Tuesday, 26 July 2016

The Real Estate (Regulation and Development) Act, 2016 (Act)

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.

No comments:

Post a Comment