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AN OVERVIEW OF RERA 2016
AUTHORED BY - NAVYA ARORA
Introduction
At the core, real estate can be
referred to as property, which consists of land and its tangible attachments.
Real estate includes land i.e., the actual surface of the earth, earth beneath
it, attachments to it as well as the air above it. Buildings and lands that are
utilised for residential, commercial, or industrial purpose form a part of the
real estate. When it comes to business, real estate is considered as an important instrument
of investment. Hence, its regulation is vital for any country.
In India the real estate legislations
are administered by both the state and the central government. According to the
article 246 of the Indian constitution, the 7th schedule provides that ‘land’ is
the subject matter of List II (State List) whereas ‘Transfer of property other
than agricultural land, registration of documents and deeds’ and
‘Contracts other than for agricultural land’ are a part of List III (Concurrent list). Therefore, it
is inferred that both centre and state can legislate when it comes to real estate.[1]
Consequently, the real estate sector
is associated with varied laws making the process of buying or selling or
registering property complicated. However, the Real Estate (Regulation and
Development) Act, 2016 been enacted and enforced making it a landmark
legislation primarily dedicated to regulating the real estate sector in India.
Legal framework
the Indian real estate sector is impacted by a wide range of
legislations such as various State/local/municipal laws slum rehabilitation/improvement,
rent control, apartment ownership, building codes/bye-laws, property tax,
Special Economic Zones (SEZs) and a lot more, however, Key legislatures that regulate the real estate
sector are:
The Indian
Contract Act, 1872
In India laws
related to contracts are dealt under the Indian Contract Act, 1872. This
act provides the
provisions regarding the competency to enter into a contract, its
execution and implementation, breach, and the remedies available to the parties
in consequence of breach, etc. As sale, exchange, mortgage, lease of property are special contracts they are accordingly governed
by this act.
Transfer
of Property Act, 1882:
The Transfer of Property Act, 1882 is
a central legislature and among some of the oldest Acts in India. As per its
preamble, the act defines and amends the laws regarding the transfer of
property by act of parties. It mainly deals with immovable properties and lays
down general principles relating to ownership of the same. Transfer of property
through Sale, Mortgage, Lease, Exchange, Gift and Actionable claim are included
in this act.
Since it is an act enacted for transfers that
take place as a result of a
contract. It is deemed
as an extension to the Code of Contract. The omission of the word ‘consolidate’ from its
Preamble confers that
the act does not claim to be a complete code in itself when it comes to transfer of property.
Indian
Easement Act, 1882:
The laws relating to easementary rights to
immovable property are
provided under this act.
Registration
Act, 1908 and Indian Stamp Act, 1899:
A tax in the form of stamp duty has
to be paid for registration of various deeds, documents and instruments which deal with transfer
of interest in immovable property. The stamp duty act governs the laws related to that. The main objective of this
Act is to generate revenue for the government of India.
In order to ensure registration of
important documents the Registration Act 1908 was enforced. This act governs
the laws as to registration of documents that contain essential information
related to deal regarding land or other immovable property.
Foreign
Exchange Management Act, 1999 and Foreign Direct Investment Policy:
The
purchase and sale of immovable property in India done by foreign entities and NRIs is regulated under FEMA, while the FDI Policy provides for rules regarding the
admissibility of foreign investment, compliance parameters and withdrawal of such investors in the real estate sector in India. the concerned ministries the Department of Industrial
Policy and Promotion (DIPP) and the Reserve Bank of India (RBI) regulate such foreign
investment.
Land
Revenue Codes:
The land revenue codes provide for
the division and classification of immovable property in a state along with
restrictions on its transfer
and powers and duties of revenue officers thereof. It also includes rules,
regulations and penalties for breaching such codes. Quite a few land revenue codes have been enacted in India as each
state devises its own code that deal with agricultural land-holding, land
revenue, types of tenancy and similar matters connected.
Right to
Fair Compensation and Transparency in Land Acquisition, Rehabilitation and
Resettlement Act, 2013:
The act
governs regulations concerning land acquisition in India. Land acquisition herein refers to the
procedure through which the government acquires private land for the purpose of
industrialisation, infrastructural development or urbanisation and undertakes compensation
or rehabilitative measures for those who are impacted by the process.
The Real
Estate (Regulation and Development) Act, 2016
The Real
Estate (Regulation and Development) Act, 2016 (RERA) is a legislature which
specifically address the concerns of the real estate sector in India. The act was enacted in order to promote
accountability, efficiency & transparency in the real-estate sector. The
act led to the establishment of the Real Estate Regulatory Authority and the Appellate
Tribunal which provided a mechanism for speedy dispute redressal. The act also
aims at preventing malpractices present in the industry through various
provisions.
A
compendium of the RERA act
·
Setting up Regulatory Authority and Appellate
Tribunal
As per section 20 of the act,
the appropriate government in accordance with the act must establish Real
Estate Regulatory Authority with the aim of exercising the powers conferred
thereupon and the functions assigned as per section 34 of the act.
Following would account for the Authority’s main responsibilities:
o Registering
real estate projects;
o Registering
real estate agents;
o
Resolving complaints
o Making
sure that promoters disclose real estate projects;
o Making suggestions to the
relevant Government regarding issues pertaining to the growth & promotion
of the real estate sector;
Apart from the Real Estate Regulatory
Authority, as per section 4, the appropriate government must also establish
appellate tribunal to attend to appeals from any judgments, recommendations, or
orders given by the Real Estate Regulatory Authority’s or any decision made by
the adjudicating officer. The tribunal shall exercise powers conferred
under section 53 of the act.
·
Registration of Projects
According to section 3 of the
act any plot, apartment or building in any real estate project or part of it,
cannot be advertised, marketed, booked, sold or offered for sale by a promoter
without registering the real estate project with the Real Estate Regulatory
Authority. In simple words, every real estate project must be registered,
however the section also provides that no registration is required:
o
When the number of apartments inclusive of all phases is not beyond 8 for the
proposed development
o
When
the promoter obtained a certificate of completion for a real estate
project before the act
commenced
o When any apartment, plot or building
under the real estate project is supposed to be renovated, repaired or
re-developed without involvement of marketing, advertising selling or new
allotment.
·
Registration of agents
The act provides for mandatory
registration of all real estate agents. According to Section 9, the sale
or purchase of any plot, apartment or building, as the case may be, in a real
estate project or part of it registered under section 3, cannot be facilitated
by any real estate agent unless he has obtained registration.
Section 10 prescribes the functions of the real
estate agent –
o
To
maintain books of account, records and documents
o
To
refrain from indulging in any unfair trade practices such as misrepresentation
of standard or grade of the services, approval or affiliation not yet obtained
or make misleading representation regarding the services
o Aid in the allottee in obtaining the
possession of all the information and documents he is entitled to
·
More transparency due to project disclosure
Section 11 provides
for functions and duties of the promoter which involves entering all details of the proposed
project on the website of the Authority for public viewing.
This website address, wherein all
details of the registered project have been mentioned shall be predominantly
present in the advertisement or prospectus issued or published by the promoter.[3]
The promoter shall also be
responsible to make available information such as 1) sanctioned plans, layout
plans, along with specifications, approved by the competent authority 2) the
stage wise time schedule of completion of the project, which should be
inclusive of provisions regarding civic infrastructure such as water,
sanitation and electricity.
·
Provision to file Complaint
Section 31 states that any person who is
aggrieved can file a complaint with the Authority or the adjudicating officer
in case of violation of any provision mentioned in this act.
Apart from that section 35
empowers the authority to take Suo moto cognizance of the case. An action
against any promoter/allottee/real-estate agent can be taken without
a complaint filed by any aggrieved person being an essential.[4]
Such sections protect the rights of
buyers and promote clarity & liability in the sector
·
Greater Financial Security
As per section 13 an advance
payment or an application fee taken by a promoter from a person prior to
entering into a written agreement for sale shall not exceed more than 10% of
the cost of the apartment, plot, or building as the case may be.
Section 4 (2)(l)(D) provides for the provision of the
escrow account. All developers deposit 70% of the money received
from allottee in respect to the real estate project into a separate account maintained in a scheduled bank. This
fund cannot be diverted for any other purpose and shall only be utilised for
project development.
As per section 18 in case when
the promoter isn’t able to grant the possession to the allottee as per the
terms agreed to by a specified date or because of discontinuance of his
business as a developer he shall either return the amount received for the
project if the allottee decides to withdraw from the project or in case the
allottee does not want to withdraw from the project, the promoter hall be
liable to pay interest for
every month until
the possession is
given at a prescribed rate.[5]
·
Penalties
|
Section
|
violator
|
Offense
|
Punishment
|
|
Sec 59
|
promoter
|
Non- registration of a project
|
a penalty which may extend up to 10
% of cost the real estate project as determined by the Authority.
|
|
Sec 60
|
Promoter
|
Providing false information or
contravenes the provisions of section 4
|
a penalty which may extend up to 5%
of cost of the real estate project as determined by the Authority.
|
|
Sec 61
|
Promoter
|
any promoter contravention of any
other provisions of the act
|
a penalty which may extend up to 5%
of the real estate project as determined by the Authority.
|
|
Sec 62
|
Real estate agent
|
Non registration, contravention of
sec 9 and 10
|
Rs 10,000 per day until default
continues or 5% of the total cost of real estate project as determined by the
Authority.
|
|
Sec 63
|
Promoter
|
Failure to comply with authority
orders
|
A penalty per day until default
continues thereof cumulatively extended up to 5% of cost of the real estate
project as determined by the Authority
|
|
Sec 64
|
Promoter
|
Failure to comply with appellate
tribunal
|
Imprisonment which may extend up to
3 years or
fine per day until default
continues thereof cumulatively extended up to 10% of cost of the real estate
project as determined by the Authority
|
|
Sec 65
|
Real estate agent
|
Failure to comply with authority
orders
|
A penalty per day until default
continues thereof cumulatively extended up to 5% of cost of the real estate
project as determined by the Authority
|
|
Sec 66
|
Real estate agent
|
Failure to comply with appellate
tribunal
|
Imprisonment which may extend up to
1 years or
fine per day until default
continues thereof cumulatively extended up to 10% of cost of the real estate
project as determined by the Authority
|
|
Sec 67
|
allottee
|
Failure to comply with authority
|
A penalty per day until default
continues thereof cumulatively extended up to 5% of cost of the real estate
project as determined by the Authority
|
|
Sec 68
|
allottee
|
Failure to comply with appellate
tribunal
|
Imprisonment which may extend up to
1 years or
fine per day until default
continues thereof cumulatively extended up to 10% of cost of the real estate
project as determined by the Authority
|
·
Other important provisions
Section 79 acts as the bar when it comes to
jurisdiction, according to it civil court will not have jurisdiction over
matters which come under the purview of the Authority or the adjudicating
officer or the Appellate Tribunal as per the act and no injunction shall be
granted by any other court or other authority with respect to any act done
while exercising any power conferred by or under this Act.
Section 84 empowers the appropriate government
to formulate rules in order to execute provisions of the act.
The area of a property is calculated
in 3 ways which include carpet are, built up area and super built-up area.
There has often been confusion around this concept while purchasing any
property. The section 2(k) of the act provides a definition for carpet
area to avoid such confusion.
Conclusion
Lack specific and appropriate laws
led to prevalence of hardships and malpractices in the real estate sector.
Introduction of the Real Estate (Regulation and Development) Act of 2016 has
been a step towards reforming Indian real estate legislature, the act focuses
on increasing transparency and accountability within the land sector and
protects the rights of the allottees. The transparency also benefits the
builders.
The legislature has provided a basic
framework for conducting transactions pertaining to real estate fairly.it
imposes penalties on buyers as well as builders upon defaults as per the app.
However, it largely undertakes buyers’ perspective into account, being a little
harsh on the builders. The act should take builders into account. Unnecessary
delays due to government approval is a major issue which sets back the real
estate sector and the RERA has failed to cover it. A few suggestions that could
be considered are as follows:
·
In
order to establish a faster approval mechanism, single window clearance should
be put in place to put an end to delay of projects due to government clearance.[6]
·
For
betterment of the project, industry experts for site management can be
appointed.
·
Due
to the escrow account reduces the cashflow and therefore slows down[7]
the industry alternatives such as Letter of Credit and bonds should also be
considered.
·
Proper
planning and implementation should be effectuated from the commencement
References
[1]Dhairya Kumar, Navigating the RERA Act, 2016:
Demystifying the Basics, LEGAL SERVICE INDIA, ( Sept 9, 2023 9:25 pm), Navigating the RERA Act, 2016: Demystifying the Basics
(legalserviceindia.com)
[2] Geetanjali Aman Constructions v. Hrishikesh Ramesh
Paranjpe, Appeal in SC 10000672/691
[3] IPLF IP AND LEGAL FILINGS, The Real Estate (Regulation and
Development) Act of 2016 (ipandlegalfilings.com), (last
visited 10 sept, 2023)
[4] M. Nikitha, Critical Analysis of RERA Act,
2016, B&B ASSOCIATES LLP,(Last visited on 9 Sept, 2023 11:12pm), Critical Analysis of RERA Act, 2016
- B&B Associates LLP (bnblegal.com)
[5] Shivangi Singh, Analysis of RERA Act, 2016,
BSK LEGAL SOLICITORS & ADVOCATES, (last visited 9 sept 2023 10:12 pm), Analysis of RERA Act, 2016 - BSK Legal
[6] Harsh Bhushan, Impact of RERA
in Real Estate Sector in India: An Analysis, IJPIEL (3 Jan 2022), Impact of RERA in Real Estate Sector in India: An
Analysis | IJPIEL
[7] Nithi, RERA Act: A Critical
Analysis, Volume 11, Pen Acclaims, Page 17, (2020), Nithi.pdf (penacclaims.com)
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International Journal for Legal Research and Analysis
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