What is RERA - Real Estate (Regulation & Development) Act, 2016
RERA is an Act to undertake consumer protection in real estate matters and speedy redressal of their disputes. This is though, a Central Act, but involves participation of States and UTs. The Act protects the interest of buyers by promoting accountability and transparency on the part of the Developers; and the Act covers the real estate Brokers also. The Act was swiftly passed by both the Houses of Parliament in March 2016, and received Presidential assent within few days thereafter.
In the absence of any Regulator in Reasl Estate Law, this highly booming sector has suffered the most, as significant number of frauds have happened, delays in project completion and so on. Nevertheless, the buyers can now see light at the end of tunnel with the passage of this law.
Builders / Promoters are the mostly Regulated lot under this RERA Law. Restriction is imposed on Advertisement until its contents are correct. Project approvals must be obtained before promoters sell homes. The buyers have right to approach Regulatory Authority within one year for any deficiency in project relating to quality issues in the project. The time limit for complaints in structural defects is Five years. Any such complaint shall be addressed in time bound manner by the promoter, i.e. 30 days of complaint. This issue relating to quality has been a much sought-after remedy, which has finally been addressed in this law. Although, there exists of Sale of Goods Act, 1930; which deals with quality issues in product, but only in moveable goods. Hence, the quality concerns in immoveable properties were completely eliminated from the Sale of Goods Act. Thanks to this RERA law, the buyers can now raise their voice on quality issues.
Registration: the promoters have to register their projects with the Regulatory Authority, for each phase of project. Any portion of land as small as 500 Sq. Meters or more have to be registered, which will be developed by developer. The exemption will however, apply for projects involving Renovation etc. but where there is no Advertisement involved.
Carpet Area: the promoters are allowed to sell carpet area only and not otherwise, meaning thereby ‘Sell what you have to offer’ – no exaggeration allowed. This provision will bring certainty in price calculation and a clear comparison in cost with other competitors’ projects. Any addition will require prior approval of allottee/s.
Escrow Account: the builders are required to deposit money in a separate bank account, whenever they collect money from buyers. This money shall be used specifically for the given objective. Any withdrawal is permissible in accordance with the spent made in completion of each stage of project, which will be audited on yearly basis.
Completion of project within given time: the promoters are obliged to complete the project in given time. The promoters upon registration of project will create a web page on the website of Regulator for making necessary updates of project, and its completion stage. Any delay will be subject to extension to be allowed by Regulator. No extension for more than one year will be granted. Failure to complete the project will entail revocation of Registration, and the promoters will be shown as defaulters on the website, not only that, the completion of pending work may be handed over to another competent person, and the bank account will be freezed.
No transfer of project to third party: the promoters will not transfer the project without consent of two-third of allottees, and approval of Regulator. The promoter should return the amount to allottee in case of delay, with interest and compensation.
Appeal: any person aggrieved by the decision of Regulatory Authority shall make an appeal to Appellate Tribunal within 60 days’ and the Tribunal shall also expeditiously dispose of appeal within 60 days. An appeal from the orders of Appeallate Tribunal shall lie with the High Court concerned, which can be filed within 60 days of order of Tribunal. Law provides of penalty in terms of both fine and imprisonment.
Some of the Key Definitions:
Apartment: Section 2(e) of the Act defines apartment, to include Flat, Office, Shop, Godown for Residential or Commercial purposes. This is a marked departure from inclusive definition of Consumer under the Consumer Protection Act, 1986, where a person is barred if he has purchased any product or availed services for commercial purpose.
Carpet Area: the focus is on, net usable area and not to include external walls, shafts, balcony, verandah etc. Common area is however, separately defined.
Person: to include individual, HUF, Company, Firm, Competent Authority, AOP – registered of not, Co-operative Society.
Promoter: to include a person who constructs for the purposes of selling and includes his assignees; a person who develops land into a project; a Development Authority; State Level Co-operative Housing Societies; any other person who acts as a builder, colonizer, contractor etc.
Real Estate Agent: to include a person who negotiates on behalf of a person and receives remuneration or fees, and includes property dealers, brokers, middlemen by whatever name called.
Author is well known lawyer, has dealt with numerous Real Estate matters, is a Managing Counsel & Founder of Legajoist – Advocates & Solicitor. Author can be contacted at sanjiv@legajoist.com, 9873394488.
