The Ministry of Housing and Urban Poverty Alleviation on 19 April 2017 notified in the Official Gazette of India, the remaining sections (i.e. 3-19, section 40, sections 59-70 and sections 79-80) of the Real Estate (Regulation and Development) Act, 2016 (Act) with effect from 1 May 2017 thereby protecting the interests of real estate buyers in India.
The Act aims to promote transparency and accountability in the real estate sector and provides for an adjudicating mechanism for speedy dispute redressal in the form of the Real Estate Regulatory Authority (RERA) (as adopted by various States), with appeals from decisions, directions or orders of the RERA and/ or the adjudicating officer being made to the appellate tribunal under the Act (Appellate Tribunal).
The Act, in what is seen as a landmark move to protect the interests of real estate buyers, inter-alia, puts an obligation on the promoters of a real estate project to park 70% (seventy per cent) of their funds in a dedicated bank account to be used for the cost of construction of the concerned project.
Sections 79 and 80 bar the jurisdiction of courts to entertain any suit or proceeding in respect of any matter which the respective authorities under the Act have the power to adjudicate. Further, no injunctions may be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by the Act. Additionally, no court may take cognizance of any offence punishable under the Act or the rules or regulations under it except pursuant to a complaint in writing made by the RERA or an officer authorised by the RERA to do so.
Some of the salient features of the Act are as follows:
1. The Act applies to both residential and commercial real estate transactions, as well as to real estate projects that are yet to receive a completion certificate as on 1 May 2016. Any failure to register the real estate project in accordance with the Act may invite a penalty of up to 10% (ten per cent) of the estimated cost of the project. In the event false information is given or for any other contravention of the Act, the promoter shall be liable to pay up to 5% (five per cent) of the estimated cost of the real estate project, as may be determined by the RERA;
2. The Act provides for mandatory registration of a real estate project by a promoter, except those (a) in which the area of land proposed to be developed does not exceed 500 (five hundred) square meters or the number of apartments proposed to be developed does not exceed 8 (eight) apartments; (b) where the promoter has received a completion certificate for a real estate project prior to commencement of the Act; and (c) where the real estate project is for the purpose of renovation or repair or re-development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building, as the case may be;
3. The Act also provides for mandatory registration of a real estate agent without which no real estate agent may facilitate the sale or purchase of, or act on behalf of any person to facilitate the sale or purchase of any plot, apartment or building in a real estate project or part of it. Any failure to do so may result in punitive action of INR 10,000 (Indian Rupees ten thousand) for each day of default which may cumulatively extend to 5% (five per cent) of the cost of plot, apartment or building, as the case may be, of the real estate project, for which the sale or purchase has been facilitated as determined by the RERA;
4. A promoter may not accept more than 10% (ten per cent) of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a person without first entering into a written registered agreement for sale with such person and the promoter is also required by the Act to obtain all such insurances as may be notified by the respective government;
5. Promoters of real estate projects are under an obligation to adhere to sanctioned plans and project specifications as approved by the competent authorities and are restricted from making any changes to the same without taking prior consent from persons who have agreed to acquire or invest in the project or any part thereof;
6. Promoters of real estate projects cannot transfer or assign their majority rights and liabilities in respect of a real estate project to a third party without obtaining prior written consent from two-third allottees, except the promoter, and without the prior written approval of the RERA;
7. The RERA may, if it considers it expedient to do so, on a complaint or suo motu, by order in writing and recording reasons for doing so, call upon any promoter or allottee or real estate agent, as the case may be, at any time to furnish in writing such information or explanation relating to its affairs as the RERA may require and appoint one or more persons to make an inquiry in relation to the affairs of any promoter or allottee or the real estate agent, as the case may be. The RERA has also been given the powers to impose penalties or interest with regard to any contravention of obligations cast upon the promoters, the allottees and the real estate agents, under the Act or the rules and regulations made thereunder;
8. In the event a promoter, an allottee or a real estate agent, as the case may be, fails to pay any interest or penalty or compensation imposed on such person by the adjudicating officer or the RERA or the Appellate Tribunal, as the case may be, under the Act or the rules and regulations under it, then the amount is permitted to be recoverable from such promoter or allottee or real estate agent, in such manner as may be prescribed as an arrears of land revenue;
9. Any person aggrieved by any direction or decision or order made by the RERA or by an adjudicating officer under the Act can appeal before the Appellate Tribunal having jurisdiction over the matter. However, where a promoter files an appeal with the Appellate Tribunal, it cannot be entertained, without the promoter first having deposited with the Appellate Tribunal at least 30% (thirty per cent) of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on the promoter, if any, or with both, as the case may be, before the said appeal is heard; and
10. For any failure to comply with or any contravention of any of the orders, decisions or directions of the Appellate Tribunal, the promoter is liable for imprisonment for a term which may extend to 3 (three) years or with fine for every day during which the default continues, which may cumulatively extend up to 10% (ten per cent) of the estimated cost of the real estate project. The allottee is also liable for fine of up to 5% (five per cent) of the cost of the plot, apartment or building cost as may be determined by the RERA for any failure to comply with or contravention of the order, decision or direction of the RERA.
The Act in its entirety as well as the notified sections thereunder may be accessed at the following links respectively: