1. Introduction

The Real Estate (Regulation and Development) Act, 2016 (‘RERA’) has been enacted to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment, building, or sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector.

This articles aims at providing the basic understanding and additional compliance requirement which will be required to be complied by the land owner / developer of the real estate project under MahaRERA.

2. Framework of joint development agreement:

Under a Joint Development Agreement (‘JDA’), builder / developer enters into an agreement with land owner for developing building on his land. Land owner will transfer his development right in land to the builder / developer. As a consideration, builder / developer will allot certain apartments / units (in case of area sharing JDA) or certain percentage of gross revenue ( in case of revenue sharing agreement JDA) to land owner. For better understanding, framework arrangement is depicted below:

3. Definitions:

Section 2(zk)(ii) of RERA, promoter means, “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”

Further, the MahaRERA authority has clarified vide circular 12/2017 that, “a careful consideration of the aforesaid definition in the light of the true object and purpose of the said Act, leaves no manner of doubt that such individual/organization will be covered and clearly falls within the definition of the term ‘Promoter’”.

On careful, pursuance of the definition prescribed under the Act and clarification provided by the MahaRERA authority, it is clear that, land owner who enters into JDA with builder will also be considered as ‘Promoter’ for the purpose of RERA.

4. Additional compliance burden on land owner:

Since, land owner will be considered as a promoter (in case of JDA), the land owner will be required to comply with the following:

  • As per the Section 4 of RERA, every promoter shall make an application to the authority for registration of the real estate project. Accordingly, in case of JDA, promoters will be required to obtain two registrations i.e. one registration for builder / developer and one registration for land owner.
  • As per Section 4(2)(I)(D) of RERA, the land owner will be required to deposit 70% of the amount received from allottees to the RERA designated account. Further, he will be able to withdraw amount to the extent of work completed as certified in Form 3.
  • He will be required to obtain certificate in Form 3 from Chartered Account at the time of withdrawal and / or for quarterly updation of data on RERA portal.
  • He will be required to get his books of accounts audited (even though not liable to get it audited as per the Income Tax Act, 1961) within six months from the end of financial year and is also required to obtain certificate in Form 5 from a Chartered Account.
  • The liability of land owner will be treated at par with the liabilities of the builder / developer (as per circular 12/2017. Accordingly, provisions of chapter III of RERA will be applicable to the landowner also. Summary of sections of chapter III are as under:
Section Particulars Implications
11 Functions and duties of promoter The promoter shall:

  • quarterly update data on RERA web portal
  • 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.
  • at the time of the booking and issue of allotment letter shall inform to the buyers the information prescribed under the Act.
  • be responsible to obtain the completion certificate or the occupancy certificate, or both, as applicable
  • 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
  • enable the formation of an association or society or co-operative society, as the case may be
  • execute a registered conveyance deed
12 Obligation of promoter regarding veracity of the advertisement or prospectus Refund of amount along with interest for any incorrect or false statement in the advertisement
13 No deposit or advance to be taken by promoter without first entering into agreement for sale The promoter shall not accept a sum more than 10% of agreed value as an advance payment or an application fee, from a person without first entering into a written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force.
14 Adherence to sanctioned plans and project 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.
15 Obligations of promoter in case of transfer of a real estate project to a third party He cannot 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 two-third allottees and written approval of the RERA Authority
16 Obligation regarding insurance of real estate project The promoter shall obtain all such insurances as may be notified by the appropriate Government
17 Transfer of title The promoter shall execute a registered conveyance deed in favour of the allottees
18 Return of amount and compensation If the promoter fails to complete or is unable to give possession of an apartment, plot or building, he shall refund the amount received from allottees along with interest

5. Queries which requires clarification from authorities

  • Once land owner’s apartment / units are completed and he sells he’s portion of apartment / units after receipt of Part Occupancy Certificate (remaining building work is pending). In that case, will he be able to withdraw the entire sales proceeds of the ground floor or he will be able to withdraw only to the extent of percentage completion of the entire project as he is also a co-promoter of the project.
  • After receipt of Part Occupancy Certificate (of his area share), whether land owner will be continue to be liable for the balance project.
  • Certain relief should be available to the land owner in case of structural defects as the land owner is not constructing any building.
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Author Bio

Qualification: CA in Practice
Company: Jainam H Shah & Co
Location: MUMBAI, Maharashtra, IN
Member Since: 15 Dec 2018 | Total Posts: 1
I am a member Institute of Chartered Accountants of India. I am currently practicing in following areas: - RERA compliance and advisory - Income tax compliance, litigation and advisory - Statutory and tax audits - GST compliance View Full Profile

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