RERA Act and Andhra Pradesh RERA Rules - Sandeep Jhunjhunwala

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Real Estate (Regulation and Development) Act 2016 & Andhra
Pradesh Real Estate (Regulation and Development) Rules 2017
Vishakhapatnam Branch of SIRC of ICAI – June 16, 2018
Presented By: Sandeep Jhunjhunwala, FCA

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Summary
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Presentation Overview
Summary
Need and Objective
The Build up to the Act
Preamble and Structure
Whom does it apply to?
RERA – Nationwide Acceptance Status
RERA – Administrative Preparedness
RERA – After Effects
AP – Status Report
Role of Chartered Accountants
Registration of new projects
Pre-withdrawal certification
Annual Audits and Quarterly updates
Legal Aspects
Areas for Advisory involving RERA
Knowledge Banks for Chartered Accountants
Overall Analysis
Visakhapatnam Branch of
SIRC of ICAI
June 16, 2018
Sandeep Jhunjhunwala FCA

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RERA RERA everywhere!
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SIRC of ICAI
June 16, 2018

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Need and Objective
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SIRC of ICAI
June 16, 2018

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A step closer to happy home-buying
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"Real estate cannot be lost
or stolen, nor can it be
carried away. Purchased
with common sense, paid
for in full, and managed
with reasonable care, it is
about the safest investment
in the world" - Franklin D.
Roosevelt, US president
"The best investment on
Earth is Earth" - Louis
Glickman, Real Estate
investor
"Don’t wait to buy real
estate. Buy real estate and
wait"- Will Rogers, Actor
In India – Homebuyer activism, Trust-deficit, deliberate delays, defective land titles, fly-by-night operators, unregulated/
unorganized/ fragmented markets, no provision of compensation from the Government side, fraudulent advertisements,
opaque records, pseudo-agents, long drawn litigation, curative (and not preventive laws)…….Visakhapatnam Branch of
SIRC of ICAI
June 16, 2018

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A step closer to happy home-buying
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Lack of standardization and
adequate consumer protection
Lack of uniform regulatory
environment
Dearth of transparency and
accountability in transactions
High levels of risk perception by
investors/ consumers
Redundant/ Static land laws
Consumers forced to sign on
dotted lines
Making project investment
ready for REITs
Steering in transparency into
real estate transactions
Elimination of information
asymmetry and ensuring full
and fair disclosures
Provide respite to flat
purchasers against the practice
of fly-by-night developers
Protect consumer interests
Ensure timely execution of the
projects
Provide a speedy/ robust
dispute resolution mechanism
Need
Objectives
Though the Consumer Protection Act, 1986 is available as a forum to the buyers in the RE
market, the resource is only curative and is not adequate to addresses all the concerns of
the buyers and promoters
"We need action on real side (as) also on transparency on land acquisition, transparency on
construction and on sales” – Former RBI Governor
SIRC of ICAI
June 16, 2018

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The Build up to the Act
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Date Event
January 20, 2009 National conference of Ministers of Housing, Urban Development and Municipal Affairs of States and UTs
proposing a law for RE sector
July, 2011 Ministry of Law & Justice suggested central legislation for RE sector under specified entries of concurrent list of the
Constitution for regulation of contracts and transfer of property
June 4, 2013 Union Cabinet approved the Real Estate Bill, 2013
August 14, 2013 Real Estate Bill, 2013 introduced in Rajya Sabha
September 23, 2013 Bill was referred to the Department related Standing Committee
February 2014 Report of the Standing Committee tabled in Rajya Sabha on February 13, 2014 and in Lok Sabha on February 17,
2014
February 9, 2015 Attorney General upheld the validity of central legislation for RE sector and the competence of the Parliament
April 7, 2015 Union Cabinet approved official amendments based on Standing Committee Report
March 6, 2015 Real Estate Bill, 2013 and official amendments referred to the Select Committee of Rajya Sabha
July 30, 2015 Select Committee of Rajya Sabha tabled its Report along with Real Estate Bill, 2015
December 9, 2015 Union Cabinet approved the Real Estate Bill, 2015 as reported by the Select Committee of Rajya Sabha for further
consideration of the Parliament
March 10, 2016 Real Estate Bill, 2015 passed by Rajya Sabha
March 15, 2016 Lok Sabha passed the Real Estate Bill, 2015
March 25, 2016 The President of India accorded his assent to the Real Estate Bill, 2015
March 26, 2016 Real Estate (Regulation and Development) Act, 2016 published in the Gazette for public information
April 27, 2016 69 Sections (Sections 2, 20-39, 41-58, 71-78, 81-92) of the Act notified by the Ministry of Housing & Urban Poverty
Alleviation bringing the Act into force with effect from May 1, 2016 - Remaining to come into force on May 1, 2017
*Source: Press Information Bureau, Government of India
SIRC of ICAI
June 16, 2018

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The Build up to the Act and thereafter
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Date Event
October 28, 2016 Issues Real Estate (Regulation and Development) Removal of Difficulties Order, 2016
October 31, 2016 Real Estate General Rules, 2016 and Agreement for Sale Rules, 2016 notified for UT of Andaman & Nicobar
Islands, Chandigarh, Dadra & Nagar Haveli, Daman & Diu and Lakshadweep
March 27, 2017 The State Government of Andhra Pradesh notifies Andhra Pradesh Real Estate (Regulation and Development)
Rules 2017
August 4, 2017 The State Government of Telangana notifies Telangana Real Estate (Regulation and Development) Rules 2017
*Source: Press Information Bureau, Government of India
UTs: Andaman & Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep and Chandigarh
SIRC of ICAI
June 16, 2018

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RERA – Nationwide
Acceptance Status
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SIRC of ICAI
June 16, 2018

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RERA – Nationwide Acceptance Status
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~21 States and 7 Union Territories (UTs) have implemented RERA [framed rules as required under Section
84 of the Real Estate (Regulation and Development)Act]
Out of these, 16 states have a fully functional online RERAportal
Out of these only 5 States - Gujarat, Maharashtra, Madhya Pradesh, Rajasthan and Punjab haveestablished
permanent Real Estate Regulatory Authority, while 19 States/ UTs have set up interimauthorities
A sum of 9 States/ UTs have named the Appellate Tribunals under the Real Estate Act, while 7 States have
begun the online enlistment under theAct
Maharashtra has seen the maximum response in project registrations (~16,000 project registrations) withits
real estate regulatory authority
~2,500 in Uttar Pradesh (second in the list), ~1,700 in Gujarat and Madhya Pradesh (both stand third)
While deviation from the model Act is the main cause for concern, slow progress of states in operationalising
RERA and making available details of registered projects widely is even moreperturbing
Regulators in Maharashtra have imposed fine on ~1,800 developers for delayed registration
Maharashtra has a conciliation forum (which has representation from Builders' and Consumers'
Associations) to speed up dispute resolution between buyers and propertydevelopers
In Andhra Pradesh - Principal Secretary to Government Municipal Administration and Urban Development
(MA & UD) Department is acting as the Regulatory Authority (Interim)
*Source: Based on publicly available information
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SIRC of ICAI
June 16, 2018

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RERA – Administrative
Preparedness
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SIRC of ICAI
June 16, 2018
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*Source: Based on publicly available information
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RERA – Administrative Preparedness
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State Rules Notified Website Permanent Authority
Andhra Pradesh Yes Operational Not Formed
Karnataka Yes Operational Not Formed
Tamil Nadu Yes Operational (no online registrations) Not Formed
Telangana Yes Created, Non Operational Not Formed
Delhi Yes Created, Non Operational Not Formed
Haryana Yes Created, Non Operational Not Formed
Uttar Pradesh Yes Operational Not Formed
Maharashtra Yes Operational Formed
West Bengal No (West Bengal
Housing Industry
Regulation Act 2017)
No Not Formed
Punjab Yes Operational Formed
Haryana Yes Created, Non Operational Not Formed
Gujarat Yes Operational Formed
Madhya Pradesh Yes Operational Formed
Content
SIRC of ICAI
June 16, 2018

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RERA – After effects
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SIRC of ICAI
June 16, 2018

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RERA – After effects
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Builders getting
more cautious
about new
launches
Builders
charging on
carpet area
basis
Advertisement
getting more
factual -
Lesser
misleading &
ambiguous
than before
Detailed
written
agreements
Online
mechanism of
lodging
Transparency
of details with
respect to
registered
projects
Banks
shutting out
Builders
without RERA
Registration
complaints
Content
SIRC of ICAI
June 16, 2018

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Impact on Pricing
Content Cost of capital would go up (may be a short-term trend)
– No recourse to interest free liquidity of the upfront payments received on pre-launches etc
– Developers may look for equity (or mezzanine credit - mix of debt and equity) rather than structured
debts to finance buying of land as paying interest may get tougher (with the new condition of selling
units after project approvals + Withdrawal related restrictions)
– Lease Rental discounting (LRD) could go up
– Debt product offering by Banks may change
– Stressed Balance sheets
– Operating cost of the developers would increase
Sale on the basis of carpet area alone would necessitate change in pricing policies etc
Need to relook at Stamp Duty rates and premium Floor Space Index (FSI) rates on carpet area basis
Developers may also collect likely penal costs indirectly from consumers
Added cost of compliances may also indirectly impact pricing:
– Disclosures (which was hitherto done only by listed entities)
– Registration costs
– Insurance
– Structural defect liability period
– Ongoing compliance costsVisakhapatnam Branch of
SIRC of ICAI
June 16, 2018

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Content
RERA – Basics
ContentContent
SIRC of ICAI
June 16, 2018

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Preamble and Structure
An Act to: Act has 92 sections divided into
10 chapters as below:
Chapter I
Preliminary
Section 1 – 2
Long Title Structure
Chapter II
Reg of RE Projects
and RE Agents
Section 3 – 10
Chapter III
Functions and
Duties of Promoter
Section 11 – 18
 ensure sale of plot, apartment, building, RE
project in an efficient/ transparent manner
 protect the interest of consumers in the RE
sector
 establish an adjudicating mechanism for
speedy dispute redressal
 establish Real Estate Regulatory Authority for
regulation/ promotion of RE sector
Content
 establish the Appellate Tribunal to hear appeals
from decisions, directions or orders of the Real
Estate Regulatory Authority
 for matters connected therewith or incidental
thereto
Chapter IV
Rights and Duties of
Allottees
Section 19
Chapter V
The Real Estate
Regulatory Authority
Section 20 – 40
Chapter VI
Central Advisory
Council
Section 41 - 42
Chapter VII
The Real Estate
Appellate Tribunal
Section 43 – 58
Chapter VIII
Offences, Penalties
and Adjudication
Section 59 – 72
Chapter IX
Finance, Accounts,
Audit and Reports
Section 73 – 78
Chapter X
Miscellaneous
Section 79 – 92
*Section 89: Act to have an overriding effect
SIRC of ICAI
June 16, 2018

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Whom does it apply to…
Content
Residential +
Commercial
Projects
Projects on land
of 500 sq mts or
more
> 8 units
No completion
certificate
issued
Act applies to:
– Commercial RE projects including shops, offices,
showrooms, godowns
– Residential Apartments
– Plotted Developments
– Ongoing projects in respect of which completion
certificates have not been issued - Retrospectivity?
– Challenge of "impossibility of performance" in absence of
a regulatory body in many states – No sales from May 1?
RE projects developed in Phases would require registration for
each phase separately
Exemptions:
– Projects being developed on land less than 500 sq mts
(0.05 hectare or 0.12 acre)
– Number of units does not exceed 8 (all phases)
– Obtained completion certificate for the project before the
commencement of the Act
– Redevelopment RE projects where no new allotments are
to be made
– Renovation/ Repair - Not involving marketing,
advertisement, selling or allotment of any apartment, plot
or building
– Sale of ready to occupy property in the resale market
– States given the right to “lower” the ceiling of 500 sq mts
and 8 units;
– RE Act seems to exclude industrial RE such as factories,
mines and farms
SIRC of ICAI
June 16, 2018

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Whom does it apply to…
Content
Residential +
Commercial
Projects
Projects on land
of 500 sq mts or
more
> 8 units
No completion
certificate
issued
Outside the purview
– Projects developed to be leased (ie not for sale)
– Unsold projects in respect of which CC has been received
– Projects outside the "Planning Area” may not need
registration
Promoter - In case of Joint Development Agreement (JDA), both
land owner and builder should be jointly responsible under the
Act; may need separate registrations and liable to discharge
functions and responsibilities independently – Confirmed by
Maharashtra RERA Authority
The Ministry of Housing & Urban Poverty Alleviation had set
October 31, 2016 for States to frame Rules under this Act and
April 30, 2017 as the deadline to establish Real Estate
Regulatory Authority/ Appellate Tribunal – Almost all states are
non-compliant
State Governments have started framing rules appurtenant to
the law – most have notified, rest at draft/ planning stage
– States given the right to “lower” the ceiling of 500 sq mts
and 8 units;
– RE Act seems to exclude industrial RE such as factories,
mines and farms
SIRC of ICAI
June 16, 2018

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Real Estate Regulatory
Authority
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SIRC of ICAI
June 16, 2018

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Real Estate Regulatory Authority (‘RERA’)
Content
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
To be set up by the State Government(s) within a period of 1 year from the date of this Act coming into
force
Until the establishment of RERA, the State Government shall designate any Regulatory Authority (or
Secretary of the Housing Department) to perform the functions of RERA
RERA to 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
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
SIRC of ICAI
June 16, 2018

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RERA - Functions and Powers
Content
Registration and regulation of RE
projects
Maintenance of a database on its
website for public viewing of all
registered RE project, details of
developers and RE agents
Fixation of standard fees to be levied on
the allottees, promoters or RE agents
Ensure compliance of its regulations and
other obligations cast upon the
promoters, allottees and RE agents
FUNCTIONS
SECTION 34
POWERS
SECTION 35 - 38
May suo moto or on receipt of complaint,
call for information and conduct
investigation
May issue interim orders during the
pendency of proceedings
Has the power to impose penalty or
interest in regard to the contravention of
the of the obligations cast upon:
– Developers
– Allottees or
– RE agentVisakhapatnam Branch of
SIRC of ICAI
June 16, 2018

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Impact on Promoters/
Developers
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SIRC of ICAI
June 16, 2018

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Registration
Content
Promoter
RERA
Registration
Certificate
Make an
application
Grant of
certificate within
30 days
Deemed
Registration
Failure to
register within
30 days
[Rule 6-A(8) of
AP RERA Rules
Project promotions/ advertisements/ marketing/ selling/
booking not permitted before registration with RERA –
FAQ: Not even SMS/ emails
Application for registration to disclose:
– Brief details of enterprise ie name, registered
address, type of enterprise
– Details of projects launched in the past 5 years,
litigations, status of other projects and delays
– Copy of commencement certificate, sanction plan,
layout plan, development plan to be executed etc
– Location details of 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
– Number, type and carpet area of apartment and area
of garages/ parking area
– Details of RE agents, contractors, architect,
structural engineer etc
– Declaration supported by an affidavit, signed by the
promoter (details on next slide)
– Registration to be granted for a specified period (time period
within which the developer expects to complete the project).
– Extension possible upon application in reasonable
circumstances without promoter's faults (including “Force
Majeure” conditions). Period of extension in aggregate not
to exceed 1 year.
Builder can’t sell units prior to obtaining commencement certificate, as it is a mandatory document for obtaining
registration. Usually it takes 3-4 months post initiation of construction activities (plinth level construction) to get
commencement certificate
SIRC of ICAI
June 16, 2018

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Registration
Content
Legal title to the land proposed to be
developed and details thereof
Land is free from encumbrances or
details thereof, as the case may be
Time period within which the project is
proposed to be completed
70 percent of the amounts realized
from the project shall be deposited in a
separate account (not an escrow
account - confirmed by FAQs) in a
scheduled bank and that it would be
utilized only for cost of construction
and land cost
Undertake to obtain pending approvals
in a timely manner
DECLARATION
BY DEVELOPER
Restriction
on usage of
funds
Developer mandated to deposit the
funds collected from the allottees
in a separate bank account and
any withdrawal from the separate
bank account would have to be
certified by an Engineer,
Architect and a Chartered
Accountant* that the withdrawal is
in proportion to the percentage of
completion (PoC) of the project
Further, mandatory audit of
accounts within 6 months from the
end of FY - Auditor to verify and
specifically certify usage of funds
as per PoC method
The Pre-withdrawal certificate needs to be signed by 3
professionals. The CA will have to rely on the Architect and
Engineer for PoC. The Architect and Engineer in turn would have
to rely on the CA to certify withdrawal numbers. What if there is no
overall collective consensus?
Certain local statutes such as the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management & Transfer) Act, 1963 had a
similar provision that required the promoter to maintain a separate bank account for the receivables from the project, which was not implemented in practice by the
promoters, who considered funds received from allottees of various projects as fungible.
SIRC of ICAI
June 16, 2018

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Registration
Content
Promoter is in default of the
requirements of the Act/ Rules/
Regulations
Violates terms and conditions of the
approval given by the competent
authorities (local authorities - BDA,
BBMP etc)
Involved in "unfair practice or
irregularities" – Explanation to Section
7
Opportunity of being heard with 30 days’
speaking notice, in writing
REVOCATION
Consequenc
eses of
Revocation
Debar the promoter from
accessing its website
Listing of developer as defaulters
Freezing Bank accounts
Inform RERA in other States/ UTs
about such revocation
Handover of the development to
Association of allottees/
Competent Authorities upon
consultation with State Govt
Right of first refusal for
completing the construction lies
with the Association of allottees
SIRC of ICAI
June 16, 2018

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Functions and Duties of Promoter
Content • Details of registration granted by RERA and quarterly updates on – Number/ types of
apartments or plots booked, approvals granted, status of the project etc
Webpage on RERA
website
• Sanctioned plan, layout plan, stage wise schedule of completion of the project including
the provisions for civic infrastructure like water, sanitation and electricity
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 leasehold certificate, completion/ occupancy certificate
• Providing and maintaining essential services until take over of the maintenance by the
Association of allottees
• Execute a registered conveyance deed of the apartment, plot or building within 3 months
from the date of issue of occupancy certificate
• After executing agreement for sale, not to mortgage or create a charge on the
apartment, plot or building
• Cancellation of allotment only in terms of the agreement for sale
General
– Under this Act, Developers can sell units only on carpet area, which means the net usable floor area of an apartment. This
excludes 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.
– 'Carpet area' would be the basis for RE purchases. Buyers would now be paying only for the carpet area and not the ‘super
built-up area’.
– Exclusive balcony and open terrace area should mean the area belonging and to be used by the specific allotee.
• Responsible for compensation for loss or damage caused due to incorrect/ false
statement made in prospectus or notice of advertisement or in relation to the model
apartment, plot or building
Veracity of
Advertisement
SIRC of ICAI
June 16, 2018

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Content • Prohibited from taking more than 10 percent of cost of apartment, plot or building as
advance payment from allottees without first entering into a written agreement for sale*
and registering the same
Advance Payment/
Application Fee
• 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)
• Minor additions or alterations permissible due to architectural and structural reasons
Alteration
• Transfer/ Assignment of majority rights and liabilities in respect of RE projects to third
party would now require period written consent of 2/3rd allottees and RERA
• No extension of time to the intending promoter in order to comply with all the pending
obligations of the erstwhile promoter
Transfer/
Assignment
* The Developer needs to accept payments from Allottees only by crossed account payee cheques or Demand Drafts or through internet banking such as
RTGS/ NEFT/eCMS in view of Section 269SS of the Income tax Act, 1961. Similarly, refunds on cancellation of allotments, if any, should be made
through the same channels to comply with Section 269T of the Income tax Act, 1961.
• 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 the case of
default)
Interest
• Any failure on the part of 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, including in respect
of the title of land and construction of RE projects
Insurance
SIRC of ICAI
June 16, 2018

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Page 29
Content • Claim of compensation due to defective title of land etc not subject to the law of limitation
provided under any other law (Sword of Damocles hanging over for lifelong)
No limitation
• Fixing structural defects or any other defect in workmanship, quality or provision
of services or any other obligations of the promoter as per the agreement for sale
for 5 years after handing over possession to the allottees without any further
charges
• Defect needs to be rectified within 30 days and failure to rectify such defects within 30
days entitles the allottees to compensation
Defect liability
5 years to be considered from:
– Date of possession of the respective unit or all units in the apartment or handing over of
common area to the association of allottees?
– What if there are unsold units or units sold subsequently in later years. Whether liability for
structural defect would be considered from the date of last unit sold?
Are 30 days enough for rectification? Identifying the contractor, deploying labour and completion
of rectification within 30 days seems far fetched
SIRC of ICAI
June 16, 2018

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Page 30
Real Estate Agent
Content
SIRC of ICAI
June 16, 2018

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Real Estate Agent
Content 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 any unfair trade practices
Facilitate the possession of all the information and documents to the
allottee
Section 2(zm) - "Real Estate Agent" means any person, who negotiates or acts on behalf of one person in a
transaction of transfer of his plot, apartment or building, as the case may be, in a real estate project, by way of sale,
with another person or transfer of plot, apartment or building, as the case may be, of any other person to him and
receives remuneration or fees or any other charges for his services whether as commission or otherwise and
includes a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation
for sale or purchase of plot, apartment or building, as the case may be, and includes property dealers, brokers,
middlemen by whatever name called
SIRC of ICAI
June 16, 2018

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Unfair Trade Practices
Content
Unfair Trade Practices
Section 10(c)
Practice of making any statement,
whether orally or in writing or by
visible representation
(A)
Falsely represents that the services
are of a particular standard or grade
(i)
Represents that the Promoter or
himself has approval or affiliation
which such promoter or himself
does not have
(ii)
Makes a false or misleading
representation concerning the
services
(iii)
Permitting publication of any
advertisement in newspaper or
otherwise of services that are not
intended to be offered
(B)
SIRC of ICAI
June 16, 2018

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Page 33
Allottees – Rights and
Obligations
Content
SIRC of ICAI
June 16, 2018

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Entitlements
Content
Obtain information
regarding
sanctioned plans,
layout plans with
specifications
Stage-wise time
schedule of completion
of the project
Claim 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
Promoter
Claim the refund of
amount paid in case of
revocation of his
registration
Entitlements
Section 2(d) - Allottee in relation to a real estate project includes a person to whom a plot, apartment or building,
as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the
promoter but does not include a person to whom such plot, apartment or building, as the case may be, is given on
rent. Normally, a person to whom the plot, apartment, building is given on leasehold basis would be paying
rent and therefore a clarity is required to that effect
SIRC of ICAI
June 16, 2018

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Page 35
Obligations
Content
Make payments in the
manner and within time
as specified in the
agreement for sale
Liable to pay interest on
delayed payments Take possession within
2 months of issue of
occupancy certificate
Participation in formation
of an association or
society or co-operative
society of allottees
Participate towards
registration of
conveyance deed
Obligations
SIRC of ICAI
June 16, 2018

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Punitive Provisions
Content
SIRC of ICAI
June 16, 2018

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Defaults and Penalties
Content # Nature of offence Penalty Prosecution
Promoter
1 Advertise, market, sell or offer for
sale or invitation to public to
purchase the plot, apartment or
building without registration with
RERA
Extending up to 10 percent of the
estimated cost of RE project
In case of non-deposit of penalty or
continued violation - Imprisonment for a
term extending up to 3 years or fine upto
10 percent of the estimated cost of the
RE project or both
2 Failure to make an application for
registration of RE project or
providing false information
estimated cost of the project
-
3 Failure to comply with the orders
or directions issued by RERA
Penalty for per day of default, which may
cumulatively extend up to 5 percent of the
-
or decisions of the Appellate
Tribunal
cumulatively extend up to 10 percent of
the estimated cost of the project
Imprisonment for a term extending up to 3
years or fine
5 Contravene any other provisions
other than listed above (including
failure to register the agreement
for sale)
-
• Any punishment with imprisonment may, either before or after the institution of the prosecution, be compounded by the Court on such terms and conditions and on
payment of such sums as may be prescribed - Section 70 of the Act
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Content
# Nature of offence Penalty Prosecution
RE 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
-
or directions issued by the RERA
cost of the project
-
or decisions of the Appellate
Tribunal
the estimated cost of the project
Imprisonment for a term extending up to 1
years or fine
Allottees
1 Failure to comply with any order or
decision of RERA or Appellate
Tribunal
cost of the project
Imprisonment which may extend to 1 year
or fine (imprisonment is compoundable as
per Section 70)
• Any punishment with imprisonment may, either before or after the institution of the prosecution, be compounded by the Court on such terms and
conditions and on payment of such sums as may be prescribed - Section 70 of the Act
• In the cases of companies (which is defined as per Section 69 to mean body corporate, firm, association of individuals), every person is in
charge for the conduct of the business and the Company shall be deemed to be guilty of the offence. The person in charge would not be liable
for punishment if it is proved that the offence was committed without his knowledge or that due diligence was exercised to prevent the
commission of such offence.
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Andhra Pradesh Real Estate
(Regulation & Development)
Rules 2017 - A brief analysis
Content
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Content
Andhra Pradesh RERA – Report Card
Content
Projects
• Projects
approved: 8
• Applications under
process: 40
• Total Applications
received: 48
Agents
• Total ApprovedAgents:
10
• Applications under
process: 3
Otherupdates
• Complaints
received: 62
• Viewing of registered
project details now
possible
*Source: https://www.rera.ap.gov.in/RERA/Views/Home.aspx [As on June 15, 2018]
Content
• Total Applications
received: 13
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Broad construct of AP RERA Rules
Chapter I
Preliminary
Section 1-2
Chapter II
Real Estate Projects
Section 3-9
Chapter III
Real Estate Agent
Section 10-14
Content
Chapter IV
Details to be
published on
website of the
Section 15
Chapter V
Rate of interest and
timelines for refund
Section 16-17
Chapter VI
Real Estate
Regulatory Authority
Section 18
Chapter VII
Salary and
Allowances of The
RERA Authority
Section 19-23
Chapter VIII
Powers and
Functions of RERA
Authority
Section 24-27
Chapter IX
Conditions of
service of RERA
Authority
Section 28-30
Chapter XII
Miscellaneous
Section 50-52
Chapter X
Real Estate
Appellate Tribunal
Section 31-46
Chapter XI
Offences and
Penalties
Section 47-49
Chapter XIII
Budget and Report
Section 53-54
Structure
54Rulesdividedinto
13chapters
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Ongoing Projects
Content Rule 2(o) – AP RERA Rules
Ongoing Project” means a project where development is going on and for which Occupancy Certificate or
Completion Certificate has not been issued but excludes such projects which fulfill any of the following criteria
on the date of notification of these rules:
– Where roads, open spaces, amenities and services have been handed over to the local authority in
layout projects
– Where all slabs are laid in housing projects
– Where all developmental works have been completed and sale/ lease deeds of 50 percent of the
Apartments/ Houses/ Plots have been executed
– Where development works have been completed and application has been filed to the competent
authority for issue of Completion or Occupancy Certificate
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Other key aspects – AP RERA Rules
Content Every promoter shall make separate application for registration of every project for the construction of
each phase, separate building or group of buildings in case of layout
No such application shall be entertained where the promoter has no title to the land unless the Agreement
between the owner of the land and the promoter, authorizing the Promoter to undertake the construction of the
building, is duly registered
Requirement to furnish audited balance sheet of the promoter for the preceding financial year and
income tax returns of the promoter for three preceding financial years
Requirement to furnish details of financial agreement made with any bank or other financial institution
recognised by the Reserve Bank of India and of legal safeguards taken, if any, for the construction of building,
or transfer of building by sale, gift or mortgage or otherwise
Requirement to file Structural stability certificate duly issued by certified structural consultant/ Engineer
Requirement to update details of civil contractors/ turnkey contractor/ EPC contractors/ structural
Engineer/ Chartered Account/ Architect proposed to be engaged or actually engaged before or after the
commencement of the construction of any building, within 7 days from date of effecting such change
Agreement for sale as per Annexure ‘A’. Any application letter, allotment letter or any other document
signed by the allottee, in respect of the apartment, plot or building, prior to the execution and
registration of the agreement for sale for such apartment, plot or building, as the case may be, shall
not be construed to limit the rights and interests of the allottee under the agreement for sale or under
the Act or the rules or the regulations made thereunder
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Content Extension for registration for project – Rule 7
The RE Act permits for extension only in case of force majeure conditions
Rules seems to suggest possibility of getting extension otherwise too - Provided that where the promoter
applies for extension of registration of the project due to force majeure he shall not be liable to pay any fee -
Dilution of the central provisions, if extension for non force majeure conditions is permitted
Rate of interest in case of default and timelines for refund – Rule 16
Rate of interest payable by the promoter to the allottee or by the allottee to the promoter, as the case may be,
shall be the State Bank of India Prime Lending Rate (PLR) plus 2 percent - Should work out ~11 percent
Any refund of monies along with the applicable interest and compensation, if any, payable by the promoter, shall
be payable by the promoter to the allottee within 45 days from the date on which such refund along with
applicable interest and compensation, if any, becomes due
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Content Details to be published on the website of the Authority – Rule 15
In addition to other disclosures -
Details pertaining to Booking/ sales
Copy of Joint Development/ Collaboration Agreement
Audited Balance sheet and income tax returns of the Promoter for the immediately preceding 3 financial years
Status of approvals – Approvals to be applied for and the date planned for application, expected date in case of
approvals applied for
Land title search report from an advocate having experience of at least 10 years in land related matters
Details of encumbrances on the land on which development is proposed including any rights, title, interest or
name of any party in or over such land along with details or non encumbrance certificate from an advocate
having experience of at least 10 years in land related matters
Listing of documents such as financial statements etc for public viewing may pose a significant threat to the
data confidentiality aspect
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Role of Professionals
Content
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Role of Professionals
Content
Role of
Professionals
Section 3:
Registration of
RE projects
with RERA
(CA/ CS/
CWA/ Legal
Practitioners
Section 4:
Pre-withdrawal
certification
based on PoC
(CA)
Section 4:
Audits
(Statutory and
Internal) and
IFCs (CA)
Section 56:
Representation
services (CA/
CS/
CWA/ Legal
Practitioners)
New area of
practice for all
- General
Advocacy,
Trainings,
Impact
assessment
etc
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Compliance and reporting
Restriction on fungibility of cash
from projects
Increased obligations
Process changes
Training
Role of Chartered Accountants
Content
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Content
Registration of projects
ContentContent
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Content
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Content
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Content
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Content
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Content
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Content
Content Marketing/ Selling/ Booking of projects possible only after obtaining registration (Section 3 of the Act)
Approvals need to be in place for registration of projects (commencement certificate as per the Act, though
not insisted upon by the Authorities)
Approvals – Building approval, Layout Approvals etc by the local bodies
Marketing/ Selling/ Booking of projects possible only after project registration (final) – Not with provisional
acknowledgement number generated pursuant to the online lodging of application - Imposes virtual stay on
businesses
Indicative/ Tentative timeline for getting project registration: within 30 days (post furnishing requisite
documents/ information/ clarification and not necessarily from the application filingdate)
Almost all information/ documents furnished (including promoter and project details) while seeking
registration are available for public view
Penalty for false information is 5 percent of total estimated project cost (Section 60 of the Act)
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ContentContent Deemed Registration – 30 days time window – Rule 6-A(8) of AP RERA Rules
Obligation of registration in few situations (case and factspecific):
Situation 1: Area sharing Joint Development Agreement (JDA) – Landowners' and Builders' share of
units - Separate registrations are required though building approval may be single (as law stands
today)
- Maharashtra RERA – Circular Nos 12 and 13 of 2017 dated December 4, 2017 - Conceptof
co-promoter – Landowner is also a co-promoter and required to maintain 70 percent account and
furnish affidavit cum declaration in Form B while seeking registration of a real estate project. However,
project registration is single (saves administrative hassles of having 2 registrations in suchcases)
- Separate registrations for a single project may require modifications in marketing collaterals as well as
legal documents such as agreement for sale (defect liability etc) and separate bank accounts
- Ample disclosures should be made in such cases and due care should be taken in terms of disclosing
the land area to be developed, so that registration fee is not paid doubly [such notes could form part of
Form-B (affidavit cum declaration to be given by theapplicant)]
Situation 2: Single building approval for development on a land parcel co-owned in equal share by2
companies (or individuals) – JDA and GPA in the names of different companies (orindividuals)
- Separate project registrations would be required
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ContentContent Situation 3: Large scale projects such as integrated townships–
- Separate registrations for various blocks (residential or commercial) and other developments(shopping
malls etc) – efficient from cash flow perspective (70:30 rule) + delay in one part of the development
does not impact the time commitment on the other part [Separate building plan approvals required for
each block/ phase]
- Additional burden arising out of single registration:
1. Defect liability period gets extended for all thephases;
2. Compensation/ damages to be computed on the estimated cost of the project, which variesfrom
5% to 20%. If the project is a large one, the quantum of damages calculated would be more;
3. Allottees of every phase would have a say in the entire largerproject;
4. EveryAllottee will have right in the common areas of the entire larger project;
5. If title of a portion of the project is affected, the entire larger project may get impacted
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70 percent condition – An illustration
Content 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
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)
Booking 10.00 7.00 0 7.0
Instalment 1 35.00 24.50 14.0 10.5
Instalment 2 60.00 42.00 28.0 14.0
Instalment 3 85.00 59.50 49.0 10.5
Instalment 4 95.00 66.50 59.5 7.0
Possession 100.00 70.00 70.0 0
How will this work in JD arrangements (Revenue
as well as Area sharing)?
Float - Collateral for other
projects?
*Few states including Maharashtra have clarified that marketing related
costs could not be considered for withdrawal from the 70 percent
account. The rules in Andhra Pradesh also defines construction cost to
mean cost incurred towards onsite expenditure for the physical
development of the project. As marketing costs are not related to
"development" of real estate project but for its "sale", a position is
possible that marketing costs would not form a part of cost of
construction. Rules in Telangana specifically covers marketing related
costs under construction costs.
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Content
Components of cost (Rule 5 – AP RERA Rules)
Content
LANDCOST
Costs incurred by the Promoter,
whether as an outright purchase,
lease charges etc
CONSTRUCTIONCOST
Cost incurred by the Promoter
towards on-site expenditure for the
physical development of the
project
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Content
Content Format of certification prescribed by the AP regulators
States such as Maharashtra, Madhya Pradesh, Gujarat, Andhra Pradesh etc have also notified formats
Andhra Pradesh also has an additional requirement for uploading the certificatesissued by professionals (CA,
Engineer and Architect) certifying Percentage of Completion (PoC) of real estate project on to the RERA
portal, whereas other states such as Maharashtra have clarified that such certificates be maintained by the
Promoter and not submitted to Banks orAuthorities
Maharashtra RERA – Circular No 5/2017 dated June 28, 2017 and Circular No 7/2017 dated July 4,2017 –
provide guidance on CA certificates
Does the Developer need to submit the certificates to Banker or retain with him for records/ audit?
– Maharashtra Circular No 3/2017 dated June 7,2017
– Promoter required to submit self-declaration to the Bank on a quarterly basis confirming the abidance
to 70:30 rule
– Certificates to be retained by the Promoter and not to be filed with the Banks/ Regulators
Certificate issued by the Chartered Accountant is available for public view. Even the certificate of
practice or certificate of membership of the Chartered Accountant issuing the certificate, could
be viewed by the public as a part of project details
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Content
Pre-withdrawal certification: Few positions
Content Few important aspects on computation ofPoC:
– Format of certification? AP has specified format
– PoC on Accounting Principles (CA)/ Physical progress (Architect &Engineer)?
documents such as purchase invoices etc could be examined
– Percentage of Completion (PoC) to be considered including land cost or excluding that (AS-7/ Ind-AS-
11/ ICDS-III/ Draft ICDS on real estate transactions on constructioncontracts)?
– PoC – Project wise/ Tower wise (if multiple towers in same phase)?
– PoC to be calculated with reference to a particular project (or share of project) in cases where a project
is vivisected into multiples on account of issues such as landowners vis-à-vis owners share etc.
Reference to estimated total cost of the registered project has to be made even if a registered project
is a sub-set of the entire project
– Fund for meeting customer refunds for cancelled units? Maharashtra Rules permit 70 percent
withdrawal under this scenario (Circular No 7/ 2017 dated July 4, 2017). Karnataka RERA Rulesare
silent on this aspect
– PoC varies amongst 3 professionals – CA, Architect and Engineer – Based on the Principle of
Prudence, CA should consider the lower PoC (fact specific though) – CA should collect/ consider/ rely
upon certificates issued by the Engineer and Architect, while issuing pre-withdrawal certificate (best
practices)
– For verification of construction costs while issuing certificates, GST returns and otherrelated
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Content
Pre-withdrawal certification: Few positions
Content
Whether the quantum of withdrawal would be determined by applying PoC so determined with the balancein
70 percent (project designated) account OR by applying PoC with total estimated cost of the project.
A plain reading of the section implies that the quantum of withdrawal shouldbe determined by applying the
percentage of completion so determined with the balance available in 70 percent account.
Based on the intent of Section 4(2)(l)(D) of the Act, it appears that the reason for creating the rule that 70%
of the receipts from customers will be pooled into a separate bank account is to ensure that the same is used
only for project cost purposes. The certification mechanism (Architect/ Engineer/ CA) also aims at
safeguarding this aspect that the withdrawals will be allowed only for meeting the project costs. Therefore, if
based on the certifications provided, if the project costs incurred till date based on certified project
completion justifies a higher withdrawal from pooling A/c, then that should be allowed since it is in line with
the intent of the 70% A/c mechanism. However, given the divergent views available, the contrary view (as
given in under Madhya Pradesh rules) cannot be ruledout.
State Position on withdrawal from the project receiptsaccount
Karnataka No clarity/ guidance
Maharashtra Costs incurred till date (based on the certified project completion
percentage) – Andhra Pradesh CA certificate format is similar
Madhya Pradesh Lower of:
A. Costs incurred till date (based on the certifiedPoC)
B. % of completion (as per certificate) * Amounts lying in theproject
receipts account (project receipts andreceivables)
Gujarat Costs incurred till date (based on the certified project completion
percentage)
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Content
Certification: Formats/ Checklists available
Content
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Content
Annual Audits and
Quarterly updates
Content
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Content
Annual Audit
Content Audit under RERA – Is this another compliance or does this get subsumed under StatutoryAudit (under
CompaniesAct 2013) or TaxAudit (under Income TaxAct 1961)?
– Likely that it is another audit as it is mandated byRERA: Audit - Project registration wise?
– First RERA audit to be completed by September 30, 2018 (6 months from the end of FY 2017-18 ie
the first year of RERAimplementation)
– It shall be verified during audit that - (i) Amounts collected for a particular project have been utilized
for that project, and (ii) Withdrawal has been in compliance with proportion to PoC of the project
– Format of Audit report notavailable – Karnataka has recently notified formats – to be done by
Statutory Auditors
– Would RERA audit be subject to certain turnover threshold (such as in tax audit) or would it be
applicable to all developers/ promoters, irrespective of any monetary thresholds?
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Content
Quarterly updates
Content Rule 15(d) of AP RERA Rules – Promoter required to update the webpage of the project within 7 days
from the expiry of each quarter
Status of project (construction and approvals), Booking details etc needs to be updated by the Promoter
As of now, AP RERA portal does not provide for online updatefacility – Intimation with respect to
updates could be filed in hard copy to avoid any penalty later
Physical letter could be filed with the authorities (or an email) providing all such details, to avoidpenal
implications at a later stage (and to avoid haste in case of short notice)
Guidance available under Circular No 8/ 2017 dated July 17, 2017 and Circular No 14/ 2017 dated
November 1, 2017 by the regulators in Maharashtra (could have a persuasive value only inAP)
Penalty for contravention could runs upto 5 percent of the estimated total cost of the real estate project
(Section 61 of theAct)
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Content
Other activities by AP RERA Authorities
Content
Grading of Promoters
APRERA will collect the information and documents submitted by promoters for registration of their project and analyze them
based on the set parameters. The primary focus is to determine the quality of the particular real estate project. After analyzing
the set parameters, a rating will be assigned and the project would be under surveillance throughout its tenure. Parameters
include - Promoter track record, Project Construction Quality, Project Legal Quality, Project Financial Quality, Project
Innovation Quality etc
Grading of Agents
APRERA will grade the real estate agents based on the documents and information submitted by them during the process of
registration. This will improve the overall transparency and accountability in the sector. Parameters include - Real Estate
Agent track record, Legal Clearance and Financial stability
ACF (Amicable Conciliation Forum)
As per Section 32 (g) of RERA, APRERA would take measures to facilitate amicable conciliation of disputes between
promoters and the allottees through dispute settlement forums set up by the consumer or promoter associations. With this
objective, ACF (Amicable Conciliation Forum) has been proposed to be set up, that shall facilitate resolution of disputes
amicably, thereby saving cost and time of litigation to parties and State, promoting greater public satisfaction with legal
system and dispute resolution
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RERA – Challenged!
Content
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How Rules have diluted overall essence of RERA!
Content Various states have digressed to an extent that their tinkered
watered-down rules violate the parent Act. State Rules littered with gaps
which will make it smoother for builders to circumvent the law.
The Ministry of Housing and Urban Poverty Alleviation (MHUPA) had
notified its rules under the Act in October 2016. Such central rules are
applicable to all Union territories without their own legislature and were
meant to serve as template for rules in other states
Rules (draft/ final) effectively issued by some states favour RE developers/
construction industry over home-buyers
Press articles suggest that:
– PMO has sought a report from the Housing Ministry with respect to
violation of central provisions
– Amid reports that key provisions of the Act have been diluted by some
states, the Central Government had forwarded the rules notified by
the states to a parliamentary committee (Committee on subordinate
legislation) for examination
– Parliamentary committee has suggested MHUPA to instruct
States to amend diluted rules or re-notify them (August 11, 2017)
Statistics reveal that home-buyers in 65 percent of ongoing projects across
8 cities - including Ahmedabad, Mumbai and NCR-Delhi are staring at a
delay ranging between a few months and over 5 years
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How Rules have diluted overall essence of RERA!
Content Few noted deviations:
– Cancellation by promoter on a week’s notice
– Registration fee at Re 1 per square metre (Central rules prescribed Rs
10/ Rs 50 per square meter depending on area of development)
– Increase in appeal filing fee (Rs 1,000 to Rs 10,000)
– Exclusion of disclosures (including pending court cases!)
– Payment of 30 percent of the total cost while signing the agreement
and 45 percent on reaching plinth level
– Deletion of anti-discriminatory clauses (given under UT model Rules)
Questions unanswered:
– Clarity on how homebuyers who have not agreed to a change in
building plans will be affected in the case of ongoing projects
– Provision on compounding rule for penalties carries the phrase "no
proceeding shall be instituted or continued" once fine has been paid -
Whether this provides lifetime immunity to the developer? – Rule 47(2)
of AP RERA Rules
Madhya Pradesh and Kerala have appointed a housing regulatory authority
as mandated under the law
Others such as Haryana, Maharashtra, Punjab and Delhi have appointed
an interim Regulatory Authority (All states have to appoint the authority by
end of April 2017 as per the Act). AP and Telangana too have interim
regulatory authorities.
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From the Courts
Content Builders take Centre to court, say RERA illegal on grounds such as retrospective application on ongoing
projects/ Infringement of right to privacy/ land being state subject
– Builders and Developers Welfare Association - PIL before Jabalpur Bench of Madhya Pradesh
High Court (Writ Petition No 7456/ 7348 of 2017)
– Swapnil Promoters and Developers - Nagpur bench of Bombay High Court (Writ Petition No 4419
of 2017)
– MIG (Bandra) Realtors and Builders Pvt Ltd
The Housing and Urban Development Ministry has decided to move the Supreme Court for clubbing of
all cases relating RERA which have been filed in different high courts, so that these can be decided by
one court
Plot owner in Maharashtra move HC on RERA making them co-promoters
– Petition says the Authority by notifying the definition of "co-promoter" foists a liability on the owner
which was never contemplated either under the Maharashtra Ownership Flats Act or RERA and
only "promoter" is defined under both acts.
– Even Parliament chose not to add the definition of co-promoter in RERA, it adds
Buyers across India, in parallel, have challenged safe harbor to ongoing home projects, legal validity &
composition of interim regulatory authority and several other diluted provisions under RERA
The Bombay High Court in its 330 page judgement (December 2017) has upheld theconstitutional
validity of various provisions, which were challenged by the developers
The Central Advisory Committee is set to examine all violations in RERA rules done by various
states and request states to align the same with RERA Act (Source: Minutes of the meeting of the
Central Advisory Council)
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Content
Judicial Mechanism
Content
RERA
Adjudicating Officer
[District Judge]
RE Appellate
Tribunal
High Court
Adjudicating Officer to be appointed by
RERA in consultation with the State
Section 12 - Veracity of information in
advertisement, notice, prospectus or model
apartment
Section 14 - Adherence to sanctioned
plans, layout plans and project
specifications by the Promoter
Section 18 - Return of amount of
compensation
Section 19 - Rights and duties of allottees
Other matters
Any dispute resolution relating to
matters on any violation or
contravention of provisions is through
RERA or the Adjudicating Officer
No recourse to civil courts on
matters covered under the RE Act –
Declaration that case is not pending
needs to be given.
Consumer forums (National, State
or District) not been barred from
the ambit of the 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
Pre-deposit at REAT level: 30
percent of penalty for Promoters or
100 percent of interest/
compensation for allottees
REAT to be headed by a sitting or
retired Judge of the High Court, with
one judicial and one administrative/
technical member
Consumer court case versus
RERA - Which one to choose?
Foradjudgingthe
compensationtobepaid
byPromoters
Required to adjudicate cases
within 60 working days from
the date of receipt of appeal/
application
* Section 31 of RERA – 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. However, Section 2(i) of AP RERA Rules restricts the complainant to be an aggrieved person
SIRC of ICAI
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Complaints by homebuyers
Construction
not started
Delay in
Possession
Enhanced
demand by
Builder at the
time of
handing over
of possession
like charging
for increase in
super area etc
Major change in
the layout plan
or building plan
by the Builder
Quality of
construction
or land title
issues
Subvention
Scheme -
Builder
defaulting in
paying of EMIs
to Bank
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Content
Other Areas (General
Advocacy, Impact
Assessment, Transaction
Advisory etc)
Content
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Content
Revisiting Business and
operational models – Developer's
perspective
Content
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Content
Departments – Increased roles & responsibilities
Content
Finance
•Cash flow / liquidity
management (70
percent clause)
•Managing project
wise bank accounts
and withdrawal
certification
•Impact on Pricing
•Alternate ways of
funding/ sourcing
equity partners
•Insurance
•Monitor cost and
schedule overruns
•Auditing of project
accounts
•Institutionalize
periodic RERA
checks
Legal
•Revised agreement
of sale/ affidavits/
declarations as per
Rules
•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
•Vendor
management/
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
•Institutionalize
periodic 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)
•Institutionalize
periodic RERA
checks & process
compliance audits
•Redefine
indemnities and
liabilities for
channel partners
and associates
Marketing/Sales/CRM
•No project
promotions/
advertisements/
marketing before
registration
•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
•Email and
communication
exchange with
customers
•Managing
cancellations (to be
compliant with the
terms agreed)
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June 16, 2018
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Content
Implications on M&A in RE space
Content Transfer of shares of the Promoter entity (Share Purchase/Buyouts)
- Developmental rights for the project continues to remain with the same promoterentity,
- No change in the developmental plans and timeline for completion of the project (project end date) as
provided while seeking registration for this project.
- Prior written consent of two-third allottees should not berequired
- Regardless of a "no-approval" situation, an intimation should be filed with the RERAAuthorities
Merger/ Demerger/ Amalgamations/ Takeovers/ BusinessTransfer
- Various positions possible such as retaining RERA registered projects in one entity (consolidation or
business reorganisations)
- Segregation of business such as RERA registered projects vis-à-vis non RERA projects etc
- In case of change of developmental rights, prior approval from two-third allottees and theAuthority is
needed
- No additional time provided to the incoming developer to complete the real estate project
- Incoming developer to be responsible for pending obligations of the erstwhile promoter and also for
damages arising out of breach or delay
Circular No 11/ 2017 dated November 8, 2018 issued by Maharashtra RERA Authorities – Clarification to the
provisions of Section 15 of RERAAct dealing with obligations of a promoter in case of transfer of a real estate
project to a third party
Reasonably sized repository of case laws/ judgements available on few regulators’ portal such as Maharashtra
RERA (~1100 reported judgements), Madhya Pradesh RERA (~650 reported judgements) – Views of
regulators support in taking positions on debatable issues, for instance, applicability of RERA provisions on
projects involving lease etc (Maharashtra RERA has a reported ruling on this piece, stating not applicable)
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Advertising – Caution list
Content
Disclaimer prior to exhibiting
mock / sample flats
Careful use of adjectives for
describing the project
Mentioning carpet area as
defined in RERA
Review and monitor emails /
written communications sent by
Marketing team/ Agents
Appropriate disclaimers in
Marketing Brochures
Overall essence for the marketing materials should be - "To be as Precise, Accurate and Correct as possible"Visakhapatnam Branch of
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Developers under scanner for RERA ad rule violations
Content
Maharashtra:
April 2018
In the biggest penalty levied so far, Maharashtra Real Estate Regulatory Authority (MahaRERA) imposed a
fine of INR 50 lakh on Piramal Realty for violation Advertisement rules
According to the order issued by MahaRERA, Piramal Realty did not publish MahaRERA website address
along with advertisement of its project. Advertisement also did not carry the project’s registration number
on first page, while the second page carried the same in “very small” font
March 2018
Penalty in the range of INR 2 lakhs - INR 10 lakhs imposed by MahaRERA on 8 builders in Mumbai for
advertising real estate project without mentioning the Authority’s website address and advertising a
non-registered project
Action taken on Suo-Motu basis by MahaRERA
Of the 8 realty developers, Builder Tridhatu Morya was fined INR 10 lakhs for advertising a non-registered
project
Rest of the 7 builders including Sumit Group, The Wadhwa Group, Ipsit project, Jyoti Builders, Parinee
Building Properties, Haware Properties and Karrm Infrastructure were fined INR 2 lakh for advertising real
estate project without mentioning the authority’s website address
June 2017
Penalty of INR 1.2 lakhs imposed on Sai Estate Consultant for advertising a unregistered project
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Maharashtra:
Earlier, Mumbai Grahak Panchayat (MGP) had listed ~40 developers from Pune, Mumbai and Konkan region
for allegedly violating MahaRERA rules by advertising housing projects without mentioning the Authority’s
website and registration number
Penalty levied even when plea of unintentional/ inadvertent act and unconditional apology was filed before
the Authorities!
In few cases (Such as Rikki Ronnie), disclaimers were published (in small font size) in their ads stating
that the Developer reserved the right to alter plans, layout amenities etc at a later date without prior
notice (Rules do not allow promoters any alterations once they are registered with MahaRERA without the
consent of 2/3rd of allottees of that project)
Real estate agent Softcorner was found advertising 10 unregistered projects at Thane property exhibition
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Haryana:
Haryana Real Estate Regulatory Authority (HRera) had announced that there should not be any difference in
the amenities and facilities shown in developers' advertisements and what they deliver on ground
"Developers who give false information and misleading ads to lure buyers will face action“
Penalty of INR 30 lakhs imposed on Krisumi Corporation, a Joint Venture (JV) between Japanese
conglomerate, Sumitomo Corporation and India based Krishna Group for announcing this partnership and
their Gurugram project in 2 national English-language newspapers
Advertisement published as "first Indo-Japanese mega real estate project - Krisumi City Waterfall Residence,
Sector 36A, Gurugram"
Action taken on Suo-Motu basis by HRera
Developer submitted that advertisement was not intended for inviting applications for sale, but just to make
prospective buyers familiar with their project
It was concluded that Krisumi Corporation had violated the Act by publishing the advertisement before
getting HRera registration for the project
Notices also issued to 10 other developers for advertising their projects without getting registered under
HRera - Chintel India, Pivotal infrastructure, Maxworth, DLF, Bestech, Tulip Infrastructure, Ambience
Infrastructure, Mangalam Multiplex, Mansha Buildcon and Signature Global
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Content
Rajasthan:
Notices issued to Shubham Group and Manglam builders for advertisement of project without prior
registration
Manglam Build Developers Ltd was allegedly found guilty for publishing advertisement in newspaper inviting
booking for Manglam Aroma project
Similarly, Shubham Group allegedly published advertisement for Shyam Vatika, a residential township,
which was not registered with Rajasthan RERA Authorities
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Content
Penalties for false or
misleading advertisements
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Content # Nature of offence Penalty Prosecution
Promoter
1 Advertise, market, sell or offer for
sale or invitation to public to
purchase the plot, apartment or
building without registration with
RERA
estimated cost of RE project
In case of non-deposit of penalty or
continued violation - Imprisonment for a
term extending up to 3 years or fine upto
10 percent of the estimated cost of the
RE project or both
2 Contravene any other provisions
other than listed above (including
failure to register the agreement
for sale)
-
Real Estate 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
-
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Marketing related
provisions under RERA
Content
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Provisions of the Law - Promoter
Content
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 11(2)
•The advertisement or
prospectus issued or
published by the promoter
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
Section 12
•Where any person makes
an advance or a deposit on
the basis of the information
contained in the notice,
advertisement or
prospectus, or on the basis
of any model apartment,
plot or building, as the case
may be, and sustains any
loss or damage by reason
of any incorrect, false
statement included therein,
he shall be compensated by
the promoter in the manner
as provided under this Act:
•Provided that if the person
affected by such incorrect,
false statement contained in
the notice, advertisement or
prospectus, or the model
apartment, plot or building,
as the case may be, intends
to withdraw from the
proposed project, he shall be
returned his entire
investment along with
interest at such rate as may
be prescribed and the
compensation in the manner
provided under this Act
Section 14(2)
•Notwithstanding anything
contained in any law,
contract or agreement, after
the sanctioned plans, layout
plans and specifications
and the nature of the
fixtures, fittings, amenities
and common areas, of the
as the case may be, as
approved by the competent
authority, are disclosed or
furnished to the person who
agree to take one or more of
the said apartment, plot or
building, as the case may be,
the promoter shall not
make - (i) any additions and
alterations in the sanctioned
plans, layout plans and
specifications and the
nature of fixtures, fittings
and amenities described
therein in respect of the
as the case may be, which
are agreed to be taken,
without the previous
consent of that personVisakhapatnam Branch of
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Provisions of the Law - Promoter
Content
•"Advertisement" means any document described or issued as advertisement through any
medium and includes any notice, circular or other documents or publicity in any form,
informing persons about a real estate project, or offering for sale of a plot, building or
apartment or inviting persons to purchase in any manner such plot, building or apartment or to
make advances or deposits for such purposes
Advertisement
[Section 2(b)]
•"Prospectus" means any document described or issued as a prospectus or any notice, circular,
or other document offering for sale or any real estate project or inviting any person to make
advances or deposits for such purposes
Prospectus
[Section 2(zl)]
•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.
•Explanation - For the purpose of this sub-section "person" shall include the association of
allottees or any voluntary consumer association registered under any law for the time being
in force.
Aggrieved Person
[Section 31(1)]
• Information and documents to be uploaded by the Promoter on the website of the Regulatory
Authority as well as the information and documents, which he is liable to give or produce or
cause to be given and produced to the person intending to take or invest in the project
under the Act including those disclosures to the public at large through print media, electronic
media, property exhibitions and promotional events under various related Acts
Disclosures [Rule 2(j) of
AP RERA Rules
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Marketing - Do’s and
Don’t’s
Content
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Marketing – Do’s and Don'ts
Content
It is well known that great property images are essential to effective real estate marketing, but you do not
want to go so far as to make them deceiving!
Marketing collaterals (includes internet advertising too!) should not contain false or misleading information
Sanitize marketing collaterals/ brochures etc (identify and address conflicting customer commitments) and
align to requirements under RERA
RERA registration number and website details to be provided in marketing collaterals
Project website to be periodically updated based on the progress of the project
Saleable area related specifications in the marketing collaterals to mention "Carpet Area" as per RERA
For Excluded/ Exempted projects, it is important to ensure that OC has been obtained and mention such
OC reference number
Ensure that the registration number granted by RERA is disclosed on all advertising materials as well as on
Company’s website and website of channel partners (online brokerage firms etc)
Ensure that pre-RERA advertising material is withdrawn and only RERA compliant advertising material is
being used (use date stamping, if possible while issuing marketing brochures etc)
To ensure that marketing agents are registered with RERA (distinction: employee vis-à-vis agent –
employee to be on the payroll of the same promoter entity developing the project, marketing done by one
entity in-house for entities in the group may require agent registration under RERA)
An advertisement should be considered compliant if it meets the test of truthfulness and does not attempt to
hide or not disclose important information which would otherwise assist the prospective purchaser to make an
informed choice. Start by asking two fairly straight-forward questions: ‘Is it the truth?’ and ‘Does the ad convey
a truthful impression overall?’
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If testimonials are used such as quotes or other comments from satisfied clients to promote real estate
developments, they must be accurate (take written confirmations, if possible). Please do not:
- Invent quotes from fictitious clients;
- Make false or misleading comments about actual comments made by clients; and
- Use testimonials from genuine clients that are false or misleading
Any claims made about any property or land characteristics in any photographic representations should
be accurate and should not give prospective buyers, any wrong impression
Examples of undesirable photographic property advertisements could include photographs of:
- Water view or scenery, placed next to a photograph of an apartment, makes it difficult to ascertain
whether the water view or scenery can be seen from the apartment or whether it is a ‘location shot’
- Beach scene with the wording ‘minutes to this’ or ‘stroll to beach’ typed above the photograph does not
give a clear indication of the distance from the property to the beach which is being shown
- Park and beach with the wording ‘opposite apartment’ where, in fact, this view cannot be seen from the
property
Photographic enhancements (internal or external) by touching up to hide undesirable characteristics or
enhance other features could mislead consumers
Courts have adopted the following as a test to what is misleading "the advertiser must be assumed to know
that the readers will include both the shrewd and the ingenuous, the educated and the uneducated and the
experienced and inexperienced in commercial transactions“. Advertiser cannot avoid liability simply by
claiming that the buyer/ consumer should have made reasonable enquiries and checked the information
provided (bear in mind that RERA is a consumer protection law!)
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Photographic enhancements could include Brightness and Contrast Adjustments, Lawn Enhancements, Sky
Replacement, Landscaping etc
Facilities (such as shopping centres, sports grounds, schools, transport etc) pictured in advertisements or
signs should actually exist. Otherwise, reference to how far they have progressed should be spelt out.
Advertising credit terms, finance rates, price ranges – must be backed up by reports from external
agencies
Usage of marketing phrases such as:
- 10 minutes drive from the International Airport (at what time? Walking/ driving?)
- Best/ largest real estate project in the city/ locality (who awarded?)
- Best located (who certified?)
- World class amenities (what is world class – very subjective and difficult to substantiate)
- Fully loaded Gymnasium (what is fully loaded – very subjective)
- 5 Star Clubhouse (what is 5 star – subjective)
- Investment hotbed (who certified?)
- 50 percent appreciation in 2 years (who certified, any underlying data?)
- Assured rentals (is it real?)
- Last few apartments left, Limited Edition (Is it real, does booking data support this statement?)
- All approvals received etc ("All"?)
- Expressions such as Sleek landmark, Unmatched lifestyle, Unique project, Whole new breed of
homes, First ever etc
Consumer Law prohibits representations being made about any future event without reasonable grounds.
Therefore, one needs to be careful when predicting and advertising trends in property values or development
prospects! An offence can occur whether or not you intended to mislead or deceive. It is your actions and
statements that matter - not your intentions
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Sometimes the weather is not great, or the only time professional photos can be scheduled is when it is
overcast and cloudy. It is also common knowledge in real estate the dusk shots and sunny days present
the best in advertisements. It should to be okay to use image enhancement to replace sky backgrounds
whenever the weather is not ideal.
* Illustrative only
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Content
Spaces that are empty are replaced to make the listing more appealing. The main thing to remember
when virtually renovating or staging a property is to include a disclaimer and/ or the ‘before’ photos. Full
disclosure is the best thing to do it you’re ever unsure if an image could be considered deceiving.
* Illustrative only
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Content
Include a disclaimer that some of the features are digitally included to represent the final outcome
* Illustrative only
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Model/ Sample Flat
Content
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Model/ Sample Apartment
Content Can you Judge a Book By Its Cover? Short answer – Yes!
Are physical specifications different from actual flat – such as no doors, glass partitions/ gypsum boards
instead of concrete walls, increased ceiling height and lighting etc
Sample Flats are captivating and generally created to look more "Spacious"
Sample Flats gives the feeling of "Premium”
Standard and non-standard fittings, changed dimensions etc must be made known to the customer
and written confirmation taken
Floor tiles, fixtures, wall texture etc in model apartment could significantly vary from one actually used in
saleable units
Show the unfurnished sample flat as well, if possible (and feasible!)
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Specifications/ Amenities
in advertisements/
agreements
Content
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Specifications/ Amenities
Content Infinity Pool, Temperature controlled pool, Open spaces, Business Center, Roof deck, Amphitheatre etc
Mention of Brand name for fittings (such as Jaquar for bathroom fittings) – Avoid or use “Equivalent"
Mention what would be delivered
Ensure well-defined product typology
Specifications/ Amenities mentioned in the Agreement for sale should match with marketing collaterals
Specifications required to be disclosed during project registration
Ensure that there are no significant deviations from what has been promised to the customer and disclosed
to the Authorities
What one leaves on the public domain may well have to be controlled, even the pre-RERA information left on
many portals may come to haunt
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Use of Disclaimers
Content
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Disclaimers for Brochures
Content By using or accessing the brochure, you agree with the Disclaimer without any qualification or limitation. The
Company/ Firm reserves the right to terminate, revoke, modify, alter, add and delete any one or more of the
terms and conditions outlined in the brochure. The Company/ Firm shall be under no obligation to notify the
user of the amendment to the terms and conditions and the user shall be bound by such amended terms and
conditions.
Computer generated images, walkthroughs and render images used on this brochure are the artist's
impression and are an indicative of the actual designs. The imagery used on the brochure may not represent
actuals or may be indicative of style only.
The information on this brochure is presented as general information and no representation or warranty is
expressly or impliedly given as to its accuracy, completeness or correctness. It does not constitute part of a
legal offer or contract. This brochure may unintentionally include inaccuracies or errors with respect to the
description of a plot/ flat size, site plan, floor plan, a rendering, a photo, elevation, prices, taxes, adjacent
properties, amenities, design guidelines, completion dates, features, zoning, buyer incentives etc. Further
the actual design / construction may vary in fit and finish from the one displayed in the information and
material displayed on this brochure.
The user must verify all the details and specifications, including but not limited to the area, amenities,
specifications, services, terms of sales, payments and all other relevant terms independently with our sales/
marketing team prior to concluding any decision for buying any unit in any of our projects/ developments.
Notwithstanding anything, in no event shall the Company/ Firm, their promoters, partners/ directors,
employees and agents be liable to the visitor/ user for any or all damages, losses and causes of action
(including but not limited to negligence), errors, injury, whether direct, indirect, consequential or incidental,
suffered or incurred by any person/s or due to any use and/or inability to use this brochure or information,
action taken or abstained through this brochure. While enough care is taken by the Company/ Firm to
ensure that information in the brochure are up to date, accurate and correct, the readers/ users are
requested to make their independent enquiry before relying upon the same.
* Indicative only. Disclaimers may fail to provide any legal protection in case of false or misleading advertisements done through any medium
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Disclaimers for specifications
Content Mock up - The image are for representation purposes and may be indicative of style only. The fixtures/
furniture/ finishes shown in the brochure are not are not a part of the actual offering. Please refer to the
‘agreement for sale’ and /or reach out to a Company/Firm’s representative for further clarity.
Elevation - The building elevation, facade treatment, colour, landscaping and surrounding views (outside the
marked boundary) are purely indicative. Photographs of surrounding views and location may not represent
actuals or may have been digitally enhanced or altered.
Swimming pool - This is an artistic impression. The tiles of swimming pool, landscaping, people shown and
related furniture/ fixtures are purely indicative and for representation purposes only
Kids play area - Landscaping, people and equipments shown in the kid’s play area are purely indicative and
for representation purposes only
Tennis Court - Landscaping is purely indicative and for representation purposes only.
Facility Plan - Landscaping is purely indicative and for representation purposes only.
Clubhouse reception - Furniture, fixtures, finish, fittings and colour shown are purely indicative for
representation purposes only. Photographs of interiors may not represent actuals or may have been digitally
enhanced or altered.
Floor Plans - Furniture/ fixtures shown in the floor plans are purely indicative and are not are not a part of
the actual offering. Any interested party should verify all the information including designs, plans,
specifications, facilities, features, payment schedules, terms of sales etc independently with the ‘agreement
for sale’ and /or the Company/ Firm prior to concluding any decision for buying in any of the project.
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Disclaimers for websites
Content By using or accessing the Website, you agree with the Disclaimer without any qualification or limitation. The
Company/ Firm reserves the right to terminate, revoke, modify, alter, add and delete any one or more of the
terms and conditions of the website. The Company/ Firm shall be under no obligation to notify the visitor of
the amendment to the terms and conditions and the visitor shall be bound by such amended terms and
conditions.
Computer generated images, walkthroughs and render images used on this website are the artist's
impression and are an indicative of the actual designs. The imagery used on the website may not represent
actuals or may be indicative of style only.
The information on this website is presented as general information and no representation or warranty is
expressly or impliedly given as to its accuracy, completeness or correctness. It does not constitute part of a
legal offer or contract. This website may unintentionally include inaccuracies or errors with respect to the
description of a plot/ flat size, site plan, floor plan, a rendering, a photo, elevation, prices, taxes, adjacent
properties, amenities, design guidelines, completion dates, features, zoning, buyer incentives etc.
The user must verify all the details and specifications, including but not limited to the area, amenities,
specifications, services, terms of sales, payments and all other relevant terms independently with our sales/
marketing team prior to concluding any decision for buying any unit in any of our projects/ developments.
Notwithstanding anything, in no event shall the Company/ Firm, their promoters, partners/ directors,
employees and agents be liable to the visitor/ user for any or all damages, losses and causes of action
(including but not limited to negligence), errors, injury, whether direct, indirect, consequential or incidental,
suffered or incurred by any person/s or due to any use and/or inability to use this site or information or its
links, hyperlinks, action taken or abstained or any transmission made through this website. While enough
care is taken by the Company/ Firm to ensure that information in the website are up to date, accurate and
correct, the readers/ users are requested to make their independent enquiry before relying upon the same.
SIRC of ICAI
June 16, 2018

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