Real Estate (Regulation & Development) Act, 2016

After a lot of opposition, deliberation and several amendments, the Rajya Sabha has, on 10th March 2016, approved the Real Estate (Regulation and Development) Act, 2016.

The Act largely seeks to protect the interest of the allottees/purchasers by promoting transparency, accountability and efficiency in the construction and execution of real estate projects by promoters. It also holds the promoters accountable for not registering their projects with the Real Estate Regulatory Authority (Regulatory Authority) or for providing insufficient information regarding their project. In addition to the promoter and allottees, the Act also brings real estate brokers who facilitate the sale and purchase of units in a project within its ambit.

Salient Features

The salient features of the Act are the following:

i. Real Estate Regulatory Authority

1. Under the Act, instead of a regular forum of consumers, the purchasers of real estate units from a developer would have a specialised forum called the “Real Estate Regulatory Authority” which will be set up within six months from the date of coming into force of the Act which came into effect from 1st May, 2017. In the interim, the appropriate Government (i.e., the Central or State Government) shall designate any other regulatory authority or any officer preferably the secretary of the department dealing with Housing, as the Regulatory Authority.

ii. Registration with the Regulatory Authority

1. The promoter has to register their project (residential as well as commercial) with the Regulatory Authority before booking, selling or offering apartments for sale in such projects. In case a project is to be promoted in phases, then each phase shall be considered as a standalone project, and the promoter shall obtain registration for each phase.
2. Further, in case of ongoing projects on the date of commencement of the Act which have not received a completion certificate, the promoter of such project shall make an application to the Regulatory Authority for registration of their project within a period of three months of the commencement of the Act.
3. The following types of projects shall not be required to be registered before the Regulatory Authority:
   1. Where the area of land proposed to be promoted does not exceed 500 square meters or the number of apartments to be constructed in the project does not exceed eight apartments. However, the appropriate Government (Central and State Government) may, if it considers appropriate, reduce the threshold limit;
   2. Projects where the completion certificate has been received prior to the commencement of the Act;
   3. Projects for the purpose of renovation or repair or re-development which does not involve marketing, advertising, selling and new allotment of any apartment plot or building.
4. The application for registration must disclose the following information:
   1. Details of the promoter
   2. Detail of the projects launched by the promoter in the past five years completed or being developed, current status of the projects, any delay, pending cases, pending payments.
   3. An authenticated copy of the approval and commencement certificate received from the competent authority and an authenticated copy of the approval and commencement certificate of each of such phases for project to be completed in phases;
   4. The sanctioned plan, layout plan and specifications of the project, plan of development works to be executed in the proposed project and the proposed facilities to be provided thereof and the vocational details of the project;
   5. Proforma of the allotment letter, agreement for sale and conveyance deed
   6. Number, type and carpet area of the apartments and garages for sale in the project
   7. The names and addresses of real estate agents, contractors, architects, structural engineers affiliated with the project
   8. A declaration by the promoter supported by an affidavit stating that:
      1. He has a legal title to the land, free from all encumbrances, details of encumbrances, if any in the land including any right, title, interest or name of any party in or over such land along with the details;
      2. The time period to complete the project or the phase
      3. 70% of the amounts realised for the real estate project from the allottees, shall be deposited in a separate bank account to cover the cost of construction and land and shall be used only for that purpose.
1. Carpet Area
2. Under the 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 service shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
3. 70% of realisation from allottees in a separate bank account
   1. Promoter shall deposit 70% of the amount realised from the allottees, from time-to-time, in a separate account to be maintained in a scheduled bank to cover the cost of construction and land. The amount deposited shall be used only for the concerned project.
   2. The promoter can withdraw the amounts from the separate account, in proportion to the percentage of completion of the project. However, such withdrawal can only be made after it is certified by an engineer, an architect and chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.
   3. Accounts to be audited within six months after the end of every financial year by a practising chartered accountant. Further, he is required to produce a statement of account duly certified and signed by such chartered accountant, and it shall be verified during the audit that (i) the amounts collected for a particular project have been utilised for the project; and (ii) the withdrawal has been in compliance with the proportion to the percentage of completion of the project.

iii. Acceptance or refusal of registration

1. Upon receipt of an application by the promoter, the Regulatory Authority shall within a period of 30 days, grant or reject the registration.
2. Upon granting of registration, the promoter will be provided with a registration number, including a login IDand password for accessing the website of the Regulatory Authority and to create his web page and to fill in the details of the proposed project.
3. If the Regulatory Authority fails to grant or reject the application of the promoter within the period of 30 days, then the project shall be deemed to have been registered.
4. The registration, will be valid till the period of completion of the project as committed. This period shall be extended by the Regulatory Authority for a period not exceeding one year in aggregate, only due to force majeureand on payment of such fee as may be specified by regulations made by the Regulatory Authority.

iv. Revocation or lease of registration

1. The Regulatory Authority may revoke the registration granted on receipt of a complaint or suo motuor on the recommendation of the competent authority in case:
   1. The promoter makes a default in doing anything required under the Act or the rules or regulations made there under;
   2. The promoter violates any terms of the approvals granted for the project; and
   3. The promoter is involved in any kind of unfair practice or irregularities.
2. When registration is revoked or lapses, the Regulatory Authority shall:
   1. Debar the promoter from accessing the website in relation to the project, specify his name in the list of defaulters on its website and also inform other Regulatory Authorities in other States and Union Territories about such cancellation;
   2. Facilitate the remaining development works to be carried out by competent authority or the association of allottees or in any other manner as may be determined by the Regulatory Authority. However, the association of allottees shall have a first right of refusal for carrying out the remaining development works; or
   3. Direct the scheduled bank holding the project bank account, to freeze the account and thereafter take such further necessary actions, including consequent defreezing of the account, for facilitating the remaining development work.

v. Website of the Regulatory Authority

1. The promoters webpage should include:
   1. Details of the registration granted by the Regulatory Authority;
   2. Quarterly up-to-date list of the number and types of apartments or plots or garages, booked, status of the project, list of approvals obtained and approvals pending and
   3.  Such other information and documents as may be specified
   4. Advertisement or prospectus issued by the promoter:
      1. The advertisement or prospectus issued or published by the promoter should prominently mention the website address of the Regulatory Authority
      2. Where any person makes an advance or a deposit on the basis of the information contained in the notice, advertisement or prospectus and sustains any loss or damage because of any incorrect, false statement included in these, he shall be compensated by the promoter as provided under the Act. Also, if the person so affected intends to withdraw from the proposed project, his entire investment (along with interest at such rate as may be prescribed and compensation in the manner provided under the Act), will be returned to him.

Limit on receipt of advance payment

A promoter shall not accept a sum more than 10% of the cost of the apartment, plot, or building, as the case may be, as an advance payment or an application fee, without first entering into a written agreement of sale and register the said agreement of sale, under any law for the time being in force.

Restriction on addition and alteration in the plans

1. The promoter cannot make any addition or alteration in the approved and sanctioned plans, structural designs, specifications and amenities of the apartment, plot or building without the previous consent of the allottee or without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such a building.

Structural defect

In case any structural defect or any other defect in the workmanship, quality or provision of services or any other obligations of the promoters is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, the promoter shall rectify such defect without any further charge, within thirty days. If the promoter fails to rectify such defect within such time, the aggrieved allottee shall be entitled to receive appropriate compensation in the manner as provided in the Act.

Restriction on transfer and assignment

The promoter shall not transfer or assign his majority rights and liabilities in respect of a project to a third party without obtaining prior written consent from two-thirds of the allottees, except the promoter, and without the prior written approval of the Regulatory Authority. The allottee, irrespective of the number of apartments or plots booked by him or by his family; and in the case of companies/firms/and association of individuals, booked in its name or booked in the name of its associated entities/related enterprises, shall be considered as one allottee only.

Refund of amount in case of delay in handing over possession

In case the promoter is unable to hand over possession of the apartment, plot or building to the allottee (i) in accordance with the terms of the agreement of sale; or (ii) due to discontinuance of his business as a promoter on account of suspension; or (iii) revocation of his registration or for any other reason, then the promoter shall be liable, on demand being made by the allottee, to return the amount received by him from the allottee with interest and compensation at the rate and manner as provided under the Act. 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 by the promoter for every month of delay, till the handing over of the possession, at a prescribed rate.

Other relevant provisions

1. The same rate of interest will be payable by the allottee and the promoter in the event of their respective defaults.
2. In the absence of any local laws, an association or society or co-operative society, as the case may be, of the allottees, shall be formed within a period of three months of the majority of allottees who have booked their plot or apartment or building, as the case may be, in the project.
3. After the promoter executes an agreement for sale for any apartment, plot or building, no mortgage or charge can be created by the promoter on such apartment, plot or building. If any such mortgage or charge is created, then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment’ plot or building.
4. The promoter may cancel the allotment only in terms of the agreement for sale. However, the allottee may approach the Regulatory Authority for relief, if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale, is unilateral and without any sufficient cause.
5. The promoter shall obtain insurance as may be notified by the appropriate Government, including but not limited to the title of the land and building and construction of the project. The promoter shall also be liable to pay the premium and charges in respect of the insurance.
6. The promoter shall execute a registered conveyance deed in favour of the
   1. Allottee in respect of the apartment, plot or building; and
   2. Association of allottees of competent authority in respect of the undivided proportionate title in the common areas, and hand over possession of the same within the period as specified under the local laws. In the absence of any local law, such conveyance deed shall be carried out by the promoter within three months from date of issue of the occupancy certificate.
7. The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land in the manner as provided under the Act, and such claim for compensation shall not be barred by limitation provided under any law for the time being in force.
8. Every allottee shall take physical possession of the apartment, plot or building, within a period of two months of the occupancy certificate issued for the said apartment, plot or buildings.
9. The Regulatory Authority shall make a recommendation to the appropriate Government on (i) creation of a single window system for ensuring time-bound project approvals and clearances for timely completion of the project; and (ii) creation of a transparent and robust grievance redressal mechanism against acts of omission and commission of competent authorities and their officials.

Real Estate Appellate Tribunal

1. Any person aggrieved by any direction or decision made by the Regulatory Authority or by an adjudicating officer, may make an appeal before the Appellate Tribunal within a period of 60 days from the date of receipt of a copy of the order or direction.
2. The Appellate Tribunal shall deal dispose of the appeal within a period of sixty days from the date of receipt of appeal.
3. The Appellate Tribunal shall have same powers and shall be deemed as a civil court and an appeal against the order of the Appellate Tribunal may be filed before the jurisdictional High Court within a period .of sixty days from the date of communication of the decision or order of the Appellate Tribunal.

Adjudicating Officer

For adjudging the compensation to be paid by the promoter in accordance with the provisions of the Act, the Regulatory Authority shall appoint an adjudicating officer for holding an inquiry in this regard.

Offences and Penalty

18. The provisions of this Act shall have an overriding effect in case there is any inconsistency between the provisions contained in this Act and in any other law (including a state law) for the time being in force.

The Maharashtra Housing (Regulation and Development) Act 2012 has been repealed by the Central Government.