RERA - ALL THAT YOU MUST KNOW

HERE IS WHAT ALL YOU WANTED TO KNOW ABOUT RERA

WHAT IS RERA ?

WHAT IS THE IMPACT OF RERA?

HOW RERA WILL BENEFIT BUILDERS/PROMOTERS?

WHAT IS THE BUILDERS/PROMOTERS OBLIGATION FOR REGISTRATION UNDER RERA?

WHAT ARE THE RESTRICTIONS SET UNDER RERA FOR UTILISATION OF THE FUNDS?

WHAT IS THE POST- POSSESSION WARRANTY CLAUSE?

IS THERE ANY PENALTY AGAINST THE PROMOTERS, REAL-ESTATE AGENTS & COMPANIES COVERED UNDER RERA?

WHAT AMOUNT CAN BE CHARGED AS BOOKING UNDER RERA ACT?

WHAT ARE THE RULES FOR THE CARPET AREA?

WHAT ARE THE RULES FOR TITLE REPRESENTATION?

WHAT ARE THE RULES FOR ALTERATIONS IN SANCTIONED PLANS?

WHAT ARE THE OBLIGATIONS OF A PROMPTER IN CASE OF THIRD PARTY TRASFER?

IS AGENT REGISTRATION MANDATORY?

IS THERE ANY APPEAL AGAINST THE RERA DECISION?

WHAT ARE THE PENALTIES AGAINST THE PROMOTERS?

WHAT ARE THE PENALTIES AGAINST THE REAL ESTATE AGENTS?

CAN RERA ORDER BE EXECUTED?

WHAT CAN BE DONE IF THE PROMOTER FAILS TO COMPLY WITH RERA ORDER?

CAN RERA ORDER BE EXECUTED THROUGH A CIVIL SUIT?

WHAT IS RERA?

It has been implemented on 1st May 2017, with an aim to regulate the real estate sector of India with a strict hand. 

RERA Act 2017 has not only empowered the buyers but also shaped the total regulation of the activities of the builders regarding the real estate property.

Salient Features Of RERA:

There are certain features of the RERA Act which makes the RERA rules totally consumer friendly and appropriate for managing any transaction relevant to the real estate:

·         More security to the investment made by the first time home buyers

·         Better assurance of timely possession

·         More strict actions against any fraud or false promise

·         digitization of all records, to reduce loss of data.

·         Quick remedies for any dispute

Difference between Old Rules and New RERA Rules

The Real Estate Development and Regulatory Act has brought several changes in dealing with the real estate projects. Read this article to know how it has changed the scenario of the buying and selling of the real estate properties:

·         Registration:
Before RERA: Before 2016, many projects started its transaction without a valid registration. Neither the authority, nor the law were much serious regarding the registration and security of the buyer’s rights.

After RERA: RERA Act has made the registration of each project compulsory. Without registration, they can not - proceed with the construction, sell any plot or flat, take any advance, make advertisement for selling, or get into any agreement.

·         Advertisement:
Before RERA: Before the Act came into existence, anytime the advertisements were published, and people were shown a empty plot and designs on the paper. They were promised that a project will be constructed over there, but often it was seen that, no project took place even after few years.

After RERA: RERA rules clearly bans any kind of false promise. If a rooftop swimming pool is promised, it has to be delivered, if a 8 ft/3 ft balcony is promised, they can not reduce it to 6ft/2ft. Even if they have not mentioned in the agreement but has mentioned in the advertisement, they are liable to that.

·         Transferring Right:
Before RERA: Before the implementation of RERA Act, even if the project was transferred from one builder to another, the buyer were often not informed. If the buyer faced any issue, the previous owners refused to respond to it, stating the reason that the previous owners does not have any more responsibility towards the project. This harassed more the home buyers.

After RERA: The Real Estate Development and Regulatory Act made it compulsory that any project which is being transferred to any other person, it requires to get notified to the allottees, investors, buyer, and the authority. The name and the ownership will be changed on the documents. Everything must be done in the prescribed way. Until the total procedure is completed, the previous owner shall not be released from the responsibility.

·         Timely Possession:
Before RERA: Before the Act took the matter into its grip, there was no assurance when the property would be delivered to the buyer. Often it made delay of 10-15 years, which is really stressful matter for a common man. Many times, the project was not even started on the promised delivery day. The builders and sellers also used to get unresponsive to that problem.

After RERA: The Real Estate Development and Regulatory Act imposed certain rules regarding the delay in possession. If the possession is delayed for an unreasonable period, the buyer gets certain options like - alternate shelter till the project is completed, money back policy along with interest or alternate residence of same standard that has been promised by the builder. In the alternate residence, if any extra cost is required, the builder shall bear it.

·         Quality Material:
Before RERA: When the sale deed of a property or a plot is prepared, it is necessary to write the quality of each essential materials those are to be used. Often it was seen that, the material used were of lower quality that has been promised, which resulted in earlier decay and damage to the products. When a person spending his hard earned money in projects, it is really a fraud happening on such person.

After RERA: When the Real Estate Development and Regulatory Act was implemented, it became compulsory to use the promised product and if any issue appears, materials of similar quality is to be used. In case, worse quality products are used, the builder is liable to pay compensation on that ground. If anyone has suffered any loss due to usage of such material even later on, the victim can claim for a compensation from the builders.

·         Carpet Area:
Before RERA: Previously, the builders used to play a trick game. They either used to mention ‘area of xxx sq. ft.’ or ‘carpet area of approximately xxx sq ft.’. Later on they used to defend that, there is a difference between total area and the carpet area or they never promised the exact carpet area. Such tricks are not easy to understand for a common person. This way, he often was not getting an area for which he has paid.

After RERA: The Real Estate Development and Regulatory Act made it compulsory to mention the exact carpet area or the reasonable variation of that. For example, now the builder has to mention ‘carpet area of xxx sq. ft, more or less by yy sq.ft’. If the flat is of lesser carpet area, the buyer shall pay only for the area he is under possession.

·         Essential Documents:
Before RERA: Before this Act came into existence, the buyers hardly used to get any essential documents other than the sale deed in their hand, which always kept them in ambiguity regarding the project.

After RERA: After the Real Estate Development and Regulatory Act got implemented, all the builders are obliged to handover necessary documents related to the details of the project and the area or plot where the person is investing his money. The documents include - brochure, copy of registration, copy of the drawing of the flat and the project where he is investing.

·         Bankruptcy:
Before RERA: Bankruptcy of the builders terrified the buyers in previous time. The builders often after taking money from the buyer, leaving the project incomplete, used to declare himself bankrupt. That used to safeguard him from any liabilities, and ultimately it is the common people who used to suffer an irreparable loss.

After RERA: As per the Real Estate Development and Regulatory Act, the builder has to open a separate account for the project under consideration. This account must be totally separate from the personal account of the builder or any of his relative/friends. The builder has to deposit 70% of the total raised money in that separate account, which will be used only for the purpose of the project.

·         Post Possession Liabilities:
Before RERA: Before RERA was implemented, the builders used to go totally non-responsive towards any issue occurring to the project. The law prescribed that any damage occurring within 6 months of possession (legal/physical whichever is earlier), due to the manufacturing fault, shall be taken care of by the builder.

After RERA: The Real Estate Development and Regulatory Act has extended the period till 3 years from the possession.

Therefore, RERA has brought a drastic change not only in regulating the real estate laws, but also brought the buyer and the seller under tight observation.

WHAT IS THE IMPACT OF RERA?

·         Cushman and Wakefield report says residential project launches have fallen by 8% since the Real Estate (Regulation and Development) Act 2016 was announced.

·         The fall in new unit launches is most noticeable in the NCR. Launches in the residential sector are expected to remain restricted over the next 2 to 3 quarters as developers will be making changes to their business structure, operations and marketing strategies to comply with RERA norms.

·         The share of affordable segment in total launches has improved. While sales have been weak across segments, it has been prominent in the high-end and luxury segments over the last quarters owing to demand-supply mismatches

·         Under RERA, all property brokers will have to register with real estate regulators in their states, thus sieving out the small-time players and consolidating major ones

·         In a major relief to citizens, the Real Estate Regulatory Authority has decided to accept complaints about unregistered projects for free of cost from informants until the 90-day period granted to builders to register their projects ends. The law though states that a mandatory fee of Rs 5,000 is required for filing of the complaint.

HOW RERA WILL BENEFIT BUILDERS/PROMOTERS?

The builders will also benefit from the RERA, as it proposes to impose penalty on allottee for not paying dues on time. Also, the builder will have the opportunity to approach the regulator in case there is any issue with the buyer.

But, builders believe that the bill was heavily stacked against them. The bill provides for penalty up to 10 per cent of the total project cost or even imprisonment, if builders do not honour their commitment or fail to register themselves with the regulator.

WHAT IS THE BUILDERS/PROMOTERS OBLIGATION FOR REGISTRATION UNDER RERA?

All new developers of commercial as well as residential projects will have to register their project with RERA. While the word ‘industrial’ was also used in the initial draft, the final draft excludes it. 

Therefore, projects with a pre-specified purpose for industrial use have been excluded. However, small builders – making an apartment with 8 or fewer units, or covering an area less than 500 square meters are exempted from the registration requirements.

WHAT ARE THE RESTRICTIONS SET UNDER RERA FOR UTILISATION OF THE FUNDS?

 Every builder commencing projects after the RERA has been set-up in the State is under an obligation to deposit 70 per cent of the amount paid by buyers of the property in a separate account. This account is especially ear-marked, for its funds can only be utilized for meeting developmental costs. What it ensures is that developers will no longer be able to cross-utilize funds received for one project towards meeting the expenses of another project. The proceeds of this account also need to be certified by a professional, such as a Chartered Accountant. 

The Act also covers ongoing projects, bringing those existing projects where possession has not been handed over yet under its ambit. Projects for which completion certificates have been obtained are outside the purview of the Act.

WHAT IS THE POST- POSSESSION WARRANTY CLAUSE?

Now, for the first time an act in India provides an implied warranty to buyers of property for five years in the following words- In case of any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter’s failure to rectify such defects with. 

The language employed by the legislature is fairly strict:  “any structural defect”, “any other defect”, leaving little scope for ambiguities for builder’s to exploit. This has also necessitated greater oversight by builders on their workmanship and design. It would also be prudent to take insurance for indemnifying against future claims, in the case of projects with heavy outlay.

IS THERE ANY PENALTY AGAINST THE PROMOTERS, REAL-ESTATE AGENTS & COMPANIES COVERED UNDER RERA?

The Act enshrines heavy penalties for all promoters entrusted with the task of development and promotion. Non-registration of the project with RERA can attract a penalty of 10% of the project cost. Failure to comply with rules framed by RERA in this regard may also attract imprisonment of up to 3 years and an increased penalty of up to 20% of the estimated project value. 

Under the Act, Real-estate agents and companies may also be charged 10,000 rupees a day, up to 5% of the cost of plot.

WHAT AMOUNT CAN BE CHARGED AS BOOKING UNDER RERA ACT?

most of the builders used to ask for 10 percent of the property as the advance payment for the booking of the same property. 

Now, after the RERA Act has come into the picture, the promoter cannot accept more than 10 percent of the advance money paid by the buyer at the time of the booking inclusive of the application fee or any other fee demanded by the promoter. It is mandatory for the promoter to first enter into the registered agreement of sale by RERA.

WHAT ARE THE RULES FOR THE CARPET AREA?

The area of a property is often calculated in three different ways – carpet area, built-up area, and super built-up area. Hence, when it comes to buying a property, this can leads to a lot of disconnect between what home buyer pays and what he actually gets.

But, now it is mandatory for the developers to disclose the size of their apartments, on the basis of carpet area (i.e., the area within four walls). This includes usable spaces, like the kitchen and toilets.

WHAT ARE THE RULES FOR TITLE REPRESENTATION?

Promoters are required to disclose clear title over the property and project. 

If any defect is found in title of property then you can ask for the compensation and there is no limit for the amount of this compensation.

WHAT ARE THE RULES FOR ALTERATIONS IN SANCTIONED PLANS?

If a builder wants to make alteration in plans and specifications of your individual flat then he can do that only with the approval of you. 

And if a builder wants to make alteration in the entire project’s layout & common areas of society  then he needs approval of the 2/3rd number of total buyers.

WHAT ARE THE OBLIGATIONS OF A PROMOTER IN CASE OF THIRD PARTY TRANSFER?

The promoter will not be allowed to transfer the majority rights and liabilities in respect of a real estate project to a 3rd party without the prior written consent from two-third allottees (buyers), except the promoter, and without the prior written approval of the RERA authority.

IS AGENT REGISTRATION MANDATORY?

Now, every real estate agent has to register himself under RERA before selling or advertising any property and he has to abide by all rules of regulation like, maintaining books & records, not be involved in unfair trade practices or make any false statement oral or written.

IS THERE ANY APPEAL AGAINST THE RERA DECISION?

If any buyer, promoter or agent has any complaints with respect to the project, they can file a complaint with RERA. 

State real state regulatory department will try to resolve the dispute within 60 days. If you aren’t satisfied with RERA’s decision, a complaint can also be filed with the Appellate Tribunal within the next 60 days. Even after that if he is not pleased the complaint can be filled to high court and supreme court.

WHAT ARE THE PENALTIES AGAINST THE PROMOTERS?

The following are the penalties and compensation that can be levied on promoters.

For non-registration of a project Penalty of up to 10% of the estimated cost of the project. For violation of other provisions of the Act Penalty of up to 5% of the estimated cost of the project. For non-compliance of the orders of the Authority Penalty for every day of default, which may cumulatively extend up to 5% of the estimated cost of the project. For non-compliance of the orders of the Appellate Tribunal Penalty for every day of default, which may cumulatively extend up to 10% of the estimated cost of the project or with imprisonment for a term which may extend up to three years or both.

WHAT ARE THE PENALTIES AGAINST THE REAL ESTATE AGENTS?

The following are the penalties and compensation that can be levied on the real estate agent.

For non-registration under project, he is selling	Rs. 10,000 per day of defaults which may extend up to 5% of the cost of the property.
For contravention of the orders or direction of the RERA	Penalty on a daily basis which may cumulatively extend up to 5% of the estimated cost of the property whose sale or purchase was facilitated.
For contravention of the orders or direction of appellate tribunal	Imprisonment up to 1 year with or without fine which may extend up to 10% of the estimated cost of project or both.

CAN RERA ORDER BE EXECUTED?

 

The Real Estate (Regulation and Development) Act, 2016 or RERA establishes a complaint redressal mechanism that enables home buyers or any other aggrieved person to file a complaint with the RERA authority or Adjudicating officer. Under RERA, a case against builder can be filed for delayed possession, non-compliance with real estate laws and rules, extra charges levied by builder, changes in builder layout without buyer’s permission and several other reasons.

The home buyers are able to claim a refund with interest from the builder and cancel their booking for any of these reasons by filing a complaint under RERA. The RERA Authority is empowered under the Act to grant compensation and interest to the buyer or direct the builder to delivery possession within 12 months.

WHAT CAN BE DONE IF THE PROMOTER FAILS TO COMPLY WITH RERA ORDER?

 

Once the RERA Authority passes an order for compensation and interest, the builder has 45 days to execute the order and provide the compensation and interest to the home buyer. This period begins from the date on which the order is served upon the builder and can be extended only if the builder provides substantial reasons to the authority.

However, there are several cases when the builders refuse to enforce the RERA order delivered by the Authority within time and home buyers are left without resolution of their grievance with the builder. In such circumstances, the RERA Authority can be approached to get the RERA order executed by the builder as per the provisions of Section 40 of the Act.

Section 40 of the RERA Act states that if a promoter, allottee or real estate agent  fails to pay any interest or penalty or compensation imposed by the adjudicating officer or the RERA Authority, it can be recoverable from such promoter or allottee or real estate agent in such manner as may be prescribed as an arrears of land revenue.

Non-Compliance With RERA Order By Builder

Once the RERA Authority passes an order for compensation and interest, the builder has 45 days to execute the order and provide the compensation and interest to the home buyer. This period begins from the date on which the order is served upon the builder and can be extended only if the builder provides substantial reasons to the authority.

However, there are several cases when the builders refuse to enforce the RERA order delivered by the Authority within time and home buyers are left without resolution of their grievance with the builder. In such circumstances, the RERA Authority can be approached to get the RERA order executed by the builder as per the provisions of Section 40 of the Act.

Section 40 of the RERA Act states that if a promoter, allottee or real estate agent  fails to pay any interest or penalty or compensation imposed by the adjudicating officer or the RERA Authority, it can be recoverable from such promoter or allottee or real estate agent in such manner as may be prescribed as an arrears of land revenue.

Execution Of RERA Order Against The Builder

If the adjudicating officer or RERA Authority issues any order or directs any person to do any act, or refrain from doing any act, failure in compliance with such order or direction can be enforced in by filing an application under Section 40 of the Act. Any person who has an order in their favour and the other party is not executing the same can file an application for enforcement of such order.

In case the builder fails to enforce the order passed by the RERA Authority in favour of the home buyer, the home buyer can file an application for the execution of RERA order against the builder with the same RERA Authority.

The home buyer can also send a legal notice to the builder for execution of the RERA order with the help of a RERA lawyer in India. This notice must be sent before an enforcement application is filed and can be used as proof when the builder fails to comply with the terms of the legal notice.

Penalty For Non-Enforcement Of RERA Order

Section 63 of the RERA Act lays down the penalty for non-enforcement of RERA order. If any promoter fails to comply with or contravenes any of the orders or directions of the Authority, he shall be liable to a penalty of 5% of the estimated price of the real estate project for every day during which such default continues.

Under penalties for non-compliance with the Act, the builder may also face imprisonment for a term extendable up to 3 years or a fine which may extend up to 10% of the cost estimated of the real estate project, or both.

CAN RERA ORDER BE EXECUTED THROUGH A CIVIL SUIT?

If the builder is not executing the order even after filing an enforcement application with the RERA Authority, you can take a legal action against the builder by filing a civil petition for execution of decree with a civil court. 

Under Section 51 the Code of Civil Procedure, a civil court in India has the power to order the execution of decree by:

1. by delivery of any property specifically decreed.

2. by attachment and sale or by sale without attachment of any property.

3. by arrest and detention in prison.

4. by appointing a receiver.

5. in such other manner as the nature of the relief granted may require.

The conditions applied to the use of such power under Section 51 of CPC includes:

1. That the judgment-debtor, with the object or effect of obstructing or delaying the execution of the decree:

o    Is likely to abscond or leave the local limits of the jurisdiction of the Court, or

o    Has, after the institution of the suit in which the decree was passed, dishonestly transferred concealed, or removed any part of his property, or committed any other act of bad faith in relation to his property, or

2. That the judgment-debtor ha, or has had since the date of the decree, the means to pay the amount of the decree or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same, or

3. That the decree is for a sum for which the judgment-debtor was bound in a fiduciary capacity to account.