RERA - Key practical aspects and compliances - Sandeep Jhunjhunwala

THE REAL ESTATE (REGULATION & DEVELOPMENT) ACT 2016 AND
RELATED RULES
KEY PRACTICAL ASPECTS AND COMPLIANCES

WHO DOES IT APPLY TO….
Applicability of RE Act
No clear transition provisions have been laid down under the RE Act in relation to the under
construction projects
• The RE Act extends its applicability to:
• Commercial buildings including godowns (with an intent to sell all or some of the
developed area), residential apartments, plotted developments
• All ongoing projects in respect of which completion certificates have not been issued
• RE projects developed in phases would require registration for each phase separately
• All future RE projects which do not fall under the exemption would have to be registered
• Exemptions:
• Projects being developed on land less than 500 sq. mts OR where the number of units
does not exceed 8 (all phases)
• Obtained completion certificate for the project before the commencement of the RE
Act
• Redevelopment RE projects where no new allotments are to happen are also
exempted
• Projects outside the "Planning Area"
Residential +
commercial
projects
Projects on
land of 500 sq
mts or more
> 8 units
No
completion
certificate
issued

DETERMINING PROJECT PHASEOngoingProjects
Residential (Multiple towers,
wings, premium blocks etc) + Club
House
Residential + Commercial+ Retail+
Club House
Large projects – Township
+Residential+ Commercial
+Hospitals+Schools
– The Real Estate (Regulation and Development) Act 2016
does not define phases
– Mentions that where RE project is developed in phases,
every such phase shall be considered a standalone RE
project requiring separate registrations
– Maharashtra RERA Rules: "Phase of a Real Estate Project"
may consist of a building or a wing of the building in case
of building with multiple wings or defined number of
floors in a multi-storeyed building/ wing

REGISTRATION PROCESS IN A NUTSHELL
Application to RERA for
Registration
Registration to be granted /
rejected within 30 days
Promoter to create web page
for the Project and provide all
details
Sale / booking for the Project
can commence
Registration valid till date of
completion of project / phase
as declared by Promoter
Out of RE Act
purview – Excluded
project
Qualifying
project
•<= 500 sqmt of built up area
•<= 8 units (phases-wise or project-wise)
•Completed projects
•Projects developed to be leased (ie not for
sale)
•Unsold projects in respect of which CC has
been received
Excluded
projects
Yes No

REGISTRATION DISCLOSURES
• No project promotions/ advertisements/ marketing would be permitted before registration
• Application to be made for registration of the project requires the developer to provide details/ disclose the following:
• Brief details of the enterprise viz name, registered address, type of the enterprise
• Details of the projects launched in the past five years, litigations, status of other projects and delays
• Copy of the commencement certificate , sanction plan, layout plan, plan of development plan to be executed
etc
• Location details of the project, clear demarcation of the land proposed to be developed
• Proforma of allotment letter, agreement for sale, and the conveyance deed proposed to be signed with the
allottees
• The number, type and carpet area of the apartment and area of garages
• Details of RE agents, contractors, architect, structural engineer etc
• Declaration supported by an affidavit

QUALIFYING PROJECTS - ISSUES
• Land owner share under JD arrangements (both area and revenue sharing arrangements) – Land owner is explicitly
covered under "Promoter" definition
• Even a Constructor gets covered under the definition of Promoter – Joint liability aspect needs to be checked
• PE Investor, land owning SPV – Promoter?
• Sale of small plots by individuals post minimal development – Though not intended, some cases could meet the ‘Project’
and registration provisions (view supported by FAQ’s released by few states)
• Transfer in the course of re-organisations / restructuring – No specific exemption – Whether covered under sale /
purchase in "any manner"?
Key change from current industry practice as under the current regime sale / booking possible only upon registration which is post
receipt of all approvals – Pre-launches / launches prior to approvals would be a challenge. Fungibility of cash from projects restricted

REAL ESTATE REGULATORY
AUTHORITY

REAL ESTATE REGULATORY AUTHORITY
Establishment of Real Estate Regulatory Authority (“RERA”)
• RE Act provides for establishment of the RERA in all states to regulate projects being developed in that state, which shall have the
powers of the civil court while trying any suit
• RERA to be set up by the State Government(s) within a period of one year from the date of RE Act coming into force
• Until the establishment of RERA the State Government shall designate any Regulatory Authority to perform the functions of RERA
• RERA would act as the nodal agency to co-ordinate efforts regarding development of the RE sector and render necessary advice to
the State Government to ensure the growth and promotion of a transparent, efficient and competitive RE sector
• One of the functions of RERA is to recommend to the local authorities and State Government, the creation of a single window
system for project approvals
The RE Act does not contain concrete steps to address the long standing demand of the developers for a single window system.
Structurally, therefore, the RERA results in a fundamental imbalance, where the Developer is put under onerous obligations on various
aspects related to the development of the project but there is a lack of an appropriate mechanism that ensures timely approvals towards the
same
RERA is intended to perform the same role for property/ RE transactions as the SEBI does for security transactions in the capital markets

• Registration and regulation of the RE
projects
• Maintenance of a database on its website
for public viewing of all registered RE
project, details of the developers and RE
agent
• Fixation of standard fees to be levied on
the allottees, promoters or the RE agent
• Ensure compliance of its regulations and
other obligations cast upon the promoters,
allottees and RE agent
POWERS
• RERA may suo moto or on receipt of complaint call for information and conduct investigation
• RERA may issue interim orders during the pendency of proceedings
• RERA has the power to impose penalty or interest in regard to the contravention of the of
the obligations cast upon the developers, allottees or RE agent
• RERA Rules grant following additional powers -
• require the promoter, allottee or real estate agent to furnish in writing such information
or explanation or produce such documents within such reasonable time, as it may deem
necessary
• Any public record or document or copy of such record or document from any office
subject to the provisions of the Indian Evidence Act, 1872
FUNCTIONS AND POWERS OF RERA
FUNCTIONS

FUNCTIONS & DUTIES OF DEVELOPERS

DECLARATION BY DEVELOPER AT REGISTRATION
STAGE
• Legal title to the land proposed to be developed and details
• Land is free from encumbrances and details
• Time period within which the project is proposed to be completed
• That 70 percent of the amounts realized from the project shall be deposited in a separate account and that it would be
utilized only for cost of construction and the land cost
• Undertake to obtain all pending approvals
Registration to be granted for a specified period. Extension possible upon application in reasonable circumstances

THE 70 PERCENT CONDITION
• 70 percent of the amounts realized for the sale of the real estate project from the allottees, from time to time, shall be
deposited in a separate account to be maintained in a scheduled to cover the cost of construction and the land cost
and shall be used only for that purpose (Karnataka rules – Onsite expenditure)
• The Promoter shall withdraw the amounts from the separate account, to cover the cost of the project, in proportion to
the percentage of completion of the Project
• Engineer + Architect + Practicing CA to certify that withdrawal is in proportion to the percentage of completion of the
Project
• Rule 5(1)(i)(b) of Maharashtra Rules: Architect - PoC + Engineer - Actual cost incurred + CA – Cost (land & construction)
and proportion of actual costs to estimated total costs. Such proportion to be used to determine withdrawal amount.
(Karnataka rules are silent on this aspect)
• Auditor to certify in annual statements that amounts collected for a particular project have been utilized for the project
and the withdrawal has been in compliance with the proportion to the percentage of completion of the Project
Conditions provided in Section 4(2)

THE 70 PERCENT CONDITION - ISSUES
• Moneys for construction advances may need to be given from the 30 percent component/ project finance – 70 percent
clause applies on moneys received from allottees
• Whether the terms ‘cost of construction’ and ‘land cost’ include overheads, interest and management costs? If not,
then developers would be significantly constrained from using the project cash flows for genuine project expenditure
• Whether land cost is to be included in computing ‘percentage of completion of the Project’ which is a relevant factor
for determining the withdrawal of funds from the project collection account
• Interpretation can be derived from Accounting Standard – 7 ‘Construction Contracts’ to compute the percentage
completion – This does not provide for inclusion of land cost in determining the completion ratio
• PoC to be considered including land cost or excluding that (AS-7/ Ind-AS-11)?
• Withdrawal - Money for cancelled units, overheads etc?
• PoC – Accounting aspects (CA) vis-à-vis physical progress (Engineer/ Architect)?
• Stamp duty related costs and other recoveries towards statutory charges (Maharashtra FAQ # 48)

COMPONENTS OF COST – MAHRASHTRA RERA
RULES
Land Cost
• Acquisition cost, lease charges overhead
cost, marketing cost, legal cost and
supervision cost
• Premium paid to obtain development
rights, FSI, additional FSI, fungible FSI,
and any other incentive under DCR
• Acquisition of TDR
• Consideration payable to the outgoing
developer to relinquish ownership and
title rights over such land parcels
• Amounts payable to State Government or
Competent Authority towards stamp
duty, transfer charges
• Premium payable as per annual
statement of rates (ASR) for
redevelopment of land owned by public
authorities
Construction Cost
• On-site and off-site expenditure for
development of project
• Payment of taxes, fees, charges,
premiums, interest etc
• Principal sum and interest payable to
financial institutions, scheduled banks,
NBFCs or money lenders
• Rehabilitation Scheme: expenditure
incurred towards clearance of land or
encumbrances for temporary transit
accommodation, construction of rehab
building, overhead cost, ASR linked
premium, fees, charges and security
deposits to authorities

THE 70 PERCENT CONDITION – ILLUSTRATION
Cost Assumptions
Land cost 20
Construction cost 20
Overheads, Interest,
Others*
30
Project Cost 70
Sale Assumptions
Land 50
Construction 50
Sale value 100
Payment and Construction Schedule
Booking stage
Instalment % completion
10% 0
1st Milestone 25% 20%
2nd Milestone 25% 40%
3rd Milestone 25% 70%
4th Milestone 10% 85%
Possession 5% 100%
Particulars
Cumulative
cash flow
Amount
that needs
to be
deposited
(70%)
% completion X
Project cost
(cumulative)
Retentions
(Restricted
cash)
Agreement 10.00 7.00 0 7.00
Instalment 1 35.00 24.50 14.00 10.50
Instalment 2 60.00 42.00 28.00 14.00
Instalment 3 85.00 59.50 49.00 10.50
Instalment 4 95.00 66.50 59.50 7.00
Possession 100.00 70.00 70.00 0
How will this work in JD arrangements (Revenue as well as
Area sharing)?
*Draft Rules in Karnataka permit withdrawal only for onsite expenditure for the physical development of the project. Such rules, if implemented could further restrict the quantum of cash
withdrawal, thereby increasing the restricted cash component
Float - Collateral for other projects?

FUNCTIONS AND DUTIES OF DEVELOPER
• Details of the registration granted by the RERA and quarterly updates on list of number and types of
apartments or plots booked, approvals granted, status of the project etc
Website
• Sanctioned plan, layout, stage wise schedule of completion of the project including the provisions for
civic infrastructure like water, sanitation and electricity
Provide information to
the allottees
• Responsible for all obligations, responsibilities and functions under the provisions of the Act or the rules
and regulations
• Responsible for obtaining lease certificate, completion / occupancy certificate
• Providing and maintaining essential services until take over of the maintenance by association
• Execute conveyance deed
• 11(4)(h) - After executing agreement for sale, not to mortgage or create a charge on land/ plot/
apartment or if created should not affect the rights and interests of the allotees
• RERA Rules prescribe the developer to a declare stating that the promoter shall not discriminate against
any allottee at the time of allotment of any apartment, plot or building, as the case may be in Form-A
General

• Responsible for compensation for loss or damage caused due to incorrect / false statement made in the
prospectus or notice of advertisement or in relation to the model apartment
Veracity of
Advertisement
• Prohibited from taking more than 10 percent as advance from the allottees without first entering into a
written agreement for sale
• Interest payable by the developer and the allottees in case of default to be specifically mentioned in the
agreement for sale
Advance
• Any structural alteration / addition to the sanctioned plan can now be made only with the previous
written consent of at least 2/3rd of the allottees (other than the developer)
Alteration
• Transfer of RE projects to third party would now require period written consent of 2/3rd allottees and
RERA
• No extension of time to comply with all the pending obligations of the erstwhile promoter
Transfer

• Payment of interest to the allottees in cases of default (rate of interest for this purpose has been fixed at
the same rate which the allottees would have to pay in case default) within 45 days of it becoming due
• Karnataka RERA rules prescribe an interest rate of State Bank of India Prime Lending Rate plus 2 percent
(13.85 per cent + 2 per cent)
Interest
• Any failure on the part of the developer to hand over the possession of the property in accordance with
the agreement for sale would empower the allottees, at their will, to withdraw from the project and
demand refund of the amount paid along with interest
Handover
• Obtain insurance as may be notified by the appropriate Government authority including in respect of the
title of land and construction of RE projectsInsurance
• Compensation not subject to law of limitation
No limitation
• Fixing structural defects for 5 years after transferring the property to the allottees
• Any loss caused due to defective title would have to be compensated by the developer and this would
not be subject to limitation provided under any law
Defect liability

• Promoter is in default of the requirements of the Act
or regulations
• Violates terms and conditions of the approval given
by the competent authorities (local authorities)
• Involved in unfair practice or irregularities
• Unfair practice means a practice which for the
purpose of promoting the sale or development or any
real estate project adopts any unfair method or
deceptive practice
• Opportunity of being heard with 30 days notice
REVOCATION
REVOCATOIN OF REGISTRATION
Consequences
of revocation
• Debar the promoter from accessing its
website
• Listing of developer as defaulters
• Freezing of the bank accounts
• This may even include the handover of the
development to association of allottees /
competent authorities upon consultation with
the relevant state government

REAL ESTATE AGENT
Every RE agent is required to be registered with RERA for facilitating sale,
purchase of any RE project
RE Agent Shall not facilitate purchase or sale of RE project not registered with
RERA
Maintain and preserve books of accounts, records and documents as may be
prescribed
Not involve in unfair trade practices
Facilitate the possession of all the information and documents to the allottee

FEW PERTINENT POINTS
Can they piggy-back on the disclosures of the promoters?
– No, they can’t
Definition of ‘Real Estate Agent’ includes any person who negotiates or acts on behalf of one person in a transaction of for sale
of real estate with another person and receives remuneration for his services. It includes a person who merely introduces
prospective buyers and sellers to each other for negotiation for sale of real estate.
– Seems to be an impractical proposition given the tens of thousands of people, having regular jobs, who sometimes
moonlight as middle men for a small commission
– Online portals such as 99acres.com, Housing.com, Common Floor etc should get covered (confirmed by FAQs)
Consolidation is bound to happen and many may leave the field - To remain in the mainstream, certain minimum scale needs
to be achieved
Fate of older state laws such as the Haryana Regulation of Property Dealer and Consultancy Act, 2008
– Interestingly, this law is not listed in the list of repeals
– Except for the requirement of registration (a process requiring fee) and the obligation of maintenance of a register, the
instant law does not actually mainstream or bring professional standards into property brokerage
– Law also silent on the qualifications of a broker/ RE agent (for instance certified trainings etc which is prevalent in
European countries and the Middle East nations). State Governments focused to garner more registration fee rather
(INR 500,000 as per draft rules in Karnataka!)

ALLOTTEES – RIGHTS AND
OBLIGATIONS

Approved sanctioned
plans, layout plans
Stage-wise time schedule of
completion of the project
Claim the refund of amount paid along
with interest in case of failure to provide
possession of the property
Claim the possession of apartment as per
the time period of completion committed
by the developer
Claim the refund of amount
paid in case of revocation of his
registration
Entitlements
ENTITLEMENTS

OBLIGATIONS
Make payments within time
as specified in the
agreement
Liable to pay interest on
delayed payments Take possession with 2 months
of receipt of occupancy
certificate
Participation in formation of an
association or society or co-
operative society
Participate towards registration
of conveyance deed
Obligations

JUDICIAL MECHANISM
RERA Adjudicating Officer
RE Appellate
Tribunal
High Court
Matters to be adjudicated by AO
Obligation of promoter regarding veracity of the
advertisement of prospectus
Adherence to sanctioned plans and project specifications by
the promoter
Return of amount of compensation
Rights and duties of allottees
Other matters
• Under the RE Act, any dispute resolution relating to
matters on any violation or contravention of provisions is
through the RERA or the adjudicating officer who would
be appointed by RERA for determining the compensation
• Further, the civil courts would have no jurisdiction to
entertain any suit or proceedings on matters covered
under the RE Act
• In respect of matters pending before consumer courts, the
appellants have the option to withdraw such complaint
and file an application before the adjudicating officer –
Aspect of completion certificate?
Required to adjudicate
cases within 60 working
days from the date of receipt
of appeal/ application
*Section 31 – As per the definition of
“aggrieved person”, even an outsider
(who is not the customer or the
association of allottees) could file a
complaint with the Adjudicating
Authority or the officer

CONSEQUENCES OF DEFAULT
SL No Nature of offence Penalty
Developer
1 Advertise, market, sell or offer for sale or invitation to public to
purchase the plot, apartment or building with out registration with
the RERA
Shall be liable to penalty extending up to 10 percent of the cost of
the project
2 Continued violation of above offence Punishable with a fine of 10 percent of the cost or imprisonment for
a term extending up to 3 years or both
3 Failure to make an application for registration of RE project Shall be liable to penalty extending up to 5 percent of the cost of the
project
4 Failure to comply with the orders or directions issued by RERA Penalty for everyday during which the default continues,
cumulatively which may extend up to 5 percent of the cost of the
project
5 Contravene any other provisions other than listed above Shall be liable to penalty extending up to 5 percent of the cost of the
project
6 Failure to comply with the orders or decisions of the Appellate
Tribunal
Penalty for everyday during which the default continues,
project or imprisonment for a term extending up to 3 years or both

SL No Nature of offence Penalty
Agent
1 Failure to obtain registration or fails to comply with his functions as
prescribed
Penalty of INR 10, 000 for everyday during which the default
continues, cumulatively which may extend up to 5 percent of the
cost of the apartment, plot or building
2 Failure to comply with the orders or directions issued by the RERA Penalty for everyday during which the default continues,
apartment, plot or building
3 Failure to comply with the orders or decisions of the Appellate
Tribunal
Penalty for everyday during which the default continues,
apartment, plot or building or imprisonment for a term extending up
to 1 year or both
Company
1 Any offence committed under the RE Act Every person in charge shall be punished accordingly
CONSEQUENCES OF DEFAULT
Imprisonment under Section 54, 64,66 and 68 – Compounding fee prescribed under the State Rules

OVERVIEW – RULES IN KARNATAKA
• Karnataka Real Estate (Regulation and Development) Rules, 2016 released for public consultation
• While many states have dropped the requirement of income tax return of the promoter for registering the project (owing to confidentiality
aspect), the draft rules released by Karnataka Government provides for the requirement of income tax return of the promoter for preceding
3 years
• "Cost of construction“ to mean onsite expenditure for the physical development of land - for withdrawal based on PoC method
• Agreement for sale:
– Roles, responsibilities and obligations of promoters/ allottees specified
– Buyer can stop making payment if the project does not achieve the construction milestones because of promoter’s fault
– Undertaking from the promoter for timely delivery of the project
– Promoter required to clearly indicate date of delivery
– Provision for extension of project delivery date in cases of delay caused due to "force majeure"
– Date of grant of commencement certificate, land title, number of storeys and plots in the project, carpet area, common area, total
price to be mentioned
– Total price is escalation free except when development changes are altered
• Final rules likely to be notified in next 1-2 weeks followed by the setting up of authorities

OVERVIEW – RULES IN MAHARASHTRA
• The Government of Maharashtra has released the below rules/ regulations:
– Maharashtra Real Estate (Regulation and Development)(Registration of Real Estate Projects, Registration of Real Estate Agents,
Rates of Interest and Disclosures on Website) Rules, 2017 vide Notification No REA 2016/CR No 79/DVP-2 dated April 20, 2017
– Maharashtra Real Estate Regulatory Authority, Officers and Employees (Appointment and Service Conditions) Rules, 2017 vide
Notification No REA 2016/CR No 79/DVP-2 dated April 17, 2017
– Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine payable, Forms of
Complaints and Appeal, etc.) Rules, 2017 vide Notification No REA 2016/CR No 79/DVP-2 dated April 20, 2017
– Maharashtra Real Estate Appellate Tribunal, Officers and Employees (Appointment and Service Conditions) Rules, 2017
– Maharashtra Real Estate Regulatory Authority (Form of Annual Statement of Accounts and Annual Report ) Rules, 2017 vide
Notification No REA2016/CR No 123/DVP-2 Dated April 18, 2017
– Maharashtra Real Estate Regulatory Authority (Recruitment and Conditions of Service of Employees) Regulations, 2017
– Maharashtra Real Estate Regulatory Authority (General) Regulations 2017
• The Government of Maharashtra has also released a detailed FAQ on its website https://maharerait.mahaonline.gov.in/

OVERVIEW – RULES IN TAMIL NADU & GOA
• The Government of Tamil Nadu had released the draft of Tamil Nadu Real Estate (Regulation and Development) Rules, 2016 on January 28, 2017
• Press articles suggest the Tamil Nadu Government may reduce the number of units to 5 (as against 8 suggested by the Union Act) under the final
rules
• The Government of Goa is also likely to finalise the rules in the coming months

COMPARITIVE ANALYSIS
Parameter Karnataka RE Rules Tamil Nadu RE Rules Maharashtra Rules
Current status Draft rules, yet to be notified Draft rules, yet to be notified Notified, RERA registration started
Key disclosures at the time of
registration
Promoter KYC (including details of
parent entity in case of a new entity,
details of litigations on other projects
by the promoter, bank loan sanction)
Land cost and cost of construction
(Estimated cost), Proposed and
Sanctioned FSI, nature of organisation
of allottees to be constituted
As per rules prescribed for UTs
Registration fee for RE
projects
Not specified explicitly Sum calculated at the rate as specified
by the Authority from time to time.
No registration fee to be levied on
Tamil Nadu Slum Clearance Board
developed projects, Affordable
Housing projects of Tamil Nadu
Housing Board and Housing projects
executed by Tamil Nadu Police
Housing Corporation
Re 1 per sq mt (area of land proposed to
be developed < 1,000 sq mt) and Rs 2 per
sq mt (area of land proposed to be
developed > 1,000 sq mt)
[Subject to a maximum limit of Rs
100,000]
Time period for registration
of ongoing RE projects
Within 3 months of notification of the
Act (ie by July 31, 2017)
Within 3 months of notification of the
Act (“ongoing project” specifically
defined in the Rules – Explanation I to
Rule 4)
Within 3 months of notification of the Act
(ie by July 31, 2017)

Fee for extension of
registration of RE project
Twice the registration fee +
Explanatory note setting out the
reasons for delay and need for
extension of registration
An an amount as may be specified by
regulations made by the Authority +
Explanatory note setting out the
reasons for delay and need for
extension of registration
Re 1 per sq mt (area of land proposed to
be developed < 1,000 sq mt) and Rs 2 per
sq mt (area of land proposed to be
developed > 1,000 sq mt) [Subject to a
maximum limit of Rs 100,000]
Registration fee for RE
Agents
Within the jurisdiction of Bangalore
Metropolitan Region Development
Authority (“BMRDA”) - Rs 50,000 in
case of an individual and Rs 500,000
for other than an individual
Within the jurisdiction of any
planning area outside the jurisdiction
of the BMRDA - Rs 25,000 in case of
an individual and Rs 250,000 for
other than an individual
Rs 25,000 in case of an individual and
Rs 50,000 for anyone other than an
individual
A sum of Rs 10,000 in case of agent being
an individual
Rs 100,000 in case of agent being an
entity not registered under Companies
Act, 2013
Rs 25,00,000 in case of agent being a
body corporate, registered under the
Companies Act, 2013

Renewal of RE Agent’s
Registration
Application to be filed within at least
3 months prior to the expiry of
registration granted. Fee: BMRDA -
Rs 25,000 and 250,000 respectively
for individuals and non -individuals;
others - Rs 15,000 and Rs 150,000
respectively
Application to be filed within at least 3
months prior to the expiry of
registration granted.
Fee: Rs 5,000 in case of individual and
Rs 50,000 for anyone other than an
individual
Application to be filed at least 60 days
prior to the expiry of registration.
Fee: Same as for new registration
Interest payable by promoter
and allottee
State Bank of India Prime lending rate
+ 2 percent
Repo Rate of the Reserve Bank of India
+ 2 percent
Prevailing State Bank of India Prime
lending rate as on the date on which the
amount becomes due + 2 percent
Timelines for Refund 45 days from the date on which such
an amount becomes due
45 days from the date on which such
an amount becomes due
30 days from the date on which such an
amount becomes due. Every case of such
refund payment shall be reported by the
concerned promoter to the Authority
within 30 days

Appeal Filing fee Filing fee: Rs 1,000 Filing fee: Rs 1,000 Filing fee: Rs 5,000
Penalty for non-registration
by the Promoter
10 percent of the estimated cost of
RE project
10 percent of the estimated cost of RE
project
2 percent of the estimated cost of the RE
project (may extend to 10 percent)
Penalty for failure by the
Promoter/ RE Agent to
comply with, or
contravention of any of the
orders, decisions or
directions of the Appellate
Tribunal
RE project
project
project (may extend to 10 percent)
Failure by the allottee to
comply with, or
contravention of any of the
orders, decisions or
directions of the Appellate
Tribunal
the plot, apartment or building, as
the case may be
10 percent of the estimated cost of the
plot, apartment or building, as the
case may be
(Provided that the Government may,
by notification, amend the rates
specified above)
5 percent of the estimated cost of the
plot, apartment or building, as the case
may be, subject to maximum of ten
percent

FEW IMPORTANT FAQ’s*
33. Is there any time limit prescribed for the promoter for formation of society or any other legal entity of home buyers?
Promoter has to enable formation of Legal Entity like Cooperative Society, Company, Association, Federation etc within three months from the
date on which fifty one per cent of the total number of Purchasers, in such a building or a wing, have booked their apartment.
38. Will ongoing Project have to stop sales or construction till receiving the Registration?
At the end of ninety days from the date of notification of Section 3 of the Act, the promoter of an ongoing project shall not advertise, market,
book, sell or offer for sale or invite persons to purchase in any manner any plot, apartment or building, unless he registers the project.
40. If an ongoing project is registered under MahaRERA, then will the Act be applicable for the entire project or will it be applicable only to
units sold after registration?
Registration is of the Project/Phase and hence the provisions of the Act are applicable to all units of the Project/Phase.
46. Can project finance taken by promoters from financial institutions be withdrawn from designated 70 percent account?
Yes, if this is declared at the time of registration and subject to provisions of Section 4 of the Act and Maharashtra Real Estate (Regulation and
Development)(Registration of Real Estate Projects, Registration of Real Estate Agents, Rates of Interest and Disclosures on Website) Rules, 2017
made there under. However, the money withdrawn should be utilized towards construction expenses of the project, on priority.
FAQ’s released by the state of Maharashtra, may have persuasive value for other states

47. In case of joint development with land owner on revenue share basis or area share basis, whether land owner’s component could be
withdrawn from designated account of 70 percent?
The Act makes both the Promoters and the land owner or any such parties which are beneficiary of a sale of a project and receive payments from
allottees, as Co-Promoters and hence liable to adhere to the provisions of the Act and Rules and Regulations made there under.
48. Whether money collected from allottees towards stamp duty, registration, share money for society, deposits for maintenance, corpus
funds, infrastructure charges, parking charges etc., are required to be deposited in the designated bank account (70 percent)?
Yes, since these are part of the project cost
56. What if Part OC is received for the project: is it exempt from registration?
No
60. Separate Bank Account: can escrow account opened with the Bank from whom loans are availed, be treated as Separate Bank Account for
a MahaRERA registered project.
No. A separate bank account needs to be opened in accordance with the provisions of the Act and rules made there under.

61. Can separate account be more than one since at times, there might be multiple lenders in same project (building wise lender) though
developer might register the project at one go?
No. There should be one designated bank account for every registered project or registered phase of a project.
63. Referral bookings: Existing customers referring to others for buying the flat in same project or other project of same developer: Will they be
treated as Real Estate Agent?
Yes, if it is against a consideration. Real Estate Agent is clearly defined in Section 2(zm) of the Act
64. For Foreign brokers registration and advertisement outside India, will same rule apply as in India ?
Yes, if it pertains to a registered project under MahaRERA.

POTENTIAL IMPACT - RULES OF THE GAME
REDEFINED?
• Sale / booking possible only upon registration which is post receipt of all approvals – Pre-launches / launches prior to approvals would be a
challenge
• Challenge of "impossibility of performance" in absence of a regulatory body in many states – Filing a letter in the interim with the
Department of Housing intimating the details of ongoing projects – Registration to be done by July 31, 2017
• Fungibility of cash from projects restricted – Impacts developers’ ability to plan new projects with cash flows from launched projects
• Cash flow planning to factor in the change in the ‘game’ – 70 percent condition
• Increased obligations - Onus on association formation, structural defect liability etc
• Delay in completion / possession to lead to interest (as per prescribed rates) and compensation – no scope for relaxation – Provisions heavily
tilted towards consumers
• Increased compliance burden and costs
• Transitionary provisions would bring under construction projects under the purview of the RE Act – This may not have been factored in when
the project was launched and hence it can cause a lot of pain
• Positive Impact – Act provides that RERA has to implement a ‘single window clearance’ system (Press releases suggest Karnataka may come
up with this mechanism)

POTENTIAL IMPACT - RULES OF THE GAME
REDEFINED?
• Section 15 – Transfer of RE Project to third parties:
– Project level stake sale possible?
– Requires approval from 2/3rd allottees + Authorities
• Section 16 – Insurance mandatory
• Is the audit of accounts in addition to the ones required under the Companies Act and the Income tax Act? The threshold under these
legislations should not apply to the requirement of undertaking audit under RERA.
• Agreement for sale – Prior to May 1, 2017 – does it need to change as per RERA requirements (aspects such as sale of open car parking,
structural defect liability etc)? If not, entitlements of the buyers would be different for the same project – Legal Bizarre! Maharashtra
FAQ # 40 could be referred
• Stamp duty costs needs to be specifically excluded in the costs discussed in the agreement of sale – otherwise 70 percent rule would apply on
such recoveries also (clarified by Maharashtra FAQ # 48) – FAQ released by MHUPA allows for slight variations in the agreement
• Section 11(5) – Cancellation as per agreement for sale – What if the customer books the unit and does not turn up for executing the
agreement for sale?

PRIORITIZE EXISTING AND PLANNED
PROJECTS
Prioritize Completion Prioritize Completion
Build RERA
Competency
(may need to comply
with rules related to
ongoing projects)
Prioritize completion
(may still need to
comply with rules
related to ongoing
projects)
Consider revising/
Shifting (as per RERA
requirements)
Build RERA
Competency or phase
out the project
Build RERA
Competency
Final Stage
<3 Months
Mid-way
Newly
launch/
Planned
< 10 Percent 10-50 Percent > 50 Percent
% sold out
ProjectStatus
Priority status
Mid Low Top

GREATER THAN BEFORE ROLES
UNDER RERA REGIME
Finance
•Cash flow / liquidity
management (70 percent
clause)
•Managing project wise
bank accounts and
withdrawal certifications
•Impact on pricing
•Alternate ways of
funding/ sourcing equity
partners
•Insurance
•Monitor cost and
schedule overruns
•Baseline schedule and
budgets (determination
of estimated costs etc)
•Auditing of project
accounts (RERA Audit)
•Institutionalize periodic
RERA checks
Legal&Regulatory
•Aligning of agreement of
sale/ affidavits/
declarations/ transaction
documents as per RERA
•Deep land due diligences
•Registrations/
Extensions/ Updation of
details on RERA website
•Formation of association
of allotees within 3
months from the date of
majority of units being
booked
•No mortgage or charges
etc prejudicial to
customers’ interest
•Vendor Management
(renegotiating back to
back contracts for
defaults)/ Dispute
Resolution/ Cyber
Security
•Ring-fencing senior
management/ promoters
liabilities
Design
•Prioritize design
development and
delivery capabilities
•Fix structural defects or
any other defect in
workmanship, quality or
provision of services or
any other obligations of
the promoter – 5 year
warranty period
•Minor vs major
additions/ alterations
(changes) to the
structure as per
sanctioned plan – careful
consideration
RERA checks
Operations
•Strengthen delivery and
management capabilities
around execution,
monitoring, handover
and operations
•Managing alterations and
additions
•Empanelment of channel
partners (including
architects, engineers,
real estate agents etc)
RERA checks & process
compliance audits
•Redefine indemnities
and liabilities for channel
partners and associates
•Changes in ERP, MIS,
Score cards
•Process compliance
Audits
Marketing/Sales/CRM
•No project promotions/
advertisements/
marketing before
registration
•Advertisement – Crisp
and clear, no false info,
deliver what is promised,
no puffery/ oversized
statements
•Provide information to
allotees - sanctioned
plan, layout plan, stage
wise schedule of
completion
•Sanitize marketing
collaterals/ brochures etc
(identify and address
conflicting customer
commitments) and align
to RERA regime,
including email and
communication
exchange with customers
•Managing cancellations
(to be compliant with the
terms agreed)
•Broker Management

WHERE PROFESSIONALS CAN HELP?
Compliance and reporting
Restriction on fungibility of cash
from projects
Increased obligations
Process changes
Training
– Individual discussions with the core team (marketing and sales, accounting and
compliance, construction and product strategy, customer relationship, Finance,
operations and design) and lawyers (internal/ external) and help in creating a
project/ state specific handbook for RERA compliances
– Assistance in registration of existing and new projects with the RERA authorities
– Overall transitioning under RERA (documentation, sanitization of marketing
collaterals etc) for the ongoing projects
– Assist in modelling the utilization of installment receipts from the allottees to
ensure optimum utilization of the funds available
– On-call advisory services in relation to queries that may be raised from time to
time
– Update on the key on-going changes in the RERA legislation and highlight the
impact on business on a time to time basis

The views in this presentation are personal views of the Presenter. The information contained is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although, the overall endeavor is to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or
that it will continue to be accurate in the future. This presentation is meant for general guidance only and no responsibility for loss arising to any person/ entity acting or refraining from acting
as a result of any material contained in this presentation will be accepted. It is recommended that professional advice be sought based on the specific facts and circumstances. This
presentation does not substitute the need to refer to the original pronouncements.
Sandeep Jhunjhunwala
E: writetosandeepj@gmail.com
M: +91 97401 55469

ABOUT THE SPEAKER – SANDEEP
JHUNJHUNWALA
Sandeep is an Associate Director with BMR & Associates LLP and is based in Bangalore.
Sandeep has more than 10 years of experience in consulting in varied fields of tax and regulatory matters. After
completing internship with S.R Batliboi & Associates (network firm of Ernst & Young in India), Sandeep has
worked with KPMG in its M&A tax practice and with corporate tax and regulatory practice of Grant Thornton in
Bangalore, prior to joining BMR in 2014.
Sandeep specialises in advising clients with tax optimised business and operational structures. He has worked on
a number of leading multi-national companies in the real estate, information technology, communication,
entertainment and manufacturing sectors and has been extensively involved in tax and regulatory advisory,
compliance support, planning opportunities and litigation support on direct tax and regulatory matters.
He has been a speaker at various professional forums such as ASSOCHAM, CII, BCIC, RICS etc and regularly
contributes on tax and regulatory matters for national and international publications. He is also a visiting faculty
for taxation at the Bangalore Chapters of the Institute of Chartered Accountants of India and the Institute of
Company Secretaries of India.
Sandeep is a Graduate in Commerce from St. Xavier’s College and a Chartered Accountant and Company
Secretary by qualification.

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