Content copyright 2016. FORTUNELEGAL.IN. All rights reserved.
THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016
Real Estate Act (Regulation and Development) Act, 2016 (“Act”) is the much awaited and welcome step towards regularizing the real estate sector in India, with an aim to bring transparency and accountability between real estate buyers and sellers. The Act aims to uniformly regulate different types and sizes of projects and their implementation by setting strict guidelines for promoters and legal recourse for those affected due to malpractices.
A. Key Features:
1. Setting up of the Real Estate Regulatory Authority (“RERA”) and the Real Estate Appellate Tribunal for States/Union Territories, within one year from the date of coming into force of the Act.
2. Mandatory registration of all projects with the RERA in each State. Real estate agents who intend to sell any plot, apartment or building should also register themselves with RERA.
3. Standardization of practices by introducing standard definitions such as ‘apartment’, ‘building’, ‘carpet area’, ‘common areas’, ‘planning area’, ‘real estate project’, etc., which will make it easy for the buyers to compare different projects with the common concept of ‘carpet area’.
4. Parking of 70 percent of the sales revenue in a separate escrow account, to be channeled only towards construction of the project.
5. Clearly providing guidelines with respect to obligations of the promoters towards disclosures about project specifications, alterations, quarterly project status updates and handing over completed project to allottees or association of allottees.
6. Rights and duties of the allottees are also defined, and provisions defined for enforcement of the contract between the developer and buyer, with a fast track mechanism to settle disputes.
7. Stringent penal provisions have been prescribed against the promoter in case of any contravention or non-compliance of the provisions of the Act or the orders, decisions or directions of the Regulatory Authority or the Appellate Tribunal.
B. Rights of Allottees 1. Right to obtain information about the layout plans and project specifications, stage-wise time schedule of project completion, and other amenities like water, sanitation etc, the details of which will be disclosed by the promoters.
2. Right of safety of amount given to promoter, by making it mandatory to maintain a separate account for each project, wherein 70% of the collected amount has to be deposited.
3. Right to be intimated about any additions or alterations in the project, whereby written consent of at least two-thirds of the allottees will be required.
4. Right against transfer or assignment of project by the promoters to third party without prior written consent from two-third allottees.
5. Right to receive title of insurance to be transferred to the benefit of the allottee or the association of allottees, at the time of promoter entering into an agreement for sale with the allottee. 6. Right to claim compensation or interest from the promoters in case of loss caused due to delays, breaches of agreement or defective title.
7. Right to withdraw from the project and claim return of investment with interest if promoter fails to complete or is unable to give possession of an apartment, plot or building.
8. Right to seek legal remedy for enforcement of rights and against any wrogful cancellation of projects.
C. Duties of Promoters
1. The promoter(s) shall mandatorily register all projects with the RERA in each State, and disclose all information for registered projects like details of promoters, layout plan, land status, schedule of execution and status of various approvals, with quarterly up-to-date status of the project.
2. The promoter(s) shall not indulge in unfair practices like false marketing and advertisements should contain the website address of the RERA, wherein all details of the registered project have been made available.
3. The promoter(s) shall keep 70% of the amount realized from allottees in a separate bank account to be used only for the construction of that project.
4. The promoter(s) shall be responsible for obtaining the completion or occupancy or lease certificate, and to make it available to the allottees or association of allottees.
5. The promoter(s) shall be responsible to enable the formation of association of allottees, and to provide the essential services at reasonable charges till handing over possession of project to the allottees or association of allottees.
6. The promoter(s) shall not accept an advance payment or an application fee of more that 10%, without first entering into a written agreement for sale and registering the said agreement.
7. The promoter(s) shall not make any alterations or additions project other than minor additions or alterations, without previous written permission of at least two third of the allottees.
8. The promoter(s) shall not transfer or assign his majority rights and liabilities to a third party without obtaining prior written consent from at least two-third allottees, and without the prior written approval of the RERA.
9. The promoter(s) shall be responsible for fixing structural defects for five years after transferring the property to a buyer, within thirty days of bringing the defect to the notice of the promoter by the alottee.
10. The promoter(s) shall obtain insurance as may be prescribed in respect of the project and title, which shall stand transferred to the allottee or association of allottees, at the time of promoter entering into an agreement for sale with the allottee.
D. Offences – Penalties and Adjudication
1. Promoter has to pay upto 10% of the estimated cost of the real estate project if he fails to register the project with the RERA.
2. If any promoter does not comply with the orders of the Regulatory Authority, he shall be punishable with imprisonment up to three years or with fine which may extend up to a 10% of the estimated cost.
3. Penalty up to 5% of the estimated cost of the project or construction, if the promoter provides any false information while making an application to the Regulatory Authority or contravenes any other provision of the Act.
4. Penalty for non registration and contravention of the orders or directions of the Authority shall make the real estate agent liable to pay ten thousand rupees for every day during which such default continues, which may cumulatively extend up to 5% of the cost of the real estate project.
5. Penalty for contravention of the orders or directions of the Appellate Tribunal shall make the real estate agent liable with imprisonment up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the estimated cost of the real estate project.
6. Any allottee, who fails to comply with the orders of the RERA, shall be liable to a penalty for the period during which such default continues, which may cumulatively extend up to 5% of the plot, apartment or building cost.
7. Any allottee, who fails to comply with the orders of the Real Estate Applellate Tribunal, shall be punishable with imprisonment up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the plot, apartment or building cost.