The Real Estate (Regulation and Development) Act, 2016 (“RERA”) is an Act of the Parliament. It seeks to protect home-buyers as well as help boost investments in the real estate industry. The Act establishes a Real Estate Regulatory Authority in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution. The Bill was passed by the Rajya Sabha on 10 March 2016 and by the Lok Sabha on 15 March 2016. The Act came into force on 1 May 2016 with 59 of 92 Sections notified. Remaining provisions came into force on 1 May 2017. The Central and State governments are liable to notify the Rules under the Act within a statutory period of six months.
Preamble of RERA
“An Act to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in and efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto“.
Objectives of RERA
(1) To regulate the real estate sector for its harmonious growth and development.
(2) To bring transparency in the dealings between the promoters of real estate projects and buyers of apartments.
(3) To ensure that the real estate projects are completed within the prescribed time frame.
(4) To resolve disputes relating to the projects expeditiously.
(5) To enforce the provisions of law and the orders of the Authority.
Key Stakeholders
(i) Builders and promoters
(ii) Real estate agents
(iii) Consumers
Responsibilities of Builders/Promoters
1. All builders and promoters who undertake a real estate project with over 8 units or 500 square meters of development are required to obtain RERA Registration and fall under the ambit of RERA regulations.
2. The RERA Website provides that all builders and promoters must create a website and display on the RERA Authority’s website and enter all the necessary details of the proposed project for public view, which includes details of the registration approved by the Authority and Quarterly list of the number and type of booked apartment or plots, list of approvals taken and the list of pending ones subsequent to the commencement certificate, the status of the project etc. The promoter must mention the website address of the Authority in any advertisement or prospectus issued by him/her.
3. Completion Certificate: Promoters are vested with the responsibility of obtaining the completion or occupancy certificate from the concerned authority for the purpose of making it available to the allottees either individually or the association of allottees. Besides, the promoter is accountable for obtaining the sale deed or lease certificate which specifies the period of the lease and certifies that all dues and charges pertaining to the leasehold land have been paid. This sale deed of land, leasehold deed and completion certificate must be made available to the allottees.
4. Provision and Maintenance of Services: Promoters are required to provide and maintain the essential services at a reasonable cost until the association of the allottees take over the project.
5. Formation of Association: The promoter is vested with the responsibility of enabling the formation of an association, society or co-operative society of the allottees or a federation of the same under the applicable laws. In the absence of local laws, the association of allottees must be formed within three months of the majority of allottees having booked their plot, apartment or building in the project.
6. Availability of Documents: The promoter should facilitate the availability of documents during the booking and issue of allotment letter, which includes the likes of sanctioned plans and layout plans that are duly approved by the concerned Authority.
7. Registered Conveyance Deed: The promoter must take the responsibility to execute the registered conveyance deed of the real estate property in favour of the allottee. This must be accompanied with the undivided proportionate title in the common areas to the association of allottees, who have booked their real estate property in the project.
8. Payment of Outgoings: The promoter must pay all outgoings until he/she transfers the physical possession of the real estate project to the allottee or the association of allottees, which includes ground rent, land cost, maintenance charges, etc. If the promoter fails to pay all or any of the outgoings to the allottees or the association of allottees, then he/she continues to be liable even after the transfer.
9. Restriction on Mortgaging: After executing an agreement for the sale of any real estate property, no mortgage or creation of charge must be made on such real-estate property. Even if this stipulation is breached, the right and interest of the allottee shouldn’t be at stake.
Rights of a Homebuyer
1. Right to Obtain Information: The allottee or homebuyer is empowered to obtain information pertaining to sanctioned plans and layout plans along with the specifications, which are duly approved by the competent authority.
2. Construction Schedule: The homebuyer is entitled under the RERA Act to know the stage-wise time schedule of the completion of the project; including the provisions for water, sanitation, electricity and other amenities and services as agreed to between the promoter and allottee, in accordance with the terms and conditions of the agreement for sale.
3. Possession of Real Estate: The allottee is permitted to claim the possession of apartment, plot or building. The building association of allottees is entitled to claim the possession of the common areas.
4. Right to Refund: Under the RERA, if the building or land promoter is unable to complete the handover of the apartment, plot or building, an allottee can claim a refund of any amount paid along with the interest in the prescribed rate, as well as compensation from the promoter.
5. Custody of Documents: Under RERA, an allottee is entitled to have the necessary documents and plans, including that of common areas, after the promoter surrenders the physical possession of the apartment, plot or building.
Promoter Penalties
1. Non-Registration of Project: A promoter is required to register a real-estate project before advertising and promoting the project. If a promoter commits a breach of conduct by not registering, he/she will be levied a penalty which may be as high as 10% of the estimated cost of the real-estate project. The exact fee will be as decided by the concerned Authority. Further, if the promoter fails to comply with this rule and continues to be unregistered, he/she will have to face imprisonment for up to three years, and/or remit a fine which could be as high as 20% of the estimated cost of the real estate project.
2. Incorrect Application for RERA Registration: If a promoter provides bogus information or contravenes the provisions of Section 4, which deals with the application for registration of real-estate projects, he/she will be imposed with a penalty of up to 5% of the estimated cost of the real-estate project.
3. Non-Compliance with Orders of Authority: If any promoter fails to comply with or contravenes any of the orders or directions of the Authority, he/she will be levied with a penalty which can extend up to 5% of the estimated cost of the real estate project.
4. Non-Compliance with Orders of Appellate Tribunal: If any promoter fails to act in accordance with the orders, decisions or directions of the Appellate Tribunal, he/she will be imprisoned for a tenure of 3 years and/or will be levied with a fine which can cumulatively extend up to 10% of the estimated cost of the real estate project.
Real Estate Agents Penalties
A “Real estate agent” is a person who acts on behalf of another person in a real estate transaction, and is benefited with remuneration or fees for the service extended. RERA Registration for a real estate agent must be obtained by any person who wishes to act as a real estate agent in a transaction involving a project registered under RERA.
1. Non-Registration: A real-estate agent requires registration before the commencement of duties. If a real- estate agent fails to register, he/she will be imposed with a penalty of Rs. 10,000 for each day of default. It may cumulatively extend up to 5% of the cost of the plot, apartment or buildings of the real-estate project.
2. Non-Compliance with Orders of Authority: If any real estate agent fails to comply with or contravenes any of the orders or directions of the Authority, he/she will be levied with a penalty that may cumulatively extend up to 5% of the estimated cost of the real-estate project. The penalty will be applicable for each day of default.
3. Non-Compliance with Orders of Appellate Tribunal: If a real estate agent fails to comply with or contravenes any of the orders, decisions or directions of the Appellate Tribunal, he/she will be imprisoned for a term that may extend up to one year and/or will be fined as high as 10% of the estimated cost of the project.
Homebuyers Penalties
1. Non-Compliance with Orders of Authority: If any allottee fails to comply with or contravenes any of the orders or directions of the Authority, he/she will be levied with a penalty that may cumulatively extend up to 5% of the estimated cost of the real estate property.
2. Non-Compliance with Orders of Appellate Tribunal: If an allottee fails to comply with or contravenes any of the orders, decisions or directions of the Appellate Tribunal, he/she will be imprisoned for a term that may extend up to one year and/or will be fined as high as 10% of the estimated cost of the project.
Complaints Under RERA
1. When to file a complaint: Under RERA, there is no specific time frame provided for filing a complaint but it should be filed just after the cause of action occurred, which means as soon as the violation of terms and conditions of the agreement has happened or any violation of RERA provisions comes to knowledge.
2. How to file a complaint: A complaint can be filed under Section 31 of RERA with either the real estate regulatory authority or the adjudicating officer. The complaint can be filed against promoters, allottees, and/or real estate agents. Many state governments have laid out the procedures for filing applications under RERA. The complaint must be in the form prescribed as per the respective state government’s rules. If a buyer’s rights are violated or any provision of the RERA is contravened, a complaint can be filed under RERA in the format provided by the respective state government. Buyers need to visit the RERA portal of the respective state government. The fee for filing a complaint under RERA varies from state to state.
3. RERA Appeals: Any person aggrieved by any direction or decision or order made by the Authority or by an adjudicating officer under RERA may prefer an appeal before the Appellate Tribunal having jurisdiction over the matter. Promoters required to pay a mandatory pre-deposit.
Powers of the Appellate Tribunal
1. The Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice.
2. Subject to the provisions of RERA, the Appellate Tribunal shall have the power to regulate its own procedure. The Appellate Tribunal shall also not be bound by the rules of evidence contained in the Indian Evidence Act, 1872.
3. The Appellate Tribunal shall have, for the purpose of discharging its functions under RERA, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 in respect of the following matters, namely: –
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examinations of witnesses or documents;
(e) reviewing its decisions;
(f) dismissing an application for default or directing it ex parte; and
(g) any other matter which may be prescribed.
4. All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of Sections 193, 219 and 228 for the purposes of Section 196 of the Indian Penal Code, and the Appellate Tribunal shall be deemed to be a civil court for the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973.
5. Every order made by the Appellate Tribunal under RERA shall be executable by the Appellate Tribunal as a decree of a civil court, and for this purpose, the Appellate Tribunal shall have all the powers of a civil court. Notwithstanding anything contained in Sub-Section (1), the Appellate Tribunal may transmit any order made by it to a civil court having local jurisdiction and such civil court shall execute the order as if it were a decree made by the court.
6. Any person aggrieved by any decision or order of the Appellate Tribunal, may, file an appeal to the High Court, within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal, to him, on any one or more of the grounds specified in Section 100 of the Code of Civil Procedure, 1908. No appeal shall lie against any decision or order made by the Appellate Tribunal with the consent of the parties.
Recent Judicial Precedents
1. Neelkamal Realtors Suburban Private Limited v. Union of India: The constitutional validity of RERA was upheld by the Bombay High Court.
2. The Apex Court in Pioneer Urban Land and Infrastructure v. Union of India ruled that the RERA, Insolvency and Bankruptcy Code, 2016 (“Code“), and the Consumer Protection Act, 1986 (“CPA“) have concurrent jurisdictions, which diluted its overall purview and impact. The judgment provided relief to the promoters, in case the allottee is a speculative buyer/or if the Code has been invoked with malicious intent. It further illuminated “…A contract or a term thereof is substantively unfair if such contract or the term thereof is in itself harsh, oppressive or unconscionable to one of the parties. A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder…” It would be prudent that the RERA is considered sacrosanct and followed completely in ‘letter and spirit’.
Yojit is a partner at the Chambers of Jain and Kumar. Yojit specialises in Tax laws, transfer pricing, international tax, mergers and acquisitions, contract law, real estate law and Intellectual property law. Prior to joining Chambers of Jain and Kumar, Yojit has worked with Tier-1 firms such as Khaitan & Co and AZB & Partners. He comes with an experience of representing individuals, startups and multinational companies before benami authorities, Assessing Officers, Transfer Pricing Officers, CIT(A), ITAT, NCDRC, High Courts and the Supreme Court of India. He is also on the advisory board of certain legal blogs. Yojit ensures effective and most prudent solutions for his clients in a time-effective manner. Please reach out for any queries.
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