Real Estate Regulation Act – New regime of the Consumer-Centric Law

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Indian history may remark 2016 as one of the most significant years which brought in different norms and policies throughout the country for better governance. Be it the GST Bill passed in the parliament or the demonetization uproar, the year rooted out some very essential policies. The Real Estate (Regulation and Development) Act, 2016 (hereinafter Act) acts as one of those policies through which the rights and privileges of the property buyers are preserved and the real estate developers/builders will be held liable for unfair trade practices. The consumer oriented bill was introduced in the year 2013 by the Indian National Congress Government. Later on 10 March 2016, Upper House i.e. the Rajya Sabha approved the bill and the same also passed by the Lok Sabha on 15th March 2016. The Act finally came to its final form on 1st May 2016 enacted throughout the Republic of India except for the State of Jammu and Kashmir. Though it is a central act, the states are given liberty under Section 84 of the Act to formulate rules of their own for carrying out the provisions of the Act.

Why there was a need for RERA?

The long title of the Act reads as under:

“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 an 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.”

Going through the literal interpretation, the title reads that the purpose of the enacting this act is to usher efficiency and transparency in the real estate sector protecting the rights and interest of the consumers. It also brings in the speedy dispute mechanism through which the related disputes can be resolved in an accelerated manner. To elaborate in a better way, presently lakhs of prospective homebuyers are struck with the false commitment of the real estate players, whereby the properties they purchased or invested in, are still under-construction and are no-where near the deadline.  The constant delay part by the real estate players exploits the rights of these genuine buyers and in the end they become the puppets of their hands. The arguments on the delay could be managed if the buyers take some stringent measures against the builders, but when it comes to wrong information, after purchasing the said property, they become helpless as the very property they purchased wasn’t exactly what they invested for. The legislature becoming aware of this act of malice brought in the law and brought a paradigm change to the Indian Real Estate Sector. It enforced the accountability of the builders ensuring timely constructions of the projects and disclosing correct and clear information to their buyers.

How the Act operates:

The consumer-centric act concentrates on serving the consumers through different provisions stipulated in the act. Focusing on some important provisions, primarily Section 4 under Chapter II of the act provides for the application for registration of the projects with more than 500 sq.m. of the area or more than 8 apartments through its promoter. This provision effectively put bars on the project developers/promoters against misleading information, requiring them to disclose each and every information related to project including the details of the any past project, clearances, approvals and certificates, layout plan of the project, cost of the project, area of the project, encumbrances related issues, legal disputes in relation to the project and everything other which may affect the buyer. The information is a mandated part of the registration process. The application also requires that the promoter shall maintain an Escrow account in a scheduled bank wherein 70% of the amount realized for the real estate project from the allottees shall be deposited and shall be used only for the purpose of construction of the project. Next, comes the provision of registration of real estate agents who deal with the registered real estate projects envisaged under Section 9 of the Act, encompassing their liability for different occasions. The agents who act as an intermediary between the promoter and the buyer (allottee) are also required to get themselves registered when dealing with registered projects requiring them to disclose each and every information related to their credibility including any legal disputes of theirs. The Act also entails the functions of the real estate agents envisaged under Section 10 citing their duties when dealing with the registered project.

The turning point of these provisions doesn’t end up here. Section 11 under Chapter III of the Act, lays out the functions and duties of the promoters wherein after the disclosure and the registration part, the information of the project used for registration purpose as well as for the advertisements, prospectus of the project etc. are needed to updated on the RERA website database where each and every information uploaded is available on public domain and any person can access the same. The promoter is also required to update data in relation to the progress of the project on a quarterly basis. This promotes a transparent system, whereby the promoter is required to provide each and every information on the public domain in relation to the registered project and any person who may have queries about the project details can access the same.

Whenever any right accrues, duty follows. Section 19 of the Act allocates the rights and duties of the allottees/buyers such as the right to information to every detail of the project, information on the time schedule of progress made in the project, right of possession etc. On the duty part, this provision stipulates the allottee/buyer to pay his/her dues/installments for the project on time and on delay of payment, levy interest charge, which somehow favors the builder/promoter. Though a small part of this act does imply a favor to the promoters, when looking at the big picture, the act broadcasts a complete consumer oriented law.

Next, comes the Authority itself established for a speedy disposal mechanism cited under Chapter V of the Act. Section 20 of the Act encompasses the establishment of the Real Estate Regulatory Authority which will redress all the complaints filed under Section 31 by any aggrieved person for violation or contravention of the provisions of this act against and promoter, allottee or real estate agent. Section 21 states the composition of the authority whereby the authority shall consist of a Chairperson and not less than two whole time members appointed by the Appropriate Government. Section 32 of the Act provides for the functions of the authority for the promotion of the real estate sector, protecting the interests of the allottees, promoter, and the real estate agent and also provides for a robust grievance redressal mechanism. Section 34 lays out functions of the authority where one of the functions mandates the authority to publish and maintain a website for public viewing along with the details of the real estate project, the promoter, and the real estate agent. The authority under Section 38 of the Act entails the power to impose penalty or interest against the promoter, allottee or real estate agent on any such contravention. The Authority also holds the power to revoke the licenses of the registered real estate project or the agent, if they are found guilty with unfair trade practices. Under Section 43 the Act establishes the Appellate Tribunal to challenge the decisions of the Authority.

Chapter VIII entails penalties and offenses against the promoters, real estate agents against non-registration and non-compliance with the provisions of the act or the orders of the authority. This chapter also lists the penalties against the allottees for non-compliance part.  One of the stringent parts of this chapter provides for imprisonment for a term which may extend up to 3 years in the case of non-compliance. Since the states have also been given the liberty to make rules in relation to the penalty part, they have adapted stern approach in accordance with their state laws to penalize those in non-compliance to the act or the authority.

Are old consumer cases covered under RERA

One may question that after the enactment of the new act, will those old consumer cases in relation to real estate sector, which are still pending before the consumer court will get any benefit out of it. The answer to this question lies within Section 71 of the act whereby any complaint in respect to the matters covered under Section 12, 14, 18 and 19 of the act will get transferred from the consumer courts to RERA, subject to the permission of the consumer courts. This provision brings relief to those who are struck with the lengthy procedures of the consumer court and are yet to get some justice.

Registration of Ongoing Projects:

One of the most significant provisions of this act states the registration of the ongoing projects, where under section 3 of the act, the existing projects which haven’t received their completion certificate before the commencement of the act i.e. May 1st, 2017, are required to be registered under this act. It also requires the existing project promoters to provide details and information on the project same as of the new project. This again puts a cap on the misleading information of these ongoing projects. One of the questions raised in relation to these projects is the exclusion part. Since the states are given liberty to frame rules of their own, different states have made the different approach in this regard. Some of the states such as Uttar Pradesh in its rules primarily decided to exclude projects where services have been handed over to the local authority or the common facilities have been handed over to the residents’ welfare association. The said rules also excluded the ongoing projects where 60% of the projects were already sold. Similarly, the state of Andhra Pradesh excluded those projects where roads, open spaces, amenities and services have been handed over to the local authority or all slabs are laid or the lease deeds of 50% of the apartments are executed. Also, the state of Haryana rules exempts builders who have applied for an occupancy certificate, or a part of completion certificate, from getting registered. Where the state of UP formulated the exclusions before, the same was diluted after the formation of the new government. (Uttar Pradesh revises RERA rules, pro-developer clauses diluted, hefty fines restored, The Hindustan Times, 19th May 2017). In relation to other states there is a display of strict observations against the project developers where they haven’t received their completion certificate and also didn’t get their ongoing projects registered. As the law implies that in case they do not get registered they cannot make any transaction in relation to the said project, and if they are found entangled with such transaction, RERA will impose penalties as well as take strict actions against them.

The aftermath: will RERA succeed?

At an interim conclusion, the answer is yet to be found that whether RERA succeeds in its cause. The Act though has been enacted, is yet to see the outcomes of its fruit. The implementation is yet to see the real estate builders taking responsibility and accountability for their work and in the end result providing benefits to their consumers. So the question remains that whether RERA will finally put a halt to the unfair trade practices in the real estate sector or on the contrary will fall prey to its victims in one or the other way. One of the criticisms raised in relation to this implication is that what about the pricing model. Has RERA taken necessary steps to curb out the problem? To this part, RERA remains silent as the law nowhere contains a provision to control the prices of the real-estate sector. But the answers to the implications are yet to make an effect as the alarms have been raised and the real estate players seek escorts to rescue them from this falling pit.

 

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