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RERA: 101

The Real Estate (Regulation and Development) Act, 2016 is an Act of the Parliament of India which seeks to protect home-buyers as well as help boost investments in the real estate industry

Bill published on: 14 August 2013

Bill: Real Estate (Regulation and Development) Bill, 2016

Introduced by: Dr. Girija Vyas, Minister of Housing and Urban Poverty Alleviation

Commenced: 1 May 2016 (59 of 92 sections notified); 1 May 2017 (remaining)

Enacted by: Parliament of India

Assented to: 25 March 2016

RERA Act Rules:

The Real Estate (Regulation and Development) Act, 2016 under Section 84 envisions that within a period of six months from its commencement date, State Governments will set the rules to carry out the provisions associated with the Act.

  • On 31 October 2016, the centre, through HUPA (Housing & Urban Poverty Alleviation) Ministry, released the general rules of the Real Estate (Regulation and Development) Act, 2016.
  • All these rules are applicable to the Union Territories like Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli and Andaman & Nicobar Islands.

Some Points Under Real Estate Regulation and Development (RERA)

  • Security: Under the RERA act, a minimum of 70% of the buyers’ and investors’ money will be kept in a separate account. This money will then be allotted to the builders only for construction and land related costs. Developers and builders cannot ask for more than 10% of the property’s cost as an advance payment before the sale agreement is signed.
  • Transparency: Builders are supposed to submit the original documents for all projects they undertake. Builders are not supposed to make any changes to the plans without the consent of the buyer.
  • Fairness: RERA has now instructed developers to sell properties based on carpet area and not super built up area. In the event that the project has been delayed, buyers are entitled to get back the entire money invested or they can choose to be invested and receive monthly investment on their money.
  • Quality: The builder must rectify any issue faced by the buyer within 5 years of purchase. This issue must be rectified within 30 days of the complaint.
  • Authorisation: A regulator cannot advertise, sell, build, invest, or book a plot without registering with the regulator. After registration, all the advertisements for investments should bear a unique project wise registration number provided by RERA.

Salient Features

RERA was established to enhance accountability and transparency with respect to housing transactions and real estate. Here are the salient features of this Act:

  • Establishment of Real Estate Regulatory Authority in every Indian state. This authority will monitor as well as adjudicate and arbitrate any disputes with respect to real estate projects in the concerned state.
  • Establishment of a fast-track mechanism for settlement of disputes. This will be done via an appellate tribunal and dedicated adjudicating officers.
  • All real estate projects must be registered with RERA. Moreover, the authority will have jurisdiction over such projects. They can also refuse the registration of a particular project if guidelines have not been adhered to.
  • A project’s registration can be cancelled if RERA receives any complaints that are found to be true after an inquiry has been made.
  • A property cannot be sold if it is not registered with RERA.
  • All promoters need to upload details of the project to the RERA website. These details include the types of apartments or plots, registration information, list of approvals taken and those remaining, the layout plan, sanction plan, and the status of the project.
  • A promoter’s application will be approved or rejected within 30 days. If you do not receive any information regarding this, you can assume that your application has been approved.
  • If a promoter wishes to take an application fee or an advance payment from a buyer for a plot, apartment, or building, it cannot be more than 10% of the cost. Additionally, an advance payment or the application fee can be taken only once the promoter enters into a written agreement with the buyer regarding the sale of the property and this sale has been registered.
  • All promoters will have to obtain insurance on the title of the building, the land, and the construction of each project.
  • 70% of the amount collected from the buyers for a project needs to be deposited in a separate account. This account, ideally, should cover the cost of construction and of the land. It can only be withdrawn after the promoter receives certification from an architect, a chartered accountant, and an engineer.
  • As a promoter, if you wish to transfer or assign a majority of your rights and liabilities in a real estate project to a third party, you will have to get prior written consent from two-thirds of the allottees (not including the promoter). Additionally, you will need the written approval of RERA.
  • If there is any default from the side of the promoter or the buyer, both will be liable to pay an equal rate of interest.
  • If the promoter causes any losses to the buyer due to other people laying claim to property (defective title of land) which is under construction or has been constructed, the promoter will have to compensate the buyer. There is no limitation provided by any law currently with respect to the compensation amount.
  • If a person has any problems regarding violation of the provisions or rules of this Act by a promoter, buyer, or an agent, they can file a complaint with RERA.
  • While an enquiry is taking place, RERA can stop an agent, promoter, or buyer from continuing any activity against which a complaint has been raised.
  • If any of RERA’s decisions regarding a complaint is not satisfactory, the aggrieved party can submit an appeal before the Appellate Tribunal.
  • If the promoter fails to follow RERA’s orders, they will have to pay a penalty. This amount could be up to 5% of the evaluated cost of the property.
  • If the Appellate Tribunal’s orders are not complied with, a penalty will have to be paid. This can either be imprisonment for up to 3 years or a fine (up to 10% of the approximate cost of the project), or both.
  • If a company commits an offence under this ACT, any person who was in charge of the business at the time of the offence being committed and the company will be held guilty and will be punished.
  • No civil court will have any jurisdiction with respect to any matter that comes under RERA or the Appellate Tribunal’s jurisdiction. As such, no court can grant an injunction with regards to any action taken by RERA or the Tribunal.

Benefits of RERA

RERA has a number of benefits for the buyer, the promoter, and the real estate agent. These include:

  • Standardisation of carpet area: Before RERA the manner by which a builder calculated the price of a project wasn’t defined. However, with RERA there is now a standard formula that is used to calculate carpet area. This way, promoters cannot provide inflated carpet areas to increase prices.
  • Reducing the risk of insolvency of the builder: Most promoters and developers tend to have multiple projects being developed at the same time. Earlier, developers were allowed to move funds raised from one project to that of another. This is not possible with RERA since 70% of the funds raised need to be deposited in a separate bank account. These funds can be withdrawn only after certification by an engineer, a chartered accountant, and an architect.
  • Advance payment: As per the rules, a builder cannot take more than 10% of the cost of the project from the buyer as advance or application fees. This saves the buyer from having to source funds fast and having to pay a large amount.
  • Rights to the buyer in case of any defects: Within 5 years of possession, if there are any structural defects or problems in quality, the builder has to rectify these damages within 30 days at no cost to the buyer.
  • Interest to be paid in case of default: Prior to RERA, if the promoter delayed possession of the property, the interest paid to the buyer was much lower than if the buyer delayed payments to the promoter. This has changed with RERA and both parties have to pay the same amount of interest.
  • Buyer’s rights in case of false promises: If there is a mismatch in terms of what was promised by the builder and what has been delivered, the buyer is entitled to a full refund of the amount that was paid as advance. At times, the builder may have to provide interest on the amount as well.
  • If defect in title: If at the time of possession, the buyer discovers that there is a defect in the title of the property, the buyer can claim compensation from the promoter. There is no limit to this amount.
  • Right to information: The buyer has complete right to information about the project. This includes plans related to layout, execution, and completion status.
  • Grievance Redressal: If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA. If they aren’t pleased with RERA’s decision, a complaint can also be filed with the Appellate Tribunal.

Impact of RERA Act:

After the Real Estate (Regulation and Development) Act, 2016 enforcement, registration of sale deed of a project unit cannot be done in the office of the sub-registrar without obtaining Occupancy Certificates or Completion Certificates. At present, unit registrations are taking place without checking. It is occurring without obtaining Occupancy Certificates or Completion Certificates. No one is bothered about the legal consequences. The Department of Stamps & Registrations know about the RERA Act implications but they have not taken necessary steps to stop the unlawful sale deed registrations of such properties. Below are the few impacts:

  • Fewer projects will be launched as the promoters and builders will spend time to understand the impact of the Real Estate (Regulation and Development) Act, 2016. However, the honest promoters / builders / developers will benefit from this scenario as they will face lesser competition.
  • Dishonest builders will disappear as they will fail to sustain in the market after the RERA Act is implemented.
  • The 32 sections that have been added to the Real Estate (Regulation and Development) Act, 2016 will encourage a financial discipline in this sector.
  • After the Act implementation, the developers will have to follow several formalities if they wish to make certain changes to the project after its commencement. A short-term chaos might break out in the real estate industry but in the long run, it will boost the confidence of the customers and they will invest more.

Carpet Area Defined Under RERA Act:

The Real Estate (Regulation and Development) Act, 2016 has mandated the developers on how to sell their apartments depending on the carpet area.

  • According to the Act, carpet area is the total area of the floor that can be used within the walls of the apartment. This does not include areas like open terrace, shafts, balconies, etc.
  • This normalization of the carpet area definition will ensure that buyers are not misled by the unlawful promoters.

As the loading factor is high, the saleable area can be inflated by the developer. This will allow the developer to reduce the rate per square feet on the saleable area that is inflated. This is extremely misleading as the home purchasers get happy assuming that they are getting amazing rates. However, the flat size never changes, only the loading factor does.

Using the standard for carpet area will ensure that there is a certainty on the usable area. This also helps in the analysis of cost per square feet. Comparison between the different projects also becomes easier.

How Can You Ensure that the Property is RERA Compliant?

Things that must be considered to understand if a property is RERA compliant are mentioned below:

  • If the area of the property is more than 500 square meters, the builders should register it under RERA Act before launching or advertising a project on that particular property.
  • Builders must provide proof that 70% of the total payment has been deposited by them into a discrete escrow account instead of using it for some other investment.
  • Builders must get all the necessary consents before advertising a new project. Discounts for early bird bookings and pre-launch offers will not be there anymore.

Penalties Under RERA

If you fail to follow any of RERA’s rules, the following penalties will be applicable:

Offence Penalty
For Promoters
Non-registration 10% of the project’s estimated cost
Giving false information 5% of the project’s estimated cost
Violation of laws Up to 3 years’ imprisonment or a fine of 10% of the estimated cost of the property, or both
For Buyers
Non-compliance with RERA Daily penalty up to 5% of the approximate cost of the project
Non-compliance with the Appellate Tribunal Imprisonment up to 1 year or 10% of the approximate cost of the project, or both
For Agents
Non-registration of projects Rs.10,000 per day up to 5% of the approximate cost of the project
Non-compliance with RERA Daily penalty up to 5% of the project’s estimated value
Non-compliance with the Appellate Tribunal Imprisonment up to 1 year or 10% of the project’s estimated cost, or both

How to Register Projects Under RERA

For Promoters

  1. Prepare a checklist and collect all the documents required for registration.
  2. Obtain the number of the bank account opened as per Section 4 (2) (I) (D) the Act.
  3. Complete and submit Form A. This is the application form for registration.
  4. Complete and submit Form B. This is a declaration made by the promoter in accordance with Section 4 of RERA.
  5. Complete and submit Form G. This is the draft agreement of allotment or sale of the project.
  6. Submit an affidavit stating that the details entered in Form G aren’t contrary to the rules set out by RERA.
  7. Submit an affidavit stating that no booking amount has been taken from prospective buyers and is in accordance with Section 3 of the Act.
  8. Pay the fees required for registration which varies from state to state.
  9. Dispatch a duly-signed hard copy of all of these documents by registered post to the relevant RERA authority.
  10. Complete and submit Form C which then lets you obtain the registration certificate.

For Real Estate Agents

  1. Complete the application form and submit it along with the required documents and fee to RERA.
  2. A registration number will be provided to you. This number needs to be mentioned for every property sale.
  3. You are required to maintain books of accounts, documents, and records related to all transactions on a quarterly basis.
  4. All information and documents regarding any project must be shared with the buyer.
  5. You could be suspended if you misrepresent yourself or commit any fraud during the registration process.

How to File a Complaint

Under Section 31 of RERA, complaints can be filed against promoters, buyers, or agents. Here are the steps to follow while filing a complaint are:

  1. Find a RERA lawyer and file a complaint under the appropriate jurisdiction.
  2. Fill the complaint as per the rules prescribed by the concerned state in which the project is situated.
  3. Include the following details:
    • Details of the applicant and the respondent.
    • Address and registration number of the project.
    • A brief statement of the facts as well as the grounds of the claim.
    • If any relief is sought, then details of the relief and interim reliefs (if any).
  4. Pay the fee. Keep in mind that this amount differs from state to state. For example, the fee in Maharashtra is Rs.5,000, while it is Rs.1,000 in Karnataka.
  5. Alternatively, you can file a complaint online by visiting your state’s RERA website.
  6. If you aren’t satisfied with the decision made by RERA, you can file a complaint with the RERA Appellate Tribunal within 60 days.
  7. You can also approach the High Court within 60 days if you aren’t satisfied with the Appellate Tribunal’s decision.

Documents Required

In order to register a project under RERA, keep the following documents ready:

  • Income tax returns of the promoter for the last 3 years.
  • Audited balance sheet, profit and loss account, and auditor report of the promoter.
  • Promoter’s PAN Card and a copy of their Aadhaar Card. If there is more than one promoter, then PAN Card and Aadhar Card copies of all the promoters must be provided.
  • Passport size photograph of the promoter. If the promoter is a firm or a company, then photos of all the members including the director and chairman need to be attached.
  • The legal title deed and any other relevant document which has been authenticated. These documents should reflect all legal rights that the promoter has over the land. If this is not available, the promoter should provide a non-encumbrance certificate. This needs to be procured from a revenue authority who is not below the rank of a Tehsildar.
  • If the promoter is not the owner of the land on which the project is being developed, a copy of the collaboration agreement along with the consent of the owner needs to be provided.
  • The layout plan and sanctioned plan of the project which has been approved.
  • A plan of all the facilities to be provided. This includes drinking water facilities, fire-fighting facilities, usage of renewable energy, and evacuation facilities.
  • All location details regarding the project. This should include boundaries of the proposed project down to the latitude and the longitude.
  • An estimated invoice with details which include the sale agreement and conveyance deed proposed.
  • The carpet area, number of apartments, open terrace area, and balcony area, if any.
  • Details of the number of garages for sale and open parking areas available.
  • Names and addresses of real estate agents (if any).
  • Names and addresses of structural engineers, architects, contractors, and any other person involved with the development of the project.
  • Declaration under Form B. This declaration states that the promoter or anyone authorised by the promoter cannot discriminate during allotment of the project.
  • Any other document required by the state in which you are registering the project.