The Real Estate Regulation Act (RERA): Test for the real

Source: The Hitavada      Date: 10 May 2017 09:20:40

By CA Satish Sarda,

Real estate sector has always been in the news for all the wrong reasons. There are thousands of cases where home buyers felt cheated by the builders/promoters. However, there was no strong mechanism to discipline the errant developers. Keeping this in mind Government of India has enacted the Real Estate (Regulation and Development) Act 2016 and all the sections of the Act have came into force from May 1, 2017. The key objectives of the Act are:
nEnsuring transparency and efficiency in real estate sector in regards to sale of plot, apartment, building or real estate project.

n Protecting the interest of consumers in real estate sector.
nEstablishing adjudicating mechanism for speedy dispute redressal.
nEstablishing Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority. Under this Act, Government of Maharashtra established Maharashtra Real Estate Regulatory Authority (MahaRERA), vide Notification No. 23 dated 8 March 2017, for regulation and promotion of real estate sector in Maharashtra, with its headquarters at Mumbai.

Registration of project: Application for registration will have to be made on-line , filling the details in the requisite forms, uploading required documents and paying the necessary fees on MahaRera website ( Promoter has to register project before he starts any form of advertising, marketing, booking, selling, offer for selling or inviting people to purchase plots, apartment or buildings.Every real estate project which has land area more than 500 square metres or has more than 8 apartments needs to be registered.

The MahaRERA website would display all the registered projects. If any promoter fails to register as per Act, he will be liable to a penalty which may extend up to 10 per cent of the estimated cost of the real estate project. On continued violation, he will be punishable with imprisonment for a term which may extend up to three years or with fine which may extend up to a further 10 per cent of the estimated cost of the real estate project, or with both.

Solid credentials needed to start any project: Developers would be required to submit authenticated copy of PAN card, annual report comprising audited profit and loss account, balance sheet, cash flow statement and auditor’s report. Not only this, they would have to give a copy of the legal title deed and copy of collaboration agreement if the promoter is not the owner of the plot. They would also have to give information regarding the number of open and closed parking areas in the project.

Advertisement: It is mandatory that the advertisement for marketing of apartments in the real estate project must carry the MahaRERA registration number. Any medium adopted in soliciting for sale would be covered under the definition of advertisement, including Sms and emails. Prospectus, which is intended for sale of apartment in real estate project, will also be covered.

Project delays: Act provides for provisions as regards various situations in which the allottee would be compensated by the promoter due to delay in completion of the project etc. Developers are required to refund or pay compensation to the allottees with an interest rate of SBI’s highest marginal cost of lending rate plus two per cent, within 45 days of it becoming due.

Real estate agents registration: Every real estate agent who intends to facilitate the sale or purchase of or act on behalf of any person to facilitate the sale or purchase of any plot, apartment or building, as the case may be, in a registered real estate project being sold by the promoter in any planning area in Maharashtra, will have to apply for registration to Maharashtra Real Estate Regulatory Authority (MahaRERA).

Real estate agents have to get registered with MahaRERA either as an individual or as “other than individual.” Promoters while applying for registration of any real estate project will have to indicate the names of registered real estate agents who will be working as agents in the said project. Names of such agents will be displayed along with other project specifications on the MahaRERA website.

Penalties if not registered: If any real estate agent fails to register and contravenes the provisions of the Act, he will be liable to a penalty of Rs 10,000 for every day during which such default continues, which may cumulatively extend up to 5 per cent of the cost of plot, apartment or buildings, as the case may be.

Referral bookings: Existing customers referring to others for buying the flat in same project or other project of same developer for a consideration will be treated as real estate agent and will be liable for registration.
Delay in paying installment by allottee: In case of delay in paying the installment the allottee has to pay to the promoter, a rate of interest equal to the State Bank of India highest marginal cost of lending rate plus 2 per cent.
Filing complaints: The aggrieved person can file an application online as per format provided by MahaRERA website.

Time limit for disposal of complaint: Act provides that complaints should be disposed off as expeditiously as possible but not later than sixty days from the date of filing the same.

Formation of society or any other legal entity of home buyers: Promoter has to enable formation of legal entity like cooperative society, company, association, federation etc., within three months from the date on which 51 per cent of the total number of purchasers, in such a building or a wing, have booked their apartment. Promoter will execute a registered conveyance deed in favour of the allottee within three months from date of issue of occupancy certificate or 51 per cent of the total number of purchasers, in such a building or a wing, has paid the full consideration to the promoter, whichever is earlier.

Joint promoters/joint ventures/ development agreements: The Act makes both the promoters and the landlord or any such parties which are beneficiary of a sale of a project and receive payments from allottees as co-promoters and hence liable to adhere to the provisions of the Act and rules and regulations made there under.

Ongoing project: At the end of 90 days from the date of notification of the Act (i.e. May 1, 2017), the promoter of an ongoing project will not advertise, market, book, sell or offer for sale or invite persons to purchase in any manner any plot, apartment or building, unless he registers the project. While registering project, promoter needs to give revised date of completion which should be commensurate with the amount of development completed. The Act will be applicable for the entire project i.e. units sold as well as unsold. If the promoter wants to change the plans post registration, then consent of all pre-registration allottees will be required.

Entitlement of additional FSI: If due to a change in Government policy, the promoter is entitled to additional FSI etc., promoter can build additional floors in a registered ongoing project where initially those floors were not planned with the consent of allottees.

Separate bank account for each project: Act makes it mandatory for the promoters to deposit 70 per cent of the unused fund collected for a project in a separate bank account. Such funds can only be used for the purposes of construction and land cost.

Changing of building plans in the middle of development: The Act prohibits a developer from changing the plan in a project unless two-thirds of the allottees have agreed to such a change.

Structural defects: Developers would be responsible for fixing structural defects for 5 years after transferring the property to a buyer. Lets hope this new regulation is strictly implemented and complied by all the stakeholders. Then only consumers can test the real promoters and have the real taste of his dream home.
(The author is Past Chairman of ICAI, Nagpur branch and practicing Chartered Accountant)