Introduction to Real Estate (Regulation & Development) Act, 2016 (RERA)

Real Estate (Regulation & Development) Act, 2016

Objective

• To establish the Real Estate Regulatory Authority.
• Regulation and Promotion of the Real Estate Sector;
• To ensure sale of plot, apartment or buildings or sale of real estate project in an efficient and transparent manner;
• To protect the interest of the consumers in real estate sector;
• To establish an adjudicating mechanism for speedy dispute redressal and to establish the Appellate Tribunal.

Applicability

• Act applies to:

– Commercial Real Estate projects including shops, offices, showrooms, Godowns

– Residential Apartments

– Plotted Developments

– Ongoing projects in respect of which completion certificates have not been issued

• Real Estate projects developed in phases would require registration for each phase separately

Exemptions

• Projects being developed on land less than 500 square meters(0.05 hectare or 0.12 acre)
• Number of units does not exceed 8 (all phases)
• Obtained completion certificate for the project before the commencement of the Act
• Redevelopment Real Estate projects where no new allotments are to be made
• Renovation/ Repair – Not involving marketing, advertisement, selling or allotment of any apartment, plot or building
• Does not cover sale of ready to occupy property in the resale market

Definitions (Section 2)

• “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.
• “Allottee”- in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent.
• “Apartment” – whether called block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, tenement, unit or by any other name, means a separate and self-contained part of any immovable property, including one or more rooms or enclosed spaces, located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for any residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified.
• “Carpet Area” – means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

Explanation:-For the purpose of this clause, the expression “exclusive balcony or verandah area” means the area of the balcony or verandah, as the case may be, which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee; and “exclusive open terrace area” means the area of open terrace which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee.

• “Commencement Certificate” – means the commencement certificate or the building permit or the construction permit, by whatever name called issued by the competent authority to allow or permit the promoter to begin development works on an immovable property, as per the sanctioned plan.
• “Completion Certificate” – means the completion certificate, or such other certificate, by whatever name called, issued by the competent authority certifying that the real estate project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority under the local laws.
• “Immovable Property” includes land, buildings, rights of ways, lights or any other benefit arising out of land and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, standing crops or grass.
• “Internal Development works” – means roads, footpaths, water supply, sewers, drains, parks, tree planting, street lighting, provision for community buildings and for treatment and disposal of sewage and sullage water, solid waste management and disposal, water conservation, energy management, fire protection and fire safety requirements, social infrastructure such as educational health and other public amenities or any other work in a project for its benefit, as per sanctioned plans.
• “Planning Area” – means a planning area or a development area or a local planning area or a regional development plan area, by whatever name called, or any other area specified as such by the appropriate Government or any competent authority and includes any area designated by the appropriate Government or the competent authority to be a planning area for future planned development, under the law relating to Town and Country Planning for the time being in force and as revised from time to time.
• “Sanctioned Plan” means the site plan, building plan, service plan, parking and circulation plan, landscape plan, layout plan, zoning plan and such other plan and includes structural designs, if applicable, permissions such as environment permission and such other permissions, which are approved by the competent authority prior to start of a real estate project.
• “Real Estate Agent” – means any person, who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building, as the case may be, in a real estate project, by way of sale, with another person or transfer of plot, apartment or building, as the case may be, of any other person to him and receives remuneration or fees or any other charges for his services whether as commission or otherwise and includes a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation for sale or purchase of plot, apartment or building, as the case may be, and includes property dealers, brokers, middlemen by whatever name called.
• “Real Estate Project” – means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, 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.
• “Company”:- means a company incorporated and registered under the Companies Act, 2013 and includes, — (i) a corporation established by or under any Central Act or State Act; (ii) a development authority or any public authority established by the Government in this behalf under any law for the time being in force.
• “Promoter” :- means,—

1. a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or

2. a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or

3. any development authority or any other public body in respect of allottees of-

• buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or
• plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or
• an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or
• any other person who acts himself as a builder, colonizer, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or
• Such other person who constructs any building or apartment for sale to the general public.

Explanation.—For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made there under.

Prior Registration of Real Estate Project with Real Estate Regulatory Authority (Sec.3)

• No project can be advertised, booked, sold, offered in any form prior to registration and obtaining necessary construction approvals.
• Any real estate project more than 500 square meters or more than 8 apartments has to be registered with the Regulator.
• Projects without completion certificate are now required to be registered within a period of 3 months from the date of commencement of this act.
• Each phase of the project is to be registered separately as a standalone project.

Application for Registration of Real Estate Project (Sec.4)

• Every promoter shall make an application to the Authority for registration of the real estate project in such form, manner, within such time and accompanied by such fee as may be specified by the regulations made by the Authority.
• The Authority shall operationalize a web based online system for submitting applications for registration of projects within a period of one year from the date of its establishment.

Grant of Registration (Sec.5)

• RERA to grant or reject registration application within 30 days.
• RERA within 30 days to accept or reject the registration. If no intimation within 30 days, project is deemed to be accepted.
• Registration is valid for the period of completion of the project. May be extended by a year on very limited grounds and payment of fees.
• On registration, promoter gets a registration number, login id and password to Authority’s website to create his own page and provide project details.

Revocation of Registration (Sec.7)

• Registration may be revoked on a complaint/ suo moto if:
• promoter defaults under the Act, Rules, Regulations,
• violates the terms of the approval for the project,
• Involved in unfair or irregular practices.
• The promoter indulges in any fraudulent practices.
• The registration granted to the promoter under section 5 shall not be revoked unless the Authority has given to the promoter not less than 30 days notice, in writing, stating the grounds on which it is proposed to revoke the registration, and has considered any cause shown by the promoter within the period of that notice against the proposed revocation.

Registration of Real Estate Agent (Sec.9)

• No real estate agent shall facilitate the sale or purchase of or act on behalf of any person to facilitate the sale or purchase of any plot, apartment or building, in a real estate project or part of it, being the part of the real estate project registered u/s 3, being sold by the promoter in any planning area, without obtaining registration under this section.
• The Authority shall, within such period, in such manner and accompanied by such fees and upon satisfying itself of the fulfillment of such conditions, as may be prescribed-

(a) grant a single registration to the real estate agent for the entire State of Union territory, as the case may be;

(b) reject the application for reasons to be recorded in writing, if such application does not conform to the provisions of the Act or the rules or regulations made there under.

Functions of Real Estate Agent (Sec.10)

• Every real estate agent registered u/s 9 shall:

a) Not facilitate the sale or purchase of any plot, apartment or building, in a real estate project Or part of it, being sold by the promoter in any planning area, which is not registered with the  Authority,

b) Maintain and preserve such books of account, records and documents as may prescribed,

c) Not involve himself in any unfair trade practices, d) facilitate the possession of all the

• Information and documents, as the allottee, is entitled to, at the time of booking of any plot, Apartment or building, e) Discharge such other functions as may be prescribed.
• Unfair Trade Practices namely:
• the practice of making any statement, whether orally or in writing or by visible representation which— (A) falsely represents that the services are of a particular standard or grade; (B) represents that the promoter or himself has approval or affiliation which such promoter or himself does not have; (C) makes a false or misleading representation concerning the services;
• Permitting the publication of any advertisement whether in any newspaper or otherwise of services that are not intended to be offered.

Functions and Duties of Promoter (Sec.11)

• The promoter after receiving his Login Id and password shall create his web page on the website of the Authority and enter all details of the proposed project as provided u/s 4(2) , in all the fields as provided, for public viewing, including—

(a) details of the registration granted by the Authority;

(b) quarterly up-to-date the list of number and types of apartments or plots, as the case may be, booked;

(c) quarterly up-to-date the list of number of garages booked;

(d) quarterly up-to-date the list of approvals taken and the approvals which are pending subsequent to commencement certificate;

(e) quarterly up-to-date status of the project; and

(f) such other information and documents as may be specified by the regulations made by the Authority.

• 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.
• The promoter at the time of the booking and issue of allotment letter shall be responsible to make available to the allottee, the following information, namely:—

(a) sanctioned plans, layout plans, along with specifications, approved by the competent authority, by display at the site or such other place as may be specified by the regulations made by the Authority;

(b) the stage wise time schedule of completion of the project, including the provisions for civic infrastructure like water, sanitation and electricity.

• “Occupancy Certificate” :- It is a certificate issued by the competent (local) authority permitting occupation of any building, as provided under local laws, which has provision for civic infrastructures such as water, sanitation and electricity.

• The promoter shall be responsible

(a) For all obligations, responsibilities and functions under the provisions of this Act or the rules and regulations made there under or to the allottees as per the agreement for sale, or to the association of allottees,

(b) To obtain the completion certificate or the occupancy certificate, or both,

(c) To obtain the lease certificate,

(d) be responsible for providing and maintaining the essential services, on reasonable charges, till the taking over of the maintenance of the project by the association of the allottees;

(e) enable the formation of an association or society or co-operative society, as the case may be, of the allottees, or a federation of the same, under the laws applicable,

(f) execute a registered conveyance deed of the apartment, plot or building, as the case may be, in favour of the allottee along with the undivided proportionate title in the common areas to the association of allottees or competent authority,

 (g) pay all outgoings until he transfers the physical possession of the real estate project to the allottee or the associations of allottees

(h) after he executes an agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building.

Obligations of promoter regarding veracity of the Advertisement or Prospectus (Sec.12)

• 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.
• If the affected person 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.

No deposit or advance to be taken by promoter without first entering into agreement for sale (Sec.13)

• Only Up to 10% of cost of apartment, plot of building can be received as advance payment / application fee before entering into a written agreement of sale and balance to be received only after agreement.
• The agreement for sale shall be in such form as may be prescribed and shall specify the particulars of development of the project including the construction of building and apartments, along with specifications and internal development works and external development works.
• The dates and the manner by which payments towards the cost of the apartment, plot or building, as the case may be, are to be made by the allottees and the date on which the possession of the apartment, plot or building is to be handed over.
• The rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default, and such other particulars.

Adherence to sanctioned plans and project specifications by the promoter (Sec.14)

• The proposed project shall be developed and completed by the promoter in accordance with the sanctioned plans, layout plans and specifications as approved by the competent authorities.
• The promoter shall not make:
  • any additions and alterations in the sanctioned plans, layout plans and specifications and the nature of fixtures, fittings and amenities described therein in respect of the apartment, plot or building, as the case may be, which are agreed to be taken, without the previous consent of that person. The promoter may make such minor additions or alterations as may be required by the allottee, or such minor changes or alterations as may be necessary due to architectural and structural reasons duly recommended and verified by an authorised Architect or Engineer after proper declaration and intimation to the allottee.
• “minor additions or alterations” excludes structural change including an addition to the area or change in height, or the removal of part of a building, or any change to the structure, such as the construction or removal or cutting into of any wall or a part of a wall, partition, column, beam, joist, floor including a mezzanine floor or other support, or a change to or closing of any required means of access ingress or egress or a change to the fixtures or equipment, etc.
  • any other alterations or additions in the sanctioned plans, layout plans and specifications of the buildings or the common areas within the project without the previous written consent of at least 2/3rd of the allottees, other than the promoter, who have agreed to take apartments in such building.

Explanation—The allottees, irrespective of the number of apartments or plots, booked by him or booked in the name of his family, or in the case of other persons such as companies or firms or any association of individuals, etc., by whatever name called, booked in its name or booked in the name of its associated entities or related enterprises, shall be considered as one allottee only.

• In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of 5 years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within 30 days, and in the event of promoter’s failure to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation.

Obligations of promoter in case of transfer of a real estate project to a third party (Sec.15)

• The promoter shall not transfer or assign his majority rights and liabilities in respect of a real estate project to a third party without obtaining prior written consent from 2/3rd allottees, except the promoter, and without the prior written approval of the Authority.
• Such transfer or assignment shall not affect the allotment or sale of the apartments, plots or buildings, in the real estate project made by the erstwhile promoter.

Some Important Sections

Section 6:- Extension of Registration

Section 8:- Obligation of Authority consequent upon lapse of or on revocation of registration.

Section 16:- Obligations of promoter regarding insurance of Real Estate project

Section 17:- Transfer of Title

Return of Amount and Compensation (Sec.18)

(1) If the promoter fails to complete or is unable to give possession of an apartment, plot or building,—

(a) In accordance with the terms of the agreement for sale or, as the case may be, duly completed by the date specified therein; or

(b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason, he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act. (As per Rajasthan RERA Rules, 2017 interest and compensation has to be paid within 45 days from the date on which such refund along with interest and compensation becomes due.)

Where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.

 (2) The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force.

Required to pay Compensation

• Developers are required to refund and pay compensation to the allottees with an Interest rate of State Bank of India’s highest marginal cost of lending rate (MCLR) plus 2%, within 45 days of it becoming due. Interest rates are expected to range anywhere around 11% -12 %.

Rights and Duties of Allottees (Sec. 19)

• The allottee shall be entitled to

(1) Obtain the information relating to sanctioned plans, layout plans along with the specifications, approved by the competent authority and such other information or the agreement for sale signed with the promoter.

(2) Know stage-wise time schedule of completion of the project, including the provisions for water, sanitation, electricity and other amenities and services as agreed to between the promoter and the allottee in accordance with the terms and conditions of the agreement for sale.

(3) Claim the possession of apartment, plot or building, as the case may be, and the association of allottees shall be entitled to claim the possession of the common areas, as per the declaration given by the promoter under sub-clause (C) of clause (I) of subsection (2) of section 4.

(4) Claim the refund of amount paid along with interest at such rate as may be prescribed and compensation in the manner as provided under this Act, from the promoter, if the promoter fails to comply or is unable to give possession of the apartment, plot or building, as the case may be, in accordance with the terms of agreement for sale or due to discontinuance of his business as a developer on account of suspension or revocation of his registration under the provisions of this Act or the rules or regulations made there under.

(5) The allottee shall be entitled to have the necessary documents and plans, including that of common areas, after handing over the physical possession of the apartment or plot or building as the case may be, by the promoter.

(6) Every allottee, who has entered into an agreement for sale to take an apartment, plot or building as the case may be, under section 13, shall be responsible to make necessary payments in the manner and within the time as specified in the said agreement for sale and shall pay at the proper time and place, the share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent, and other charges, if any.

(7) The allottee shall be liable to pay interest, at such rate as may be prescribed, for any delay in payment towards any amount or charges to be paid under sub-section (6).

(8) The obligations of the allottee under sub-section (6) and the liability towards interest under sub-section (7) may be reduced when mutually agreed to between the promoter and such allottee.

(9) Every allottee of the apartment, plot or building as the case may be, shall participate towards the formation of an association or society or cooperative society of the allottees, or a federation of the same.

(10) Every allottee shall take physical possession of the apartment, plot or building as the case may be, within a period of two months of the occupancy certificate issued for the said apartment, plot or building, as the case may be.

(11) Every allottee shall participate towards registration of the conveyance deed of the apartment, plot or building, as the case may be, as provided u/s 17(1) of this Act.

Punishment for non-registration u/s 3 (Sec.59)

• Any Promoter Does not comply with the orders, decisions or directions issued under sub-section (1) or continues to violate the provisions of section 3, He shall be punishable with imprisonment for a term which may extend up to 3 years or With fine which may extend up to a further 10 % of the estimated cost of the real estate project, or with both.

Penalty for contravention of sec.4 (Application for Registration) (Sec.60)

• Any promoter provides false information Or contravenes the provisions of sec.4 Then penalty shall be leviable up to 5% of the Estimated cost of the Real Estate Project (As determined by the Authority)

Penalty for contravention of other provisions of the act (Sec.61)

• Any promoter contravenes any other provisions of this act Other than that provided u/s 3 and 4 He shall be liable for penalty which may extend up to 5 % of the estimated cost of the Real Estate Project (As determined by the Authority)

Penalty for non-registration and contravention u/s 9 & 10 (Sec.62)

• Any real estate agent fails to comply with or contravenes the provisions of section 9 or section 10 Than, Penalty of Rs.10,000 for every day during which such default continues Which may cumulatively extend up to 5% of the cost of plot, apartment or buildings As the case may be, of the real estate project, for which the sale or purchase has been facilitated as determined by the Authority.

Penalty for failure to comply with orders of Authority by promoter (Sec.63)

• Any promoter Fails to comply with ,or Contravenes any of the orders or directions of the Authority He shall be liable to penalty for every day during which such default continues, Which may cumulatively extend up to 5 % Of the estimated cost of the real estate project as determined by the authority

Penalty for failure to comply with orders of Appellate Tribunal by promoter (Sec.64)

• Any promoter Fails to comply with, or Contravenes any of the orders, decisions or directions of the Appellate Tribunal He shall be punishable with imprisonment for a term which may extend up to 3 years, or with fine for every day during which such default continues, which may cumulatively extend up to 10% Of the estimated cost of the real estate project, or with Both.

Penalty for failure to comply with orders of Authority by Real Estate Agent (Sec.65)

• Any Real Estate Agent Who fails to comply with, or Contravenes any of the orders or directions of the authority He shall be liable to a penalty for every day during which such default continues, which may cumulatively extend up to 5% of the estimated cost of plot, apartment or building As the case may be, of the real estate project, for which the sale or purchase has been facilitated and as determined by the Authority.

Penalty for failure to comply with orders of Appellate Tribunal by Real Estate Agent (Sec.66)

• Any Real Estate Agent Who fails to comply with, or Contravenes any of the orders, decisions or directions of the Appellate Tribunal He shall be punishable with imprisonment for a term which may extend up to 1 year, or With fine for every day during which such default continues, which may cumulatively extend up to 10% Of the estimated cost of plot, apartment or building, as the case may be, of the real estate project, for which the sale or purchase has been facilitated, or with both.

Penalty for failure to comply with orders of Authority by Allottee (Sec.67)

• Any Allottee Who fails to comply with, or Contravenes any of the orders, decisions or directions of the authority He shall be liable to a penalty for the period during which such default continues, which may cumulatively extend up to 5% of the plot, apartment or building cost As the case may be, as determined by the Authority.

Penalty for failure to comply with orders of Appellate Tribunal by Allottee (Sec.68)

• Any Allottee Who fails to comply with, or Contravenes any of the orders or directions of the Appellate Tribunal He shall be punishable with imprisonment for a term which may extend up to 1 year, or With fine for every day during which such default continues, which may cumulatively extend up to 10% Of the plot, apartment or building cost, as the case may be, or with both.

Some Other Sections

Section 69:- Offences of Companies

Section 70:- Compounding of Offences

Section 71:- Power to Adjudicate

Section 72:- Factors to be taken into account by the Adjudicating Officer

Section 73 to 78:- Finance, Accounts, Audit & Reports

Section 79 to 92:- Miscellaneous

The Author Can Be Reached at [email protected]