake compliances such as Post Registration and Quarterly Updates and disclose the development details of the real estate project. Further, if the development of the real estate project is completed within the end date then the Promoter has to show the completion by producing/uploading the Completion Certificate/Occupancy Certificate/Release Order as obtained by the Jurisdictional Municipal Authority.
The development of a real estate project might be undertaken in phased manner due to its size and large extent, in such scenarios the real estate project may face challenges such as unstable market conditions, ability of promoter to fund and develop the project due to adverse market conditions, non-availability of materials, change in policies, investors mandates, difference of opinion amongst the stakeholders, delay in obtaining approvals, litigations initiated by the allottees etc which in all shall lead to delay in completion of a real estate project
As afore mentioned, if the Promoter fails to complete the development of the real estate project within the end date, then end date can be extended for a period of one year, if any further extension is required then the Jurisdictional Real Estate Regulatory Authorities along with the allottees has to decide the extension of the end date.
Promoter must consider the following aspects before finalizing the End Date of the project whilst filing application for registration of project. Few important practical inputs to be considered are –
1. Total number of project completed in the past before the proposed End date
2. Total number of project which were not completed before the End date, total delay period and whether such delay period is attributable to reasons caused viz project or promoter specific
3. Financial / Brand impact to the promoter due to delay caused
Promoters must derive the end date scientifically in due consultation and inputs from architects, engineers, legal, liaison, finance and marketing departments on various aspects to complete the development of project within the proposed end date.
The Promoter shall take due precaution while deciding the end date, any end date with longer period of time will have a negative impact as home buyers or allottees may tend to reject and not consider such projects irrespective of any assurances stating that the project shall be completed much before the end date as represented in the registration.
It is also seen that few Real Estate Regulatory Authorities restrict the end date / completion date of the project upto the validity of the sanction plan / building permit. In our opinion, if authorities restrict the end date in lieu of validity of sanction plan / building permit, then such end date may not be practical for completion of the project as bye-laws may allow to renew the validity of plan sanction / building permit obtained. The Promoter in such scenarios may cancel the obtained plan sanction / building permit and may apply for new sanction plan / building permit, which shall indirectly enhance the cost of the project and lead to price rise for purchasers.
Please go through the article on ‘Completion of Project under RERA’ to know the aspects considered for completion of project in the following link https://taxguru.in/corporate-law/completion-project-rera.html being authored by Co-Author, CA Vinay Thyagaraj.
As per Section. 32 of the Act, one of the duties of the authority is grading of project / promoter on various parameters. In future completion of project within the End date shall carry the good rating by the authorities considering other aspects relating to real estate project. Readers can also go through the article on ‘Grading of Promoters under Real Estate (Regulation and Development) Act, 2016 available in the following link https://taxguru.in/corporate-law/grading-promoters-rera-2016.html being authored by Co-Author, CA Vinay Thyagaraj.
It is advised that the promoters must be cautious while mentioning/deciding the end date of the real estate project. End date must be decided based on the market situations and conditions and Promoters ability to complete the development of the real estate project within such period. End date is deemed as a deadline, and after further extension of 1 (one) year even if the project is not completed which shall eventually leads to lapse of the registration then the concerned Real Estate Regulatory Authorities in consultation with the appropriate Government will take action as it may deem fit such as carrying out remaining developmental works by competent authority or by the association of allottees or in any other manner. It is advised to take services of the consultant involved in the said practice.
|[i] Mr Hitendra V Hiremath presently works as Legal Consultant to M/s. RERA Consultants LLP at Bengaluru, Karnataka, India and can be reached at [email protected]||CA. Vinay Thyagaraj is partner in M/s. Venu & Vinay Chartered Accountants and financial consultant at RERA Consultants LLP and be reached at [email protected] / 9341246770|
Disclaimer: This article cannot be relied upon as a legal opinion and at all times we recommend the Promoters to seek the assistance of the Professionals involved in the real estate practice in case of any queries, clarifications.