Consumer : A person who has bought/ booked / intends to buy a plot, apartment or building from a real estate developer.
Real estate developer : A person who develops a building or a township of apartments and commercial complexes on an independently or a jointly owned land, which are later partially or completely sold to the consumers. It also includes a person who converts an existing building or apartments thereof and who acts as a builder, contractor or colonizer.
Project : Is a real estate project that is undertaken by real estate developer and a project can be an offering of units (defined below) of one kind of mixed (i.e. apartments, plots, offices, shop, building)
Intermediary : An intermediary is a person who negotiates the transactions of buying and selling a property between two parties and receives remuneration for the same (It typically includes brokers and property dealers).
Unit : A single apartment, plot, shop or an office which is a part of a building or township being developed.
Carpet Area : Means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
In order to make the real estate developers more responsible and accountable towards consumers, the RERA has made the following rules compulsory for them.
It is mandatory for the real estate developer to register the project with the concerned RERA and obtain a valid registration number before going ahead with the project.
Any kind of marketing, advertising or selling of units is strictly prohibited before the registration of the project.
The real estate developer is required to submit all documents related to the project which are considered necessary by the RERA.
The real estate developer must deposit 70% of the amount received from the consumers in an escrow account from time to time and ensure that the amount is solely used for the project for which it was taken.
Adhere to the project plan at all times.
Refund the money taken from the consumers with applicable interest in case the project cannot be completed for some reason.
Compensate the consumer for the time delay if any.
The Act lists down roles and responsibilities of the real estate developer at project launch, construction and handover stages. In fact the Act goes a step further and makes the real estate developer accountable for the project quality upto 5 years after handover of the project. The Act has been drafted well to define various nuances of real estate sector such as – phase wise development, commencement certificate, occupancy certificate amongst others.
Also in its spirit the Act puts an end to the practice of launches without approvals (sometimes referred as soft launch) thereby a consumer is guarded to that extent as a violating real estate developer will suffer revocation of registration, penalties and be listed on public portal as a defaulter.
Some important records to be produced by real estate developers are:
Only projects which are still under construction at the time of enactment of the Act and any new project thereon are under the purview of the RERA, provided- they are developed on an area of more than 500 sq meter or which have more than 8 units in all phases combined. Essentially, almost all large projects which have not obtained completion certificate will immediately come under the purview of the Act. Therefore consumers of under construction project can seek protection under the Act. While the central government provides for these minimum area requirements, the local governments can change the area requirements to conform to the Act, if required such minimum area threshold can be revised or even lowered.
Yes. There will be a web based system operational within one year of establishment of the RERA, specifically for submission of details and documents by the real estate developers. This information can then easily be accessed by consumers. It is for the first time that an initiative of this magnitude is coming into effect where real estate developers have to make several declarations and comply with stringent norms, while all such information is online for consumers to access.
A registration can be revoked upon receiving a complaint against the real estate developer, if RERA is satisfied that the real estate developer has not complied to the rules and regulations stated under the Act, or has violated the terms and conditions of approval given by competent authorities or bears involvement in unfair practices to sell, market or advertise their projects.
RERA recognizes both registration of property and the registration of agreement for sale. In fact the Act mandates that an agreement for sale needs to be registered once 10% of the contracted amount is collected from a consumer by the real estate developer. This provision thereby takes into account that there is a lack of uniformity across the various states of India i.e. in some places property registration takes place at the time of purchase while in others only an agreement for sale is signed at the time of purchase.
The Act takes into account 2 scenarios –
Minor changes – Minor changes can be made to a unit plan (which includes plans, fixtures, fittings etc) after proper declaration and intimation to the customer and certification by an architect or an engineer that such changes are required for architectural and structural reasons. Such minor changes are also allowed which are requested by a consumer. But these do not include changes in area or height, or removal of part of a building or any such change which the authority feels materially deviates from the product offering.
Any other change i.e. changes to sanctioned plans, layout plans, and specifications of buildings or common areas cannot be brought about without consent of at least 2/3rd of consumers of the project. The consenting consumers do not include real estate developer who might still own units in the project. In fact for the purposes of this clause the Act counts all such consumers who might own several units in a project through direct and indirect ownership (company, HUF and family) as one irrespective of the number of units held.
The Act recognizes that a large land parcel or a township isn’t developed in one go. In fact real estate developers may want to change plans of the subsequent projects launched in the township frequently. Therefore the Act permits the real estate developers to register their projects in a phase wise manner as separate projects. Hence a real estate developer is then allowed to make changes in future to the phases that aren’t registered yet.
If the real estate developers violate the registration procedures prescribed by the Act, they will be required to pay up to 10% of the total estimated cost of the project in question. If found repeating the offence, the real estate developer will be penalized either with imprisonment (up to 3 years) or a fine which may extend up to a further 10% of the above project cost.
The Act makes both the developers and the landlords or any such party which is a beneficiary of sale of a project and receives payments from consumers as real estate developers (Promoters), and is liable to adhere to the Act.
It’s important that only registered real estate agents function in the real estate business. The act also makes it mandatory for the real estate developers to make a declaration about the real estate agents, architects, structural engineers and similar parties to the RERA. Since this information is easily available online, a consumer can have access to it at all the time.
All marketing collaterals are also to be uploaded on the RERA site by the builder / developer, post registration. The advertisement or prospectus issued or published by the developer shall mention prominently the website address of the Authority, wherein all details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto. In case of any future dispute, the same can be easily referred to or produced as evidence.
Yes, from the date of enactment of the Act the real estate developers will be liable to share information with the consumers on an on-going basis. This information includes –the amount of sales concluded, the progress of the project, receipt for pending approvals and other such declarations which are important for project delivery.
While a developer is allowed to sell the project to another investor he can do so only by taking written approval of 2/3rd of project’s consumers and also the prior approval of the RERA. Again if a consumer or his family or by other means holds more than one unit in a project he is considered as one consumer only. Also the RERA need to be informed of such sale and incoming party then assumes all the rights and liabilities as the previous promoter of the project (including project delivery timelines and other such matters).
An escrow account is under the purview of a third party, essentially a bank or a recognized lender. This provision thereby results in further oversight of the bank account and signing authority is with the escrow account manager. One of the biggest concerns for consumers has been project delays. Amongst many reasons for delay, the use of collections from one project into business expansion or construction of other project or siphoning of funds by real estate developers have been observed as one of the causative factors. Therefore to protect the consumers of a project, the Act mandates that of the total collections gathered, 70% funds are to be deposited in an escrow account maintained with a scheduled commercial bank. These funds can be accessed by a real estate developer only for the purpose of construction of the concerned project. The real estate developer can withdraw funds from this account in accordance with the stage of work. Any request for the withdrawal of funds must be certified by an engineer, architect and a chartered accountant in practice stating justification for the real estate developer’s claims. This reduces the risk borne by the consumers to an extent that their payments to the real estate developers are being channelized for the good of the project.
The Act mandates setting up an Appellate tribunal by the state governments within one year of the Act coming into force. This means that RERA is the first body to approach in case of disputes and as per a pre determined set of rules, this body can establish the nature of violation and prescribe the penalty/punishment. Any person aggrieved by the decisions of the RERA or an adjudicating officer can appeal to the Appellate Tribunal. This set up will fast track the process of dispute settlement.
A person can appeal in the High Court if he is aggrieved by the decision of the Appellate Tribunal however. This isn’t allowed in cases where the decision was reached after consent of the disputing parties. The person has to approach High Court within 60 days of receiving the decision.
The appropriate Government will be required to appoint any other body as an Appellate Tribunal that currently exists to hear the appeals in the interim.
The particular appeal will be transferred to the established Appellate Tribunal under the Act and will no longer be with the one which is temporarily appointed.
In the aforementioned case,