The Real Estate Sector has experienced exceptional growth in the past two decades, however, lack of regulator or specific legislation has resulted in the Promoter of the Projects unaccountable. The regulations were weak and mostly limited to granting of approvals concerning change of land use, sanctioning of plans etc. for Projects involving development of townships, multistoried buildings etc., where public interest was affected. Lack of monitoring of Project lead to uncertainty with regard to execution and completion of the projects. The Promoter’s ability to complete such projects was suspect and for the reason of lack of information regarding the Project, there was no transparency in executing the Project which leads to bad judgment by the Consumer regarding ability and capacity of the promoters to complete and deliver projects despite taking substantial amounts of money from the consumers. The consumers were left with no remedy except to knock on the doors of the court. The aforesaid resulted in additional burden on the judiciary to adjudicate on real estate matters.
Keeping the above in mind and to remedy the above situation, the legislature found it prudent to enact the Real Estate (Regulation and Development) Act, 2016 (RERA). The prime intent of RERA is to protect the interests of consumers and bring in efficiency and transparency in the sale/purchase of real estate whereby the customers can clearly take an informed decision concerning the estimate the cost of the real estate and the history and reputation of the Promoters in the Real Estate Sector. The RERA to achieve the aforesaid purpose has in most states already established an adjudicatory mechanism for the speedy redress of disputes relating to the Real Estate Sector. RERA regulates the Real Estate Sector and defines the rights and obligations of the Promoters, Consumers and Real Estate Agents connected with a Project. RERA is specifically geared towards the protection of home buyers and enhance transparency which will consequently lead to reduction in the litigation.
RERA has become such an important legislation is the various stipulations and regulations it requires if any new Project has to be registered with RERA and requires the Promoters to make full disclosures regarding the Project without which the Project cannot be marketed by the Promoters or Real Estate Agents, most importantly 70 (Seventy)% of the money collected as advance is to be deposited in a separate bank account so that there is no misuse or misappropriation of the customer’s money and the same is specifically used for the Project only, even the progress of the project is regularly uploaded on the RERA website. If the project is to be promoted in phases, then each phase shall be considered as a separate project, and the promoter shall obtain registration for each phase. However, the cases where the land proposed to be developed is less than 500 square meters or less than 8 (Eight) apartments proposed to be developed, then they are exempted from such registration.
The legislation through RERA aims to achieve transparency and information regarding the Project even prior to registration of the Project with RERA, documents regarding its approval as well as periodical progress report are subject to scrutiny this reduces the fear and chances of delay or failure to transfer the property to ultimate customer and / or investor in the Project. This will restore confidence in investing in the real estate sector and help in the growth of the same. Consequently, it is mandatory for the promoter / real estate agents to sell the project as carpet area not super area, the concept of super area has been discarded, compulsory registration of the real estate project and the agents is mandated under RERA. The Registration of the Project must be done by the promoter or real estate agent before advertising or marketing or selling or offering the concerned property for sale, whether the project is residential or commercial.
The money has to be set aside for the completion of the Project or is to ensure the Project is completed. Prior to the enactment of RERA the misappropriation or rather misuse of the money invested by the customer from one Project to other was usual. Mainly the reason Promoters failed to complete and deliver the Projects as the money collected in one Project was utilized to make or diverted to other projects being carried out by the same Promoters. Now the Promoters can withdraw the money only to cover the cost of the Project, in proportion to the percentage of completion of the Project and such withdrawals are to be certified by an engineer, an architect and chartered accountant that the same is done as a proportion to the percentage of the completion of such project. This ensures the money collected for a Project is utilized for that Project only.
The Regulatory Authority established under RERA has to within a period of 30 (Thirty) days, subsequent to the receipt of an application concerning a Project by the Promoter grant or reject the registration. If the Project is registered, the promoter is provided a registration number, including a login Id and password for accessing the website of the Regulatory Authority and to create its web page and fill in the details of the proposed Project. The registration, if granted, will be valid till the period of completion of the Project as committed by the Promoter in its Application to the Regulatory Authority.
This relief will be available without prejudice to any other remedy available to the allottee. However, where an allottee does not intend to withdraw from the project, he shall be paid interest at a prescribed rate by the Promoter for every month of delay, till the handing over of the possession.
The RERA is a positive change as now there is transparency in the real estate sector, increasing accountability of the promoters and developers and establishing efficient forums for grievance redress which did not exist prior to the RERA. With the enactment of the RERA, the confidence of the Flat Buyer has grown which is good for the market sentiments where only honest and genuine promoters will flourish. RERA puts in place various institutions and procedural regulations thereby providing stability, certainty and transparency and brings back the confidence of the investors / buyers in the Real Estate Sector
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