Real Estate (Regulation and Development) Act 2016: Regulatory Attempt and Challenges Ahead?

The Real Estate (Regulation and Development) Act, 2016 (hereinafter referred to as “RERA Act”) came into effect on 1st May 2017. Before and until May 1, 2020, according to Minister for Housing and Urban Affairs, 51850 Real Estate Projects and 40481 Real Estate Agents have been registered under the act. In addition to this, almost 46,152 complaints have been disposed of by competent authority or adjudicating officers.^[1]

The purpose of the Act is to ensure compliance by the builders and to put a mechanism to resolve the dilemmas and the miseries of harried homebuyers. In short, the Act was enacted to bring the framework where accountability and transparency in the real estate sector are ensured and to bridge the gap between builders and buyers. Matters pertaining to timely completion and delivery of projects to the buyers and making available the information of the project plan, layout, government approvals, land title status, sub-contractors as well as the consent of two-thirds of the allottees’ on any alteration or addition in the project and many more are the features of the RERA to ensure achievement of objective as mentioned above.

This article covers the registration requirements of the project, penalties, and compensation for the violation under the act, right and duties of allottees as well as shortcomings and inefficiencies in the Act. The article encompasses above areas with a view to providing qualitative and threshold analysis of RERA Act.

Need for RERA Act

Before the RERA enactment and commencement, the builders and the real estate developers were not time-bound to deliver the property to the owner, rather the delay was evident which had a devastating financial impact on all the homebuyers, particularly the homebuyers who had invested their entire life savings in order to buy their dream home. If one was living in a rented accommodation and was waiting for the delivery of fully-constructed property, then the delay would have a compounding effect as she/he had not only to bear the brunt of continuing loan interest payment but also as well as the rent of their home, therefore the opportunity cost is extremely high for such homebuyers. This scenario would be damaging for the economy also like the movement of the economy is severely impacted and the enthusiasm of homebuyers is severely dented. But there was no one to question the builders for this.

With the RERA enactment, the buyers or the allottees are able to or can file complaints with the Authority or adjudicating officer against the builders or the developers under the RERA act read with respective state RERA regulations instead of approaching the consumer forums or the civil court for the remedies. It is to be kept in mind that though the provisions of RERA are in addition to other remedies provided under other laws^[2] nonetheless, the provisions of RERA shall have an overriding effect in case the assistance of provisions of RERA is taken by the aggrieved party.^[3]

The stark change that the RERA’s introduction had brought is significant as the banks and other financial institutions, after coming to know about the builder’s and developer’s violation can take recourse to a different course of actions like stop lending money to those builders and real estate developers who are not registered or whose registration has been canceled by the respective states in pursuance of contravention under the Act and rules or for any fraudulent conduct. In order to obtain the registration, the builders and the developers are required to produce the necessary documents and approvals to their requisite regulator.

Registration of project

The Act covers both residential and commercial property. Section 3 of the Act specifies the property to be registered or not and the property not requiring registration are^[4]–

Where the area of land does not exceed five hundred square meters or number of apartments proposed does not exceed eight inclusive of all phases, nonetheless, such threshold can be reduced by the appropriate government;
Where the property had received completion certificate prior to commencement of the action; or
Where property is just repaired or redeveloped and is not marketed, sold, advertised or newly allotted.

Consequences of revocation of project registration and remedy for an incomplete project

Majorly, the states have set-up their own RERA offices where they function under the established rules and regulations. The Act has prescribed the timelines for the registration of the project. The one-off time-period for registration within three months of the commencement of the Act is provided in case of the project started and for which completion certification were not issued before commencement of RERA^[5] whereas for the registration of new projects in different states and union territories, registration would have to be done as prescribed by the respective state or union territory RERA rules if they are framed.^[6]

Many-a-times, it happens that project registration is lapsed or revoked due to a variety of circumstances and violations, in such cases the project often gets stuck. In order to overcome such a situation, the Act under Section 8 provides the way out. RERA may consult the appropriate government on the way to continue and complete the remaining work by the competent authority or association of allottees or as determined by the authority called RERA. There is a rider in the form of the second proviso to Section 8 as it states that in the case of revocation of project registration, there is available first right of refusal with the association of allottees for carrying the remaining work and when it is read with the first proviso, this right of association when not exercised or refused, then the authority or as determined by the authority in any manner may carry the construction but only after the expiry of the period of appeal under the RERA Act^[7].

Penalty and imprisonment for contravention of provisions of the Act

The RERA prescribes penalties for the offenses committed by the real estate agents, or builders or other parties. Following are the prescribed penalties according to the RERA Act-

For non-registration of the project with the RERA authority, the penalty extendable up to 10% of the total estimated cost of the project and in case of continuing contravention of provisions of the RERA Act, there may be imprisonment for a term extendable up to three years with or without fine extendable up to 10% of the total estimated cost of the project.^[8]
When a project has not been registered and any order or direction for the same has been issued by the appellate tribunal, then up to 3 years of imprisonment with or without fine extendable up to 10% of the estimated cost of the project.^[9]
Where information or advertisement regarding the project is found to be false, then penalty extendable up to 5% of the total estimated cost of the project.^[10]
Where an order of the RERA has been contravened or has not been executed then daily penalty for every day during which such default continues after passing of the order and extendable up to 5% of the estimated cost of the project^[11].

Inadequacies in the Act

Though the Act under Section 32^[12] emphasizes on single-window clearances for the project as well as time-bound efforts, however, it fell woefully short of prescribing the steps to achieve such an admitted objective. Presently, the developers in different states have to seek multiple permissions from multiple authorities with multiple questions. This prolongs the entire process of obtaining the approval for the project. In addition to that, side dealings and corruption also gets perpetuated, hence the single window clearance in a time-bound manner needs to be implemented in spirit as it would attract investments, help in rotation of money and clear roadblocks that affect the real estate sector^[13].

Section 3 of the Act prescribes separate registration of the project to be developed in phases and each phase under the act shall be considered a standalone real estate project. The provision would aggravate the delay and encourage red-tapism and seep corruption as every time the application for registration is required to be made which include the requirement of various approvals. This need to be addressed to better sub-serve the interest of real estate sector and buyers

Similarly, there are no proper safeguards for the promoter under Section 18 of the Act^[14] when the promoter is unable to give possession in accordance with terms of the agreement as it does not take into account the factors like lean season, economy, interpretation of the completion of the project as these factors might have an impact on status of project and buyer might also be encouraged to not take possession in the lean season due to depreciation in property value and instead claim refund and compensation despite the completion of the project. Therefore, the Act presumes only the fault of developers and not of buyers who for different reasons might claim a refund.

Similarly, conveyance avoiding behavior of the buyer is not taken care of in Section 17 of the Act in order to make the promoter responsible for carrying out maintenance and repair works for as long as possible. There is a presumption in the provision that only the promoter prolongs the completion of conveyance. Therefore, a time period of three months for conveyance needs to be looked at to balance the tilt and for the development of the real estate sector^[15].

Rights and Duties of the Allottees^[16]

As per the Section 19(d) of the Act, an allottee is a person who acquires the said apartment or plot through the transfer or sale but does not include a person to whom such plot/apartment is given on rent. Under the Section 19, there are certain rights and duties mentioned regarding the allottee, these are as follows:

The allottees are entitled to-

Claim the information pertaining to the sanctioned plans, layout plans and in addition the specifications which are approved by the authorities and other such information.
Obtain the information regarding the time schedule of completion of the project, which includes the subject of water supply, sanitation, electricity supply, and other amenities or facilities.
Take the possession of the apartment, plot, or the building. The association of allottees shall be entitled to the possession of the common areas.
Obtain the refundable amount along with the interest at the rate which is prescribed and in case of the compensation, the manner prescribed in the Act.
Claim the necessary documentation which includes the planning regarding the common area, after handing over the physical possession of the section.
The price which is payable by the allottee and it must be clearly mentioned in the Model of Agreement for Sale and it should be hike free except in the case of an increase due to the statutory development charges. This total price shall include booking amount, indirect taxes which is to be paid till the time of the handing over the possession of the estate. The information regarding the payment of the amount and the time within which the amount to be paid must be given in writing by the agent or builder or developer.
The allottee has the right to visit the developmental site in order to keep the note pertaining to the progress of the construction

The allottee shall-

Make all the significant payments which are mentioned or specified in the documentation of the agreement for sale made at the time. The charges pertaining to registration, all the taxes, water and electricity charges, ground rent maintenance charges and others, if any.
Pay interest as prescribed by the RERA rules in case of late payment towards any liability on as specified in a. This rate of interest shall be included in the agreement for sale. This rate may be reduced after the negotiation between the builder and the allottee.
Participate in the establishment of any association or organization within the society.
Take physical possession of the property i.e. apartment, plot or building, within the two months of getting the occupancy certificate.
Participate in the property’s conveyance deed registration in accordance with Section 17.^[17]

The aggrieved party, allottee, can file a complaint with the RERA for the compensation because of the contravention of provisions and violation of the rights accorded in the Act.^[18] The authorities charge penalties and/or impose punishments on the developer or builder or the agent, after considering the gravity of the infringement. The RERA Act has established the Real Estate Appellate Tribunal in each state. The allottee can approach it if it gets aggrieved by the RERA. Moreover, the allottee can appeal in the High Court, within 60 days of receiving the decision of the Appellate Tribunal.^[19]

If the aggrieved party take recourse under the provisions of this Act before the authorities specified under the Act, then the jurisdiction of civil courts to entertain any suit or proceeding or even grant of an injunction is ousted.^[20] The Consumer Forums at district, state, or national level are also empowered to look into matters of redressal of injustice to the recognized aggrieved party. Further, under Section 71 sub-section (1) proviso, the aggrieved person recognized under the RERA Act can withdraw the complaint if filed on or before the commencement of the RERA Act, from the Consumer Forums, related to the Sections 12, 14, 18 and 19, and file it with the adjudicating officer provided under the Act^[21].

The association of the allottees can file a complaint, against the developer or the builder, with the authority established under RERA Act i.e. Real Estate Regulatory Authority or the Adjudicator Officer. According to the Section 31 of the Act, the complaint filed should be carried out in the form prescribed under the rules established by the state.

For the purpose of the complaint, the aggrieved party shall file an application with all the significant details such as the complainant’s name, the name of the agent, or the developer against whom the complaint has been lodged, required compensation, information regarding the property, etc. There are various states which provide for the online filling of the application and the charges related to the filing of the complaint also vary from state to state. After the receipt of the application, the authorities shall produce the matters or issues either in front of the associated bench or the chairman of the members of the authority. Further, the bench or the chairperson will appoint an officer to conduct the investigation regarding the matter. The application for the relief shall be handled by the Adjudicating officer and has to come out with the decision as soon as possible. The case has to be settled within 60 days from receiving the application. RERA ensures that accountability and transparency is established regarding the case for the allottee so that they can claim relief or compensation for the violation of the rights or delay in the delivery of the project.

Conclusion

It has been quite some time since the enforcement of the Act, however, the changes within the real estate sector is already evident. The entire mechanism has turned out to be more accountable and lucid. This Act has acknowledged the rights of the buyers and made it more welfare-oriented for the allottees or the buyers. The legal procedure is more answerable and transparent toward the buyers. Though the Act has to some extent tried to lay its hands-on hitherto untouched aspects or inadequate regulatory areas to navigate the challenges and to bring a solution to the problematic areas, nonetheless there are still shortcomings as pointed above which are required to be looked into and rectified to ensure attraction in real estate sector, orderly development of the sector and balance in the rights of every stakeholder.

Reference

www.moneycontrol.com
Real Estate (Regulation and Development) Act 2016, sec 88
Real Estate (Regulation and Development) Act 2016, sec 89
Real Estate (Regulation and Development) Act 2016, sec 3
Id at 4
Real Estate (Regulation and Development) Act 2016, sec 4
Real Estate (Regulation and Development) Act 2016, sec 8
Real Estate (Regulation and Development) Act 2016, sec 59
Real Estate (Regulation and Development) Act 2016, sec 64
Real Estate (Regulation and Development) Act 2016, sec 60
Real Estate (Regulation and Development) Act 2016, sec 63
Real Estate (Regulation and Development) Act 2016, sec 32
blog.forumias.com
Real Estate (Regulation and Development) Act 2016, sec 18
lawjournals.stmjournals.in
Real Estate (Regulation and Development) Act 2016, sec 19
Real Estate (Regulation and Development) Act 2016, sec 17
Real Estate (Regulation and Development) Act 2016, sec 18
Real Estate (Regulation and Development) Act 2016, sec 58
Real Estate (Regulation and Development) Act 2016, sec 79
Real Estate (Regulation and Development) Act 2016, sec 71

This Article has been written and submitted by Ms. Vishakha Bhardwaj during her course of internship at B&B Associates LLP. Ms. Vishakha is a third-year law student at the Army Institute of Law, Mohali.

Moderated By Shubham Khunteta (Associate)