ANALYSIS OF REAL ESTATE REGULATION AND DEVELOPMENT ACT (RERA)

The Real Estate Sector for past substantial period of time had rendered prominent contribution to the nation Gross Domestic Product (GDP) and also employment creation. However, being an integral part of the nation economic growth, the real estate sector remained unregulated for several years. With the objective to facilitate transparency in the home buying process and to regulate the unorganized sector of real estate, Parliament passed a legislation named as The Real Estate (Regulation and Development) Act, 2016 (RERA). The Act received the assent of the President of India on March 25, 2016 and was published in the official gazette of India on 26th March 2016. The Act came into force on 1st May, 2016.

The primary object of the Act is 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 case may be, or sale of real estate project, in an efficient and transparent manner. The Act envisages the object to protect the interest of consumers in the real estate sector. Further the establishment of adjudicating mechanism for speedy dispute redressal and Appellate Tribunal to hear and adjudicate the appeals from the decisions, directions or orders of the Real estate regulatory authority and the adjudicating officer and the matters connected therewith. It was brought to force to eradicate the existing inconsistencies and difficulties in the real estate sector.

The Real Estate (Regulation and Development) Act 2016 defines allottees under section 2 (d) as the person to whom a plot, building or apartment has been allottees or sold or otherwise transferred but does not include the person to whom is given on rent. The Act further defines promoter under section 2 (zk) as Builder, Developer, Development Authority, Society or Holder of Power of Attorney from the owner of the land on which building / apartment is constructed or plot is developed for sale. The Act also provides for definition of Real estate agent under section 2(zm).

Though the Real Estate (Regulation and Development) Act is a central legislation, however land/estate being the state subject under the Constitution of India on which only the state government is empowered to enact and regulate laws, hence, the Real Estate (Regulation and Development) Act, has been adopted by respective state governments and have also framed respective rules and regulations for the effective implementation of RERA in their terrain. In this regard reading of Section 84 of Real Estate (Regulation and Development) Act 2016 becomes important which empowers the respective government of state or union territory to formulate rules and regulations within 6 months of commencement of the Central Act for carrying out the provisions of the Act in the most effective and regulatory manner. Hence, deriving the powers envisaged under section 84 of the Act, Uttar Pradesh Government also formulated the rules named as The Uttar Pradesh Real Estate (Regulation and Development Rules) 2016 which was published in the official gazette on 27th October 2016. The Real Estate (Regulation and Development) Act and its provisions shall be read in addition to and not in derogation of any provisions of any other law time being in force as specifically provided under section 88 of the Act. Further the provisions of this Act have an overriding effect on other statutory laws of country as per Section 89. The civil courts of the country have been barred from jurisdiction to entertain any suit or proceedings or granting any stay in respect of any matter in which Authority or adjudicating officer or Appellate tribunal have been vested with jurisdiction as per section 79 of the Act.

Interestingly, in the matter of Neelkamal Realtors Suburban Pvt. Ltd. versus Union of India 2017 SCC Online Bom 9302 wherein certain writ petitions were preferred by real estate developers and individual plot owners before the Hon’ble Bombay High Court challenging the constitutional validity of Real Estate (Regulation and Development) Act and also claimed its state-wise implementation and appointing state-level authority as arbitrary. However, Hon’ble Bombay Court held that the provisions of RERA are constitutional. Further it was held by the High Court that “RERA needs to be closely monitored in years to come. RERA is not a law relating to only regulatory concerns but its object is to develop realty sector particularly incomplete projects.”

The Bombay High Court in Vikrant Karnik vs State of Maharastra 2017 SCC Online Bom 846 observed that by virtue of this Act if anyone is aggrieved by any irregularity contrary to the Act and Rules now framed, they are at liberty to approach the concerned authority for redressal of their grievances and if it is not redressed, they can always approach the court of law.

Significant Benefits under the Act and Impact and benefit for allottees under the Act

Real Estate (Regulation and Development) Act has brought about optimistic transformation in every facet of the real estate sector. The Act aims to diminish delay stirring in project and mis-selling. In pursuance thereof, the Act has made it mandatory for all builders/developers to undergo RERA registration before initiating the project under Section 3. Chapter II comprising of section 3 to 10 provides for the registration process for the real estate project with the Authority, grant, extension and revocation of registration as well as obligations of the real estate agents to get registered before the Authority and their functions to be discharges in consonance with section 9 and 10 of the Act.  As per Section 4 of the Act, every Promoter is under obligation to submit an application along with the prescribed fee for registration of the real estate project which shall be accompanied with the prescribed documents. The Act has been sub-divided into regulatory bodies, each of which look after the real estate development in a single state or union territory in India. RERA rules are applicable to both residential and commercial properties. The tuning brought up by the Act with the object to protect the interests of buyers and developers in the identical manner. It can clearly be deciphered that the Act has brought more accountability and transparency within the real estate industry.

However, at this juncture Section 3 of the Act also provides for the real estate projects which are not required to get registered with the Authority. Such projects relates where the area of the land does not exceed 500 square meters or number of apartments does not exceed 8 (eight) or in case where the Promoter has received completion certificate for a real estate project prior to commencement of RERA and also in case where the work involved is limited only to renovation or repair or re-development and does not involve marketing, advertising, selling or new allotment of any apartment, plot or building. The registration of any real estate project granted by the Authority may be extended only in certain circumstances which may arise as a result of Force Majeure or in any other case if the Authority is satisfied that the circumstances and reasons for extension of the project are reasonable.

Real Estate (Regulation and Development) Act impacts and benefits homebuyers in numerous ways and manner. Under the Act as provided under Chapter III (section 11 to 18) the function and duties of promoter/ builder has been defined along with various other compliances to be undertaken in consonance with the provisions of the Act. Now the builders/ promoter are under obligation to disclose every detail and aspect related with the project registered under RERA. To give a better edge for effective implementation such builders are also under obligations to apprise this information on a consistent basis. This process basically assures buyers regarding the transparency of the ongoing project and its timelines. Further it is to be noted that under the Act, the buyer has to pay for the property on the basis of the carpet area or the area enclosed by walls and hence it restricts the builders to charge for the super built-up area that includes lifts, balconies, stairs and lobbies. The carpet area for a home or apartment is well-defined under Section 2 (k) of the Act as the area within the four walls of the house. This cannot include the amenities or common area measurements that are usually included in the super built-up area. Furthermore, builders have to deposit seventy percent of the money realized from allottees in a separate bank account to be maintained in a scheduled bank to cover the cost of construction and the land cost and the same shall only be used for construction purposes.

The Act puts prominence on timely completion of projects. Any delay in the execution and completion of the project and delay in handling over the possession to allottees implies the liability on the developer has to pay interest for the period of delay. Further Section 15 of the Act specifically restricts the promoter to transfer or align his majority rights and liabilities in respect of the project to a third party without obtaining prior written consent from 2/3 allottees, except the promoter, and also without the prior written approval of the Authority. Further the promoter/builder is duty bound to get the association of allottees registered as provided under the Act. Hence in this manner the Act safeguards the rights and interests of the allottees and also envisages a monitoring power upon the Authority. Likewise, the promoter cannot make alterations or additions in the building plan without prior intimation and consent of 2/3 allottees regarding such alteration or modification. The Act also transpires for one model sale agreement between all promoters and allottees.

Interestingly various issues came up before the courts wherein the agreement had no time frame stipulated for completing the project and handing over the possession to allottees. As such in the matter of M/s Fortune Infrastructure Versus Trevor D’lima & Ors 2018 the Hon’ble Supreme Court observed that a person could not be made to wait indefinitely for the possession of the flats allotted to them. They are entitled to seek the refund of the amount paid by them, along with compensation and a reasonable time has to be taken into consideration. As such, a period of 3 years would be reasonable for the completion of the project. A similar view was had been taken and reiterated Supreme Court in Pioneer Urban Land & Infrastructure Ltd. versus Geetu Gidwani Verma & Anr 2019.

Equal Rights and Obligations

Similarly, the Act not only envisages the obligations, functions and duties of the promoter and the real estate agents, at the same time it also compasses the Rights and duties of the allottees as provided under section 19 of the Act. Certain obligations are cast upon the allottees to be discharged like timely payment as per the payment plan agreed, participation in the formation of association or society and also to take physical possession of the property within 2 months of the occupancy certificate issued for such property. Further the allottee has to participate to get the registration of conveyance deed done as per section 17 of the Act. Hence the Act equally saves the rights and interests of the promoters also, as it provides penalty on allottee for not making timely payments. Further the promoter also has the opportunity to approach the Authority in case there is any dispute with the allottee for non-compliance with the agreement resulting in defeating the provisions of Act by allottee.

However, promoters generally have a belief that the Act and its enabling provisions have caused prejudiced to them. The Act provides for penalty up to 10 per cent of the total project cost or even imprisonment, if promoter fail to comply with the provisions of the Act and the rules or work contrary to the provisions of the Act.

Statutory Remedies

Establishment and Incorporation of Regulatory Authority comprising of its chairman along with members and the functions and powers of the regulatory authority have been provided under the Act which also reflects that the Act is a complete code in itself. Section 31 of the Act provides, that any aggrieved person may file a complaint with the Authority or the adjudicating officer for the violations or contraventions of the provisions of the Act.  The aggrieved person may include allottee, promoter or real estate agent. The Authority has been entrusted with wide powers under the Act to impose penalty or interest as well as taking such other remedial measures or safeguards as may be deemed fit by the Authority. The powers also include granting of interim order, refund of consideration amount received by the Promoter from various allottee(s), change in the developer / Promoter, etc. as provided under Section 35 to 40 of the Act. Further the Act also prescribes for establishment of the Appellate Tribunals wherein any aggrieved party may prefer an appeal challenging the order of Authority or adjudicating officer. The appeal may be preferred within a period of 60 days from the date of receiving the order. However, the provisions of Limitation Act also apply thereto. The composition, powers and functions of appellate tribunal has also been enumerated under the Act. Interestingly, the Act protects the rights and interests of allottees in all stages of proceedings  which is reflected from section 43(5) of the Act which provides that in case promoter files an appeal, the same shall not be entertained unless the promoter deposits at least 30% of the penalty or such higher percentage as determine by Tribunal. Further it also imposes a condition that total amount to be paid to allottee including interest and compensation imposed on promoter shall be paid as the case may be before hearing of Appeal. In this manner the Act tries to build up a safeguard protecting the allottees against the dilatory tactics of being in long litigation process by promoter.

Section 57 of the Act provides for the manner in which the orders passed by the Appellate tribunal be executed which shall be executable as a decree passed by a civil court. Further another recourse of appeal has been provided by virtue of Section 58 wherein aggrieved person may prefer an appeal to High Court.  Further in case of non-registration of the real estate project under section 3, Section 59 of the Act provides for a penalty which may extend to 10% of the estimated cost of project and also provides for imprisonment which may extend to three years. However, this provision has to be read in context with section 70 which imbibes for the compounding of offences also. Further penalty for contravention of various provisions of the Act either by person or by company have been enumerated under Section 60 to 69. The State Rules also provides for the regulation and manner in which the orders of authorities under the Act have to be complied with. Further the Rules prescribes under its Schedule various Forms for the proper and necessary implementation of the provisions of the Act and similarly it also provides access to lay man to get aware with the manner in which registration is to be done, complaint is to be filed or the manner in which Appeal is to be filed and necessary compliances thereof is to be done or even to participate in the legal proceedings. This has to read in consonance with section 56 of the Act which envisages the right to the parties to appear before the Authority or Tribunal either in person or they may authorize chartered accountants or company secretaries or lawyers to appear on their behalf.

Under the Act, nationwide committees have been constituted to encourage uniformity and transparency, as well as to regulate the real estate sector. Under RERA, every builder or developer is required to inform homebuyers regarding the status and development of construction, fulfill all the obligations and deliver their property within the stipulated time frame, and abide by every rules and guidelines outlined by RERA, to ensure better accountability and transparency. The Real Estate (Regulation and Development) Act was brought into effect to address concerns of homebuyers, builders, brokers, and other stakeholders of the real estate industry. Since its inception, the Act has implemented many transformations in the industry and yet more are required for the effective its execution. Hence, it becomes imperative for an allottee/ homebuyer or for a promoter/builder including real estate agent, to get appraised with RERA rules and regulations which would support them to navigate the real estate landscape with comfort.

Author

Anuuj Taandon
Advocate, High Court, Lucknow,
Managing Partner STAR LEGALS

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