4. What is the RERA (Real Estate Regulatory Act)?
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act passed by the
Indian Parliament under Union Ministry of Housing and Urban Poverty Alleviation . The
RERA seeks to protect the interests of home buyers and also boost investments in the real
estate sector. The Rajya Sabha passed the RERA bill on March 10, 2016, followed by the
Lok Sabha on March 15, 2016 and it came into force from May 1, 2016. 59 of its 92
sections were notified on May 1, 2016 and the remaining provisions came into force from
May 1, 2017. Under the Act, the central and state governments, are required to notify their
own rules under the Act, six months, on the basis of the model rules framed under the
central Act.
5. Need of RERA
For long, home buyers have complained that real estate transactions were lopsided and heavily in favour of the
developers. RERA and the government’s model code, aim to create a more equitable and fair transaction
between the seller and the buyer of properties, especially in the primary market. RERA, it is hoped, will make
real estate purchase simpler, by bringing in better accountability and transparency, Delays in projects are the
biggest issue faced by buyers. The reasons are many and the impact is huge. Since the last 10 years, many
projects have seen delays of up to 7 years. Projects launched after the turn of this decade have faced delays as
well. Some have run into obstacles even before a brick was laid. The reasons include diversion of funds to
other projects, changes in regulations by authorities, the environment ministry, national green tribunal etc and
other bodies like those involved in infrastructure development and governing transport. In many places, land
acquisition becomes an issue. Errant builders often sell projects to investors without the approval of plans,
unauthorised increase in FAR, bad quality of construction, projects stuck in litigation etc.
The RERA will give the Indian real estate industry its first regulator. The Real Estate Act makes it mandatory
for each state and union territory, to form its own regulator and frame the rules that will govern the
functioning of the regulator.
6. How will RERA impact Consumers
Some of the important compliances are:
● Informing allottees about any minor addition or alteration.
● Consent of 2/3rd allottees about any other addition or alteration.
● No launch or advertisement before registration with RERA
● Consent of 2/3rd allottees for transferring majority rights to 3rd party.
● Sharing information project plan, layout, government approvals, land title status, sub-
contractors.
● Increased assertion on the timely completion of projects and delivery to the consumer.
● An increase in the quality of construction due to a defect liability period of five years.
● Formation of RWA within specified time or 3 months after majority of units have been
sold.The most positive aspect of this Act is that it provides a unified legal regime for the
purchase of flats; apartments, etc., and seeks to standardise the practice across the
country.
7. Major helpful instruments of RERA
Establishment of the regulatory authority: The absence of a proper regulator (like the Securities Exchange
Board of India for the capital markets) in the real estate sector, was long felt. The Act establishes Real Estate
Regulatory Authority in each state and union territory. Its functions include protection of the interests of the
stakeholders, accumulating data at a designated repository and creating a robust grievance redressal system. To
prevent time lags, the authority has been mandated to dispose applications within a maximum period of 60 days;
and the same may be extended only if a reason is recorded for the delay. Further, the Real Estate Appellate
Authority (REAT) shall be the appropriate forum for appeals.
Compulsory registration: According to the central act, every real estate project (where the total area to be
developed exceeds 500 sq mtrs or more than 8 apartments is proposed to be developed in any phase), must be
registered with its respective state’s RERA. Existing projects where the completion certificate (CC) or occupancy
certificate (OC) has not been issued, are also required to comply with the registration requirements under the Act.
While applying for registration, promoters are required to provide detailed information on the project e.g. land
status, details of the promoter, approvals, schedule of completion, etc. Only when registration is completed and
other approvals (construction related) are in place, can the project be marketed.
8. Reserve account: One of the primary reasons for delay of projects was that funds collected from one project, would
invariably be diverted to fund new, different projects. To prevent such a diversion, promoters are now required to park 70%
of all project receivables into a separate reserve account. The proceeds of such account can only be used towards land and
construction expenses and will be required to be certified by a professional.
Continual disclosures by promoters: After the implementation of the Act, home buyers will be able to monitor the progress
of the project on the RERA website since promoters will be required to make periodic submissions to the regulator regarding
the progress of the project.
Title representation: Promoters are now required to make a positive warranty on his right title and interest on the land,
which can be used later against him by the home buyer, should any title defect be discovered. Additionally, they are required
to obtain insurance against the title and construction of the projects, proceeds of which shall go to the allottee upon execution
of the agreement of sale.
Standardisation of sale agreement: The Act prescribes a standard model sale agreement to be entered into between
promoters and homebuyers. Typically, promoters insert punitive clauses against home buyers which penalised them for any
default while similar defaults by the promoter attracted negligible or no penalty. Such penal clauses could well be a thing of
the past and home buyers can look forward to more balanced agreements in the future.
Penalty: To ensure that violation of the Act is not taken lightly, stiff monetary penalty (up to 10% of the project cost) and
imprisonment has been prescribed against violators
9. RERA definition of ‘carpet area’
The area of a property is often calculated in three different ways – carpet area, built-up area
and super built-up area. Hence, when it comes to buying a property, this can leads to a lot of
disconnect, between what you pay and what you actually get.
Gautam Chatterjee, Maharashtra RERA chairman, explains that “It is now mandatory for the
developers of all ongoing projects, to disclose the size of their apartments, on the basis on
carpet area (i.e., the area within four walls). This includes usable spaces, like kitchen and
toilets. This imparts clarity, which was not the case earlier.”
According to the RERA, carpet area is defined as ‘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’.
10. Impact of RERA on real estate industry
Initial backlog.
● Increased project cost.
● Tight liquidity.
● Rise in cost of capital.
● Consolidation.
● Increase in project launch time.
Initially, a lot of work is to be done to get the existing and new project registered. Details such as status of
each project executed in last 5 years, promoter details, detailed execution plans, etc., needs to be prepared.
With the advent of RERA, specialised forums such as the State Real Estate Regulatory Authority and the
Real Estate Appellate Tribunal, will be established for the resolution of disputes pertaining to home buying
and the aggrieved party will have no recourse to other consumer forums and civil courts, on such matters.
While the RERA sets the groundwork for fast-tracking dispute resolution, the litmus test for its success, will
depend on the timely setting up of these new dispute resolution bodies and how these disputes are resolved
expeditiously with a degree of finality.
11. Which projects come under RERA
● Commercial and residential projects including plotted development.
● Projects measuring more than 500 sq mts or 8 units.
● Projects without Completion Certificate, before commencement of the Act.
● The project is only for the purpose of renovation / repair / redevelopment which does
not involve re-allotment and marketing, advertising, selling or new allotment of any
apartments, plot or building in the real estate project, will not come under RERA.
● Each phase is to be treated as standalone real estate project requiring fresh registration.
12. How to register projects under RERA
● Authenticated copy of all approvals, commencement certificate, sanctioned plan, layout plan, specification,
plan of development work, proposed facilities, Proforma allotment letter, agreement for sale and conveyance
deed to be given when
● Applying for project registration with RERA.
● Mandatory registration of new and existing projects with RERA before launch.
● Registration of agents/brokers with RERA.
● Dispute resolution within 6 months at RERA and RERA appellate tribunals.
● Separate registration of different phases of a single projects.
● Developers to share details of projects launched in last 5 years with status and reason for delay with RERA.
● Timely updating of RERA website.
● Maximum 1 year extension in case of delay due to no fault of developer.
● Annual audit of project accounts by a CA.
● Conveyance deed for common area in favour of RWA.
● Construction and land title insurance.
● Project completion time period.
13. Consumer Right To Information Under RERA
Number, type and carpet area of apartments.
Consent from affected allottees for any major addition or alteration.
Quarterly updating of RERA website with details such as unsold inventory and pending approvals.
Project completion time frame.
No false statements or commitments in advertisement.
No arbitrary cancellation of units by promoter.
14. When and how should you file a complaint under RERA?
“Complaints can be filed under Section 31 of the Real Estate (Regulation and Development) Act, 2016, either
with the Real Estate Regulatory Authority or the adjudicating officer. Such complaints may be against promoters,
allottees and/or real estate agents. Most state government rules, made appurtenant to the RERA, have laid out the
procedure and form, in which such applications can be made.
A complaint under the RERA, is required to be in the form prescribed under the respective states’ rules. The
complaint can be filed with respect to a project registered under RERA, within the prescribed time limit, for
violation or contravention of provisions of the act or the rules or regulations framed under RERA.
“For cases pending before the NCDRC or other consumer fora, the complainants/ allottees can withdraw the case
and approach the authority under the RERA. Other offences (except complaints under Section 12, 14, 18 and 19)
can be filed before the RERA authority,”
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18. Now where should consumer approach- RERA or NCDRC
“With the RERA coming into force, a separate designated authority has been created, to deal with all matters
relating to any deficiency of services in the real estate development sector. The RERA authority and adjudicating
officer, can hear complaints with respect to registered real estate projects, irrespective of the claim amount. An
aggrieved person can file a complaint, not only against a developer, but also against a purchaser. The Act also
makes real estate agents accountable, for their role in the sale of real estate projects and permits aggrieved
persons to file complaints against them,” explains Ameet Hariani, managing partner, Hariani & Co.
Consequently, the enactment of the RERA, could definitely reduce the burden on the NCDRC and other
consumer courts.
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21. IMPORTANT SECTION IN RERA
Section 20(1) of the Act requires establishment of Real Estate Regulatory Authority in each state and union
territory. Its functions include protection of the interests of the stakeholders, accumulating data at a designated
repository and creating a robust grievance redressal system.
➢Section 21 Authority shall consist of a Chairperson and not less than two whole time member.
➢Section 31(1) Any aggrieved person may file a complaint with the Authority or the adjudicating officer, as the
case may be, for any violation or contravention of the provisions of this Act or the Rules and Regulations made
thereunder against any promoter allottee or real estate agent as the case may be.
➢Section 38(1) The Authority shall have powers to impose penalty or interest, in regard to any contravention of
obligations cast upon the promoters, the allottees and the real estate agents, under this Act or the rules and
regulations made thereunder.
➢ section 43(1) The appropriate Government shall, within a period of one year from the date of coming into force
of this Act, by notification establish an Appellate Tribunal to be known as the — (name of the State/Union
territory) Real Estate Appellate Tribunal.
➢43(2) The appropriate Government may, if it deems necessary, establish one or more benches of the Appellate
Tribunal for various jurisdiction in the State or Union territory, as the case may be.
22. IMPORTANT SECTION IN RERA
➢ section 64 If any promoter, who fails to comply with, or contravenes any of the orders, decisions or
directions of the Appellate Tribunal, he shall be punishable with imprisonment for a term which may
extend up to three years or with fine for every day during which such default continues, which may
cumulatively extend up to ten per cent. of the estimated cost of the real estate project, or with both.
➢ section 60 If any promoter provides false information or contravenes the provisions of section 4, he shall
be liable to a penalty which may extend up to five per cent. of the estimated cost of the real estate project,
as determined by the Authority.
➢Section 4(1) Every promoter shall make an application to the Authority for registration of the real estate
project in such from, manner, within such time and accompanied by such fee as may be specified by the
regulations made by the Authority.
➢Section 3(1) No promoter shall advertise, market, book, sell or offer for sale, or invite persons to
purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or
part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory
Authority established under this Act.
➢Section 53(1) The Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil
Procedure, 1908 but shall be guided by the principles of natural justice.
➢ (2) Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own
procedure. (3) The Appellate Tribunal shall also not be bound by the rules of evidence contained in the
Indian Evidence Act, 1872.
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24. ● Ismail Ibrahim Patel and ors. .. Petitioners
Vs.
State of Maharashtra and ors. .. Respondents
● mr. Swatantra Anand
versus
● Paradigm Ambit Buildcon
● Bombay High Court upheld validity of RERA(Real Estate Regulation and
Development Act 2017)