Important Q & A under Real Estate (Regulation & Development) Act 2016 – RERA Act – Registration of Project under RERA
1. What are various aspects covered under RERA?
a. The RERA Act 2016 covers various aspects of the Real Estate business
i. Separate Authority to Regulate the Real Estate Industry
ii. Activities regulated under the Act
a) Sales and Marketing,
c) Agents and Channel Partners
d) Financial Management,
f) Quality and Defect Liability,
h) Guarantee of Title of Land,
i) Construction and development,
j) Delivery timelines,
k) Compensation in case of delay,
l) Modification of plan or specification
m) takeover/transfer of project
n) Allottees/Customers duties
iii. Adjudication mechanism
iv. Appellate Tribunal
v. Dispute redressal mechanism
2. The promoter does not intend to sell the units (apartments, plots, shops) in the Real Estate Project. Does the promoter need RERA Registration?
a. If the promoter does not intend to sell in perpetuity, then RERA Registration is not required (like lease, rent or own use).
b. However, if the intent is to sell even 1 unit out of many, RERA Registration is mandatory.
3. Can the promoter (builder, developer, landowner) advertise market/sell/units in a Real Estate Project before RERA Registration?
b. Sec 3(1) of the Act mandates the prior registration of the Real Estate Project.
c. Hence RERA Registration is mandatory before advertising, sell, market, collect advances from prospective customers.
4. Is there a difference between Completion Certificate and Occupancy Certificate under RERA?
RERA Act defines U/s. 2(q) Completion certificate and U/s.2(zf) occupancy certificate.
Sec 2(q) “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;
Sec 2(zf) “occupancy certificate” means the occupancy certificate, or such other certificate by whatever name called, issued by the competent authority permitting occupation of any building, as provided under local laws, which has provision for civic infrastructure such as water, sanitation and electricity;
5. Does RERA mandate a Separate Bank account for each project?
b. Mandatory and Separate RERA Designated Bank Account
c. Shall be opened for each project and those details shall be provided while applying for grant of registration.
d. Refer RERA Bank Account Direction 2020, Notification issued by the Karnataka RERA Authority.
6. How much money shall be required to deposit into RERA Designated Bank Account?
a. 70 % (Minimum ) of the amount realised from the Allottees shall be deposited into RERA designated project bank account.
7. I received Occupancy Certificate for the project. Can I stop deposit money into RERA Designated Account?
a. Yes / No
b. Such deposit shall continue till 100 % completion of development in the Real Estate Project (Mere receipt of OC or CC does not mean the completion of development)
c. Money shall continue to deposit, withdraw and shall be utilised for the specific project
8. Promoter already mentioned in the customer agreement (agreement for sale) that promoter has right to modify plans without obtaining prior consent/communication, is this permitted under RERA?
b. Prior written and informed consent/Approval Required for modification in the project Sanctioned plan or Specification – Refer Sec 14
9. I received Completion Certificate, do the promoter need RERA Registration?
a. RERA Registration is mandatory even if the promoter has received the occupancy certificate and completed the project’s development.
b. However, if such completion certificate is received on or before 1.5.2017, the RERA Registration is not required for that project.
10. The promoter uses their funds to develop the Real Estate Project. Is it necessary to obtain registration of a Project when the promoter has completed the construction and obtain an occupancy certificate?
a) The above question is an often repeated question from time to time that the Promoters, professionals, stakeholders ask to which the answers were discussed in several sessions or forums. However, the question remains in the minds of the Promoters, professionals.
b) The answer to the said question is “YES”
c) It is necessary to register a Real Estate Project even when the promoter himself has invested all the funds to complete the development works in the project and wants to sell only after obtaining a completion certificate.
d) Under the Act, there is no distinction between when the promoter proposes to sell and when the new project must be registered.
e) Section 3 of the RERA Act is clear that a Promoter shall not advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area without first registering the real estate project with the Authorities.
f) From the above, it can be made out that on and from the date of commencement of the RERA Act, it has become mandatory for a promoter to register the real estate Project before doing any of the activities described above in relation to the project.
g) The RERA Act does not stipulate whether the project has to be registered immediately after the plan sanction or when the promoter proposes to carry out the activities above in relation to the project.
h) From our experience in dealing with the matters relating to registration of Projects and the method in which the Real Estate Regulatory Authorities are dealing with the registration of the Projects, it can be said that the promoter should register the project immediately after obtaining plan sanction, failing which the authority may take action for non-registration of the project.
i) The authorities are taking the stand since it would not be possible for them to monitor whether the Promoters of the Projects for which the registration is not obtained is being advertised or marketed or sold.
j) As there are no sales, no collections, there will not be many compliances required to be fulfilled by the promoter under the RERA Act.
k) In a case where the promoter is investing all the funds required to complete the development works in the project and does not market or sell the units in the project, the only formality for the promoter to comply would be to obtain registration for the Project, Post Registration and Quarterly updates and no other compliances would be required to be fulfilled including the compliance concerning the financial management of the project being depositing of 70% of the amounts collected in the project in such account and upon every withdrawal obtain certificates from the Chartered Accountants, Architects and Engineers, when such compliances would not be required when the promoter is investing all the funds.
l) With the above note, we are of the opinion that the promoter should obtain registration for the real estate project to avoid any complications.
Author is a Chartered Accountant and can be reachable on [email protected]