The Real Estate (Regulation and Development) Act, 2016 a law enacted by the Indian Parliament, intends to safeguard homebuyers and promote investment in the real estate industry. The real estate sector is expanding and contributing significantly to the development of the Indian economy; however, there must be legislation to regulate it, and RERA has been implemented to do so. RERA aspires to improve public welfare and transparency. In order to meet the demand for housing and infrastructure, the real estate sector is very important. As the industry grows, consumers face challenges such as delays in delivery or completion, non-compliance with terms, delays in registration, and a lack of market transparency which were the main concerns of consumers, thereby leading to the enactment of the said Act.
HISTORICAL BACKGROUND
The UPA government submitted the Real Estate Regulatory Authority Bill in 2013 through Girija Vyas, the Minister of Housing and Urban Poverty Alleviation. The Rajya Sabha Committee that reviewed the bill made suggestions, and the Union Cabinet approved 20 significant changes to the statute in 2015. The selection committee received the bill and produced a report in July 2015. The bill was approved by the Rajya Sabha on March 10, 2016, and the Lok Sabha on March 15, 2016. The bill was approved by the President of India on March 25, 2016. The Real Estate (Regulation and Development) Act of 2016 is made up of 10 chapters and 92 sections, and it creates the Real Estate Regulatory Authority (RERA) and Real Estate Appellate Tribunal (REAT).
PROVISIONS UNDER THE ACT
Chapter II – Registration
- Section 3 of the RERA, a builder who does not register will be unable to sell the apartment, plot, or building. The following real estate projects are exempt from registration under Section 3 of the RERA if the land size does not exceed 500 square meters or the number of apartments does not exceed 8.
- If the project complies with the law, the regulator must register it within 30 days of receiving the application.
- According to Section 4(2)(l)(d), the promoter must have a “separate account” for every assignment he undertakes, wherein 70% of the cash amassed from allottees must be placed for building and land expenses. The account should be self-controlled and isn’t an escrow account that calls for Authority approval to withdraw price range.
- The money can only be utilized for building and land costs, according to Section 4(2)(l)(d).
Chapter III – Function and duties of Promoters
- The Act calls for the promoter to update all undertaking data required at the time of application on the Authority’s website. Section 11 additionally stipulates that specific information must be updated by the promoter every quarter for the buyer to make an informed decision.
- Additionally, the Promoter shall do all of the tasks defined in Section 11 during the course of the Project and after the Project is Complete.
- According to Section 13, the promoter cannot obtain an advance payment/application fee of more than 10% of the apartment/plot cost. The promoter must get into an ‘Agreement for Sale’ with the allottee before collecting any more funds for the apartment/plot cost.
Chapter IV – Rights and duties of Allottees
- The allottees’ numerous rights are outlined in Section 19. The rights that the beneficiaries have against the promoters are outlined in this section, along with those that the promoters are required to uphold in accordance with the agreement reached with the beneficiaries, such as the right to the home or land and the right to all necessary documents and plans.
- The responsibilities of allottees are outlined in Section 20. These responsibilities include paying for the apartment or plot, being responsible for interest charges for late payments, taking ownership of the property, participating in the association’s formation, and other duties.
Chapter V – The Real Estate Regulatory Authority
In addition to carrying out the Act and the Rules daily, the Regulatory Authority is directly responsible for the Regulations enacted thereunder.:
a. Registration of the real estate agent and the real estate project;
b. Extension of registration of the real estate project and its revocation;
c. Revocation of registration of the real estate agent and its renewal;
d. As per section 34, the Authority is responsible for maintaining a website of records for public inspection –
- The website must publish all projects submitted to the authority, including project information as required by law and by regulations.;
- details of promoters with promoter’s photographs;
- information about projects in the event that registration is revoked or if a project has been fined by the law;
- information of agents who have had their registrations revoked under the law, including their names and photographs.
e. As per section 71, one or more adjudicating officers must be appointed by the authority after consulting the relevant government.
f. As per section 85, within three months after its establishment, the Regulatory Authority must announce Regulations.
g. As per section 32, a fair, open, efficient, and competitive real estate industry must be promoted and grown, and numerous issues must be recommended by the Regulatory Authority.
Chapter VI – Central Advisory Council
The Central Advisory Council, which is a multi-member body chaired by the Union Minister for Housing, will consist of representatives from specific central ministries, five state government representatives who will be chosen on a rotating basis, five representatives from regulators, and any other central government department that is informed. The Central Advisory Board is tasked with providing advice to the central government on a variety of topics, including the application of the law, policy considerations, consumer protection, expansion and development of the real estate industry, and other issues as assigned by the central government.
Chapter VII – The Real Estate Appellate Tribunal
A quasi-judicial body, the Appellate Tribunal has the authority to consider appeals from orders, judgments, or directives issued by the Regulatory Authority or the Adjudicating Officer, as the situation may require. Rules established by the relevant government will specify the format and procedure for filing the appeal, the fees needed, and the procedure for hearing and considering the appeal.
Chapter VIII – Offences, Penalties, and Adjudication
Promoters
1. The promoter is liable for a fine of 10% of the projected cost of the building if a project is not registered.
2. If the promoter violates the law, he or she will face legal consequences. The consequence is 3 years of imprisonment or a fine of 10% of the cost of the building.
3. If false information is provided by the promoter, the penalty is 5% of the cost of the building.
4. In the case of other offenses 5% of the cost of the building.
Agents
1. Failure to comply with the Authority will result in a daily penalty which may extend up to 5% of the building’s cost
2. Non-registration will result in a penalty of Rs. 10,000 per day or 5% of the total cost of the building.
3. Failure to comply with rulings can result in a year in prison and a punishment that might equal up to 10% of the building’s cost.
A quasi-judicial individual with the authority to resolve disagreements arising under Sections 12, 14 , 18, and 19 is known as an Adjudicating Officer. The adjudicating officer shall be a District Judge, either on active duty or in retirement. The adjudicating officer shall consider the amount of disproportionate gain or unfair advantage, the amount of loss, the repetition of the default, and any other factors the adjudicating officer deem necessary in the interests of justice when determining whether a dispute arises under sections 12, 14, 18, and 19 of the Act.
Chapter IX – Finance, Account, Audits, and Reports
The appropriate government shall create the Real Estate Regulatory Fund, which shall be managed by a committee made up of such Authority Members as the Chairperson may appoint. The designated Fund must be used to pay the Chairperson, the Authority Members, the Appellate Tribunal, as well as any other costs incurred by the Authority in compliance with the Act’s powers and purposes.
Conclusion
A significant step toward regulating the largely unregulated real estate market and increasing transaction transparency is the Real Estate Act of 2016. It had been a long-awaited measure that was now finally implemented. However, a closer examination of the Act’s provisions reveals several flaws that ought to have been addressed before it was passed and that might harm consumers.
This blog is written by Shreya Singh, an intern of Smriti Legal LLP.
References:
[1] The Real Estate (Regulation and Development) Act, 2016, No.16, § 3
[2] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 4(2)(1)(d)
[3] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 11
[4] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 13
[5] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 19
[6] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 20
[7] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 34
[8] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 79
[9] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 85
[10] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 32
[11] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 12
[12] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 14
[13] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 18
[14] The Real Estate (Regulation and Development) Act, 2016, No. 16, § 19
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