Introduction to RERA Act, 2016 and Important Concepts
The Real Estate (Regulation and Development) Bill, 2013 was introduced in the Rajya Sabha on 14th August, 2013 after being referred to various committees almost after 4 years the bill was passed by Lok Sabha and Rajya Sabha in the year 2016. The bill received the assent of the President of India on 25th March, 2016 and subsequently the Real Estate (Regulation Development) Act, 2016 (“RERA Act”) was notified in the Gazette of India on 26th March 2016.
Prior to RERA, there was a lack of transparency regarding the real estate projects; diversion of money collected from the homebuyers for purposes other than the real estate project; unreasonable delays for completion and allotment. Therefore, to provide a solution to the above-mentioned problems RERA Act was promulgated with the following objectives : regulation and promotion of the real estate sector; sale of real estate project in an efficient and transparent manner; protect the interest of the consumers; establish an adjudicating mechanism for speedy redressal.
Since no considerable literature is available on RERA Act, an attempt has to be made to provide quick explanation notes in the form of a series. This article aims to give a brief background of RERA Act and its essential concepts.
Before venturing into the concepts, it is crucial to understand important definitions, which are explained as follows –
Allottee – The term allottee has been defined under section 2 (d) of RERA Act and includes the first buyer. The term first buyer means the person who buys the plot, apartment or building from the promoter or which has been otherwise transferred to him by way of a gift. The definition has been extended to include second buyers who buy plots and apartment buildings from first buyers and excludes allotees to whom the plot, apartment or building is given on rent.
Apartment – The term has been defined under section 2 (e) of RERA Act and includes block, chamber, dwelling unit, flat office, showrooms, shop, godown, and a separate and self-contained part of any immovable property. It is pertinent to note that the definition does not bifurcate between a residential and commercial unit.
Advertisement – According to section 2 (b) of RERA Act, advertisement means any document issued as advertisement through any medium and includes any notice, circular or publicity in any form informing persons about a real estate project or offering for sale of a plot, building or apartment or inviting persons to purchase in any manner such plot building or apartment or to make advances or deposits for such purposes. This is an inclusive definition; even an email or SMS informing any person about a real estate project also falls under the term advertisement.
Real Estate Project – According to section 2 (zn), the term real estate project includes
- Development of a building;
- Converting an existing building or part thereof into apartments;
- Development of land into plots or apartments.
To sell all or some of the apartments, plots, or buildings.
Real Estate Agent – The term real estate agent under section 2(zm) of RERA Act means any person who acts or negotiates on behalf of one person or acts on behalf of one person in a transaction of transfer of his plot, apartment or building, as the case may be, in a real estate project, by way of sale, with another person or transfer of plot, apartment or building, as the case may be, of any other person to him and receives remuneration or fees or any other charges for his services whether as a commission or otherwise and includes a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation for sale or purchase of plot, apartment or building, as the case may be, and includes property dealers, brokers, middlemen by whatever name called.
Promoters – The term promoter has been defined under Section 2(zk) to include a person who :
- Constructs or causes to construct an independent building consisting of apartments or converts an existing building or a part thereof into apartments to sell all or some of the apartments to another person. Further, the term includes his assignees;
- Develops land into a project, whether or not the person also constructs structures on any of the plots, to sell to another person all or some of the plots in the said project, whether with or without projects;
- The term also expands to include development authority or local authority in respect of allottees of :
- Buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government or
- Plots owned by such authority or body or placed at their disposal by the Government to sell all or some of the apartments or plots.
Registration Process of Real Estate Projects
Section 3 of the RERA Act provides for the registration of real estate projects with the Real Estate Regulatory Authority (“RERA”); this section can be divided into three parts, which are specified as follows-
Section 3 restricts sales/ booking /invitation to purchase or advertise the real estate project without registering with the RERA.
Further, the section provides that the prior registration projects shall apply to the following –
- Projects on 1st May 2017 (the commencement date of this Act) have not received a completion certificate;
- Projects launched after 1st May 2017.
The section exempts the registration of a real estate project in the following scenarios-
- Where the area of land is not five hundred square meters;
- The number of apartments proposed to be developed does not exceed 8;
- The promoter received a completion certificate prior to the commencement of RERA Act;
- No sale, marketing, selling or new allotment of any apartment, plot or building, as the case may be under the real estate project.
Documents required for registration of real estate project
The registration of the real estate project is done through online mode on the website. The website of each state is different. Similarly, the registration process, as well as the documents, also differ from state to state. However, the following is the uniform list of documents –
- Architect Certificate
- Financial Statement/Income Tax Returns of the Promoter
- Encumbrance Certificate
- Plan Copy
- Land Documents
- Title Report
The following declarations/undertakings shall form part of the registration document as provided under section 4 of RERA –
- Undertaking for the clear title of the property.
- Undertaking that land is free from encumbrances.
- Undertaking for timely completion.
- Undertaking for utilization of money only for the project.
- Undertaking to take pending approvals.
The Punjab RERA website mentions the checklist of relevant documents for the registration of real estate projects in Punjab.
Section 5 provides the registration process under RERA Act, which is specified as follows –
- An application along with the above-mentioned documents and prescribed fees has to be made for registration to the authority under Section 4 of the RERA Act.
- Within 30 days, the authority is required to grant its approval or rejection. If the authority rejects the application, in that case, it needs to record its reasons in writing and grant an opportunity of hearing to the applicant.
- If there is no communication concerning approval or rejection of the registration of the real estate project, in that case, it is considered as deemed approval of the real estate project by the authority.
- After the registration is approved, a registration number login and password are granted to access the RERA website.
Extension of Registration
The registration to the real estate project is only granted for the period specified in the undertaking for completion of the project along with the application. However, as per Section 6, the registration can be extended on an application made by the promoters if there is any delay on account of force majeure or without the default of the promoter based on the facts and circumstances of each case. The registration period can only be extended for one year. Further, this section also restricts RERA from rejecting the application without a hearing.
Revocation of Registration
RERA can revoke the registration granted under Section 5 on the following grounds :
- The promoter makes a default in doing anything required by or under this Act or the rules or the regulations made thereunder;
- The promoter violated any of the terms or conditions of the approval given by RERA;
- The promoter is involved in any kind of unfair trade practice or irregularities.
RERA has to serve 30 days’s notice before revoking the registration. It can also impose such terms and conditions for the benefit of the allottees instead of revoking the registration.
Effect of Revocation
In case the order for revocation of the real estate project is passed, it will have the following effect :
- The promoters will be debarred from accessing the website;
- Name and photo will be displayed in the defaulter list;
- Intimation of revocation to other state authorities;
- The separate bank account maintained by the project will be frozen;
- Development work may be carried out by the Association of Allottees/Authority or as decided by RERA.
It is also pertinent to note that the revocation order will not come into effect until the period to file an appeal under the RERA Act is over.
(Amarpal Singh Dua is an Advocate enrolled with Bar Council of Punjab and Haryana)
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