INTRODUCTION
The Real Estate (Regulation and Development) Act, 2016 (Act) was passed by the on 25 March 2016 after receiving the assent of the President. Various provisions have been notified while the others await notification.
The Act was first introduced in 2013 was passed with the underlying intention :
·
To bring transparency and safety in the market for consumers of residential
and commercial projects by introducing a
sectoral regulatory mechanism.
·
To address distortions in the real estate market due to the
asymmetrical relationship between real estate developers and consumers.
·
To prevent structural abuse of dominance
Key Highlights
The Act contains several necessities
to fill the gaps in the real estate market - by way of establishing a disclosure framework and setting strict liabilities for promoter
irregularities.
Ø
Regulatory
Authorities: Setting-up of Real Estate Regulatory Authorities (RERAs)
and real estate appellate tribunals in all states and union territories (except
Jammu & Kashmir) within 1 year of
its notification.
Ø
Registration: Mandatory registration
of real estate projects with the RERA where the total area of land proposed to
be developed exceeds 500 square meters
or where more than eight apartments are proposed to be developed inclusive of
all phases (where phase-wise development is proposed). The Act also
requires every phase of a project to be registered separately as a standalone
project. Projects cannot be advertised, booked or sold in any form prior to
registration and obtaining the necessary construction approvals. The RERA is required to either grant or reject
registration applications within 30 days.
Ø
Disclosures: Publicly
accessible disclosures of the project
and promoter details, along with a self-declared timeline within which
the promoter is required to complete the project, are compulsory. Quarterly
project related disclosures are also required. The disclosures are to be made
available online.
Ø
Standardisation: Key terms such as 'apartment',
'carpet area' and '(rate of)
interest', which will help in homogenising sector practices and prevent
abuse of consumers due to biased classifications such as 'super built-up area'
etc.
Ø
Ring-fencing
of project receivables: Promoters
must park 70% of all project receivables
in a separate account. Drawdown from such account is permitted for land and
construction costs only, in line with the percentage of project completion (as
certified by an architect, an engineer and a chartered accountant). Further, a promoter can accept only up to 10% of
the apartment cost prior to entering into a written agreement for sale with the
consumer.
Ø
Warranties: The promoter is required to declare that it has legal title to the project land or
authenticate validity of title, if such land is owned by another person.
The promoter is also required to obtain
insurance for title and buildings along with construction insurance.
Ø
Bar on
encumbrance: The
promoter is prohibited from creating any charge or encumbrance on any apartment
after executing an agreement for the same. In the event such charge or encumbrance
is created, it will not affect the right and interest of the concerned
consumer.
Ø
Project
sanctity: Prior consent of the 2-3rd of the
allottees and RERA is required for alteration in plans ,to transfer or assign majority of its rights and
liabilities in a project without such consent.
Ø
Model
agreement: A specified form of agreement for sale
between promoters and consumers may be prescribed, which will prevent inclusion of biased provisions
in it. Consumers have also been granted the right to seek relief for unilateral termination of such agreements by
promoters without cause.
Ø
Defects
liability of the promoter: Promoter is responsible for structural defects or other
deficiencies for a period of 5 years
from the date of delivery of possession.
Ø
Agents: Real estate agents cannot
facilitate any sale or purchase of plots/apartments in projects without
obtaining registration with the RERA. The agents are required to facilitate
access of project information to consumers at the time of booking and refrain
from making false statements, misleading representations and indulging in unfair
trade practices.
Ø
Legal recourse: Provides for time
bound resolution of complaints and disputes by the RERAs and the real
estate appellate tribunals. The Act also provides for refund of amounts paid by
consumers (along with interest and compensation) for promoter's failure to give
possession of the apartment in accordance with the agreement for sale, or any
breach of such agreement.
Ø
Existing
projects: Existing
projects which have not received completion certificate as on the date of
commencement of this regulation will be required to obtain registration with
the RERA within 3 months of such
commencement.
Penalties: Imposition of monetary penalties on the promoter of up to 5% of the 'estimated cost of the project' (as determined by the RERA) for
disclosure related defaults, and up to 10% for other defaults, along with a
maximum imprisonment of 3 years. Consumers are liable to a fine of up to 10% of
the apartment cost or imprisonment up to 1 year for non-compliance with orders
of the real estate appellate tribunal.
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