Units Booked/Sold before obtaining registration of Alteration in Project violates Section 3 of The Real Estate Regulation & Development Act, 2016 (RERA, 2016)?
Introduction
After the enactment of the RERA Act, approximately 10,000 Projects have been registered with GUJ RERA Authority. The Authorities are endeavouring their best to maintain the balance of equality, transparency and justice in the Real Estate Sector within the framework of the Law. Various Judgements are being issued by respective state authorities to implement the law in its true spirit. However, at times we may come across certain judgements which engender a new perspective towards the regular way of compliance and which is an anomaly in itself. One such judgement was recently issued by GUJ RERA on 02.12.2021 in the case of “Oriental Buildcon”, Project named “Viola”.
Analysis of Section 3 vis-a-vis The Judgement
As per Section 3 of The Real Estate Regulation and Development Act, 2016 – No promoter shall 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 registering the real estate project with the Real Estate Regulatory Authority established under this Act. If a Promotor violates Section 3 then a penalty of up to 10% of the estimated cost of a project can be levied as per Section 59(1) of the Act.
The facts that emerged before the Authority in the case of Oriental Buildcon for the Project named “Viola” was that the units were booked/sold after obtaining original registration but before obtaining the alteration registration. The Judgement was issued considering the said deviation as a violation of Section 3 of the Act and a penalty of Rs 3,00,000 was levied. The fact of the case are as under: –
1. As per Form 3 dated 09.07.2021 09 units out of a total of 33 units were booked/sold before obtaining the RERA alteration registration.
2. On the basis of Form 3 notices were issued to the Promoters for the Proposed violation of Provisions of RERA and a hearing was scheduled.
3. During the course of the hearing and through written submission dated 17.11.2021, it was submitted by the AR of the Promoters that – Original plan of the Project was approved by Ahmedabad Municipal corporation on 17.10.2019 and accordingly RERA registration was taken on basis of the above-mentioned plan on 28.08.2020. It was further submitted that all the units were booked after original registration but before alteration registration. i.e. from August 2020 to January 2021. Subsequently, approval was obtained from Ahmedabad municipal corporation for the revised plan on 02.07.2021. As per the old plan, there was “block A” having 9 floors and in all 19 units. However, as per the revised plan, there are Block A & B with 12 floors and in all 33 units. It was further submitted that out of 14 allotees, 2 have cancelled the booking and approval was obtained from the rest of 12 allotees for alteration in plan. As on date, the registered agreement for sale was already executed for the 9 units which were in question in the month of October 2021. It was also submitted that there is no new sale or booking of the units after an alteration of the Project – In fact, the allottees who were allotted units before the revised approval plan, expressed their willingness to shift to the newly approved plan and hence all the booking reflected are not new sale or booking but it’s merely re-allotment in substance.
4. Considering the above facts, GUJ RERA issued an Order directing to pay the penalty of Rs 3,00,000/- for violation of Section 3 read with Section 59(1) of the Act on the ground that 9 units were booked/sold before obtaining alteration registration.
Considering the given facts of the case, the decision given by GUJ RERA is an Anomaly in itself. Let’s see, why?
Why it’s an Anomaly?
1. As per the decision, it seems that RERA alteration registration steps into the shoes of original registration i.e. the violation provisions attract as if registration was never taken.
2. Section 3 of The RERA Act is reproduced as: under –“3. Prior registration of real estate project with Real Estate Regulatory Authority.—(1) No promoter shall 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 registering the real estate project with the Real Estate Regulatory Authority established under this Act:” It can be observed that Section 3 doesn’t mention anything about alteration registration.
3. Section 14 of The RERA Act mentions the procedure related to alteration which is as under: –
(2) Notwithstanding anything contained in any law, contract or agreement, after the sanctioned plans, layout plans and specifications and the nature of the fixtures, fittings, amenities and common areas, of the apartment, plot or building, as the case may be, as approved by the competent authority, are disclosed or furnished to the person who agree to take one or more of the said apartment, plot or building, as the case may be, the promoter shall not make—
(i) 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:
Provided that 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.
4. GUJ RERA have issued FAQ’s to create awareness among the stakeholders. Those FAQ’s contains the questions and answers related to the alteration of projects, which are mentioned below. It is to be noted that violation of Section 3 is not mentioned in FAQ’s
48. Can the promoter modify / amend the sanctioned plans or project specifications after having been approved by the competent authority and disclosed to the allottees?
As per section 14 of the Act the promoter can only modify / amend the sanctioned plans or project specifications, after the approval of the competent authority and its disclosure to the allottees, in case of minor additions or alterations.
However, in case of major modification / alteration, the promoter can modify the sanctioned plans or project specification only after having taken approval from two-thirds of the allottees. In addition, for arriving at the number of two-third allottees, the number of apartments held by the promoter will be excluded. Also, irrespective of the number of apartments held by an allottee he/she shall only be entitled to one vote.
Conclusion
As per the decision given by GUJ RERA – if the units are booked or sold before obtaining alteration registration then it will lead to violation of Section 3 and a penalty of Section 59(1) will attract. The fact that the units booked/sold after original registration will not be considered. However, the given case does not highlight anything on the matter related to re-allotment of the units to the existing allottees which were already reported in the Quarterly returns filed with RERA. If the promoter would have already reported the details of units their Quarterly returns and the re-allotment is made to such existing allottees then the further remedy of penalty could have been availed.
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Disclaimer: The above mentioned view are personal in nature and no decision should be taken on the basis of above information. The readers are advised to take Professional advise for any matter related to RERA compliance or litigation. The writer can be reached at [email protected] or [email protected]
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