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12 April, 2016 For Private Circulation Only

A BRIEF PRESENTATION TO
THE REAL ESTATE DEVELOPERS’ ASSOCIATION
MEERUT
ON

SALIENT FEATURES OF
Real Estate (Regulation & Development) Act
2016
[in short “RERA”]
Prepared by
*Disclaimer on Page 22 of this Presentation Utkarsh Jain & Avnish Garg
Status of RERA

Step Timeline Reference


Publishing of the Act in Official 26th March 2016
Gazette

Date of the Act Coming into Force Central Govt. has to publish Section 1(3)*
and Commencement of the Act Notification in Official Gazette

State Government(s) MUST frame Within 6 months of Section 84(1)


Rules under the Act Commencement of the Act

Each State Government MUST establish Within 1 year from the Act Section 20(1)
Real Estate Regulatory Authority coming into force

Each State Government MUST establish Within 1 year from the Act Section 43(1)
Real Estate Appellate Tribunal coming into force

*Recommendation: Wait for the Notification in the Official Gazette for Coming into Force
of RERA and Commencement of RERA. It is unclear when RERA shall commence. 2
What Type of Projects and Activities is RERA Applicable to?
Area of Plot Proposed to be Developed is greater than 500 square meters
or
Number of Units Proposed to be Constructed on the Plot are greater than 8 [Eight]

Unit includes Plots, Apartments and Buildings

The above limits are inclusive of all phases in a real estate project. If the project is developed in phases, every such
phase shall be considered as a project, and promoter shall obtain registration under this Act for each phase
separately.

Residential Projects & Commercial Projects, whether new or existing/ongoing, for the Purpose of Sale which are
meeting the 500/8 Rule are covered under RERA.

Plotted Colonies, Group Housing/Apartments, Shops, Offices, Godowns and Complete Buildings (for
Residential/ Commercial/ Business/ Professional Use) are covered under RERA.

All Ongoing Projects for which Completion Certificate has not been issued before Commencement of RERA are
covered. Such projects have to be registered with the State Real Estate Regulatory Authority within 3 months from
Commencement of RERA. Refer to Section 3(1).*

Registration of Project with Authority has to be done before following activities are carried out:
Advertising, Marketing, Booking, Sale or Offer for Sale, and Invitation to Purchase.
*Recommendation: Wait for the Rules regarding Existing and Ongoing Projects for which Completion
Certificate has not been taken. Till now, the status of such projects under RERA appears unclear. 3
Who is Covered under RERA?
Promoter is defined in Section 2(zk) of RERA and is liable for the Project:
-Person Developing Land into Real Estate Project (with or without StructuresThereon)
-Person constructing Building (whether Independent Building or Multi-Unit)
- Person converting Existing Building into Multiple Units for the Purpose of Sale
-Development Authority/ Public Body developing/constructing Project for Purpose of Sale
-Co-operative Housing Society developing/constructing units for its Members
-Builder/Contractor/Coloniser/Developer
-Power of Attorney Holder of the Land Owner
-J.V. Partners

-If one person is constructing/developing the units and another person is marketing/selling, both
persons shall be considered as Promoters and jointly liable for the Project

Promoter includes Individual, H.U.F., Company, Partnership Firm, L.L.P., Association of


Persons, Authority and Co-operative Society
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Registration & Impact of RERA on Ongoing Projects
Register Projects not having Completion Certificate when Act comes into force

STATUS OF ONGOING PROJECT IMPACT


If Completion Certificate (C.C.) for the Real Estate Registration NOT Required for Project
Project is obtained before Commencement of RERA

If C.C. is not obtained before Commencement of Registration Required for Project


RERA and any of the following conditions are met:
1. More than 8 Units (Apartments/Plots) in Land of
Any Size
2. Building(s) in Land exceeding 500 sq.m.
3. Plotting in Land exceeding 500 sq.m.

• No exemptions given to ongoing projects/existing projects (without C.C.) in the Act and
all provisions of RERA apply to them.

• However, Rules are yet to be framed which shall hopefully give more clarity in this matter.

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When to Register the Real Estate Project?
 Real Estate Projects have to be registered with the Real Estate Regulatory Authority of the State

 Until Establishment of Regulatory Authority, State Government has to designate an Authority or


Officer as Regulatory Authority

 Real Estate Regulatory Authority has to be formed by State Government within 1 year of coming
into force of the Act.

 Promoter MUST REGISTER New Project with Regulatory Authority before Advertising,
Booking, Selling, Offering for Sale, Inviting to Purchase

 Promoter CANNOT REGISTER Project without obtaining the Approved Sanctioned Plans/
Commencement Certificate from the Competent Authority

 In case of Existing/Ongoing Projects, Promoter MUST REGISTER project within 3 Months


from Commencement of the Act.

 Penalty for Non-Registration of Project up to 10% of the Estimated Cost of the Project [S. 59]
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Registration of Real Estate Project
 Real Estate Project has to be compulsorily registered with the State Real Estate Regulatory
Authority by filing the Application for the Project as per the Prescribed Rules

 Regulatory Authority shall Grant Registration within 30 days of Application and provide
Registration Number of the Project to the Promoter and unique Login ID/ Password for accessing
theWebpage of the Project on theWebsite of the Authority to fill project details

 Authority may reject a Defective Application with Reasons in Writing after giving an opportunity
to the Promoter of being heard.

 If Registration not granted or rejected by the Authority within 30 days of Application,


Registration shall be Deemed and Authority shall provide Registration Number, etc. within 7 days

 Registration of Project shall be Valid for Declared Time Period of the Project Completion in the
Application

 Registration may be extended for up to one year due to force majeure by Regulatory Authority
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Details to be Filed by Promoter in Application for Registration
Promoter and Company Details Project Details Declaration of Promoter on
Affidavit
Name and Registered Address Authenticated Copy of Approvals & He has Legal Title to the Land of the
Commencement Certificate Project
Enterprise Type (Proprietorship, Sanctioned Plan, Layout Plan and Land of the Project is Free from
Partnership Firm, LLP, Company, etc). Specifications of the Project. Location Encumbrances
& Registration Number Details with Clear Demarcation Details of Encumbrances, if any
Names & Photographs of Promoters Details of the Development Works Time Period for Completion of
Plan and the Proposed Facilities Project/ Phase
Details of Projects launched in Last 5 Proforma of Allotment Letter, He shall deposit 70% of Amount
Years (completed and under Agreement for Sale and Conveyance Realised from Allottees in a Separate
development) and their Current Deed Proposed to be Signed Bank Account to be used to cover
Status construction cost & land cost
-Details of Land of Project
Number, Type and Carpet Area of He shall get Accounts of the Project
-Details of Cases Pending in respect to
Apartments, Exclusive Balcony, Open Audited by C..A. within 6 months
Project
Terraces and Garages from the end of every FinancialYear
Details of Real Estate Agents, He shall take all pending approvals in
Architects, Structural Engineer, time from the competent authorities
Contractors, etc. for the Project
He has furnished all relevant
documents as per RERA
Promoter has to also regularly update details on Project’s Webpage on Website of the Authority
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Utilisation of 70% deposited in Separate Bank Account
70% of Amounts Realized from Allottees to be Deposited in a Separate Bank Account
Provision Implication
Purpose of depositing 70% is to cover “Cost of Payment of Land Cost and Withdrawal of Land
Project”, i.e., Construction Cost + Land Cost Cost from Separate Account possible
Amount may be withdrawn from Separate Account Percentage of Completion of the Project has to
based on Percentage of Project Completion Method be certified by Chartered Accountant, Architect
and Engineer
If separate registration numbers have been taken for separate phases in a single project, accounting for
each phase has to be done separately.
Funds from one phase cannot be utilised for works of another phase.
ISSUE: It is unclear what will be the withdrawal allowed if the opinions of the Chartered Accountant,
the Architect and the Engineer differ about the percentage of completion of project.
ISSUE: It has not been explicitly stated in the Act when the complete funds can be withdrawn from the
separate bank account.
It is unclear whether the funds can be withdrawn and Separate Bank Account closed if:
- 100% work completion as per certificate of C.A., Architect and Engineer
- Completion Certificate obtained from the competent authority
- Sale of All Units in the Project and Possession Granted to Allottees
- Handover of Project to the Association of Allottees 9
Cost of the Project
Items that will be included in Cost for Purpose of Withdrawal from Separate Account

Cost Elements to be Considered (as per observation of Author)


Cost of Land and Linked Expenses
Direct Costs of Development/ Construction and Site Overheads
Government Deposits and Fees such as Development Charges, Labour Cess, etc.
Cost of Insurance for Title of the Land & Building and Construction Thereupon
Cost of Approvals from Professionals such as Chartered Accountant, etc.
Interest Cost Paid for Project
Any other costs such as Project Overheads, Advertising and Marketing Costs
All costs should be related to the specific Real Estate Project alone.
Within 6 months of the end of every financial year, Accounts in respect to the Project shall be
audited by practising Chartered Accountant who shall verify during the course of audit that:
- Amounts collected for a particular project have been utilized for that project alone.
-Withdrawal has been made in compliance with the proportion to the percentage of
completion of the project.
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After Registration: Advertisement/Prospectus
Guidelines for Advertising under RERA
 No Advertisement/Prospectus permitted through any medium before Registration
of the Project.
 No Publicity of any manner permitted for informing persons about project, or
offering for sale of units or inviting persons to purchase units or to make
advances/deposits for the units before Registration.
 Services that are not Intended to be Offered by the Promoter should not be
mentioned in the Advertisement/Prospectus. Registration may be revoked.
 Advertisement/Prospectus shall mention prominently the Webpage Address of
Project on the Authority’s Website and the Project Registration Number.
 If Allottee books a unit based on false information provided in Advertisement, etc.
or on the basis of Model Apartment* and wants to withdraw from the Project, his
entire investment to be returned along with interest and compensation as prescribed.

*Care should be taken while constructing Model/Show Flats and even 3D Walkthroughs of Project 11
After Registration: Booking
Guidelines for Booking under RERA
 No Booking Amount/ Application Fee/ Advance Payment can be taken from Allottee
without first Registering the Project with the Regulatory Authority
 No Investor Sale/Pre-Launch Allowed
 Promoter shall not accept a sum more than 10% of the cost of the unit as advance
payment/application fee from a person without first executing Registered Agreement
for Sale with the Allottee.
 At the Time of Booking/Issue of Allotment Letter, Promoter shall provide to the Allottee:
a) Sanctioned Plans and Layout Plans, along with Specifications by Display at the Site
b) Stage-wise Time Schedule of Project Completion including Provisions for Civic
Infrastructure like Water, Sanitation and Electricity
 Booking can be cancelled only in terms of the Registered Agreement for Sale. Effectively,
the Agreement to Sale has to be cancelled for Cancellation of Booking.
 List of Bookings in the Project shall be displayed on the Project Webpage every quarter.
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After Registration: WebPage
Activities under RERA
 Updated Information has to be provided regularly about the Project Status
onWebpage of the Project on the Authority’sWebsite –
Details of Registration granted by the Authority
Quarterly Up-to-Date Information regarding the following:
a) List of Number and Types of Apartments/Plots/Garages Booked
in the Project
b) List of Approvals AlreadyTaken and Pending Approvals
c) Status of the Project
d) Any other Information as per Act and Rules made by the
Authority

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After Registration: Responsibilities of Promoter
Activities under RERA
 The Promoter shall be responsible for all obligations, responsibilities and
functions under the provisions of RERA and Rules or as per the
Agreement for Sale till the Conveyance of All Units
 The Promoter shall be responsible for providing and maintaining essential
services, on reasonable charges, till the taking over of the maintenance of
the Project by the Association of Allottees.
 The Promoter shall be liable for Payment of all Outgoings collected from
Allottees for this purpose and related to the Project until Physical
Possession of the Project has been given to the Allottees/Association.
 The Promoter shall not mortgage/create a charge on any unit for which
Agreement for Sale has already been executed and he shall solely be
responsible for any charge created by him.

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Defects & Development Obligations
 For 5 years from Handover to Allottee, the Promoter shall be responsible
for:
a) Structural Defect
b) Defect inWorkmanship, Quality or Provision of Services
c) Any Other Obligation as per the Agreement for Sale relating to the
Development

 If the Defect has to be brought to the notice of the Promoter by the


Allottee within a period of 5 years from the date of handing over
possession, the Promoter is liable to rectify the defect.

 Promoter shall rectify such defects without charge, within 30 DAYS from
the date of knowledge.

 If the Promoter fails to rectify such defects within such time, the Allottee
shall be entitled to receive Compensation as provided under RERA.
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Restrictions on Transfer & Assignment of Project

 Promoter shall NOT Transfer/Assign his Majority Rights and Liabilities in


respect of a Project to a Third Party without Obtaining Prior Written Consent
from 2/3rd of the Allottees and without Prior Written Approval of the Regulatory
Authority.
 For this Purpose:
- Even if an Allottee or His Family Member books more than one Unit, they
shall be collectively counted as One Allottee.
- In case of Companies, Firms, etc., and their Associated Entities/Related
Enterprises, they shall be collectively counted as One Allottee only.
 Such Transfer shall not affect the Allotment/Sale of the Units Made by the
Erstwhile Promoter
 The Assignee Promoter shall take over the responsibilities and liabilities of the
Erstwhile Promoter

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Granting Possession/ Transfer of Title

The Promoter shall execute a Registered Conveyance Deed in favour of:


 Allottee in respect of the Apartment, Plot or Building
 Association of Allottees or Competent Authority in respect of the Undivided
Proportionate Title in the Common Areas.

The Promoter shall HAND-OVER Physical Possession of the Unit to the Allottee AND
of the Project and Necessary Documents & Plans including Common Areas to Association
of Allottees or Competent Authority:
 within the period as specified under the local laws; or
 within 3 months from date of issue of the Occupancy Certificate.

Every allottee shall take Physical Possession of his Unit within a period of 2 months of the
Issuance of Occupancy Certificate.

Every allottee shall participate towards Registration of the Conveyance Deed as per RERA.

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Other Relevant Provisions
1. Rate of Interest chargeable from the Allottee by the Promoter, in case of default,
shall be equal to the Rate of Interest which the Promoter shall be liable to pay the
Allottee, in case of default.
2. Promoter shall ensure Formation of an Association/ Society/ Cooperative Society
of the Allottees within a period of 3 months from the majority of allottees having
booked a unit in the Project.
3. Promoter shall Compensate the Allottees for any loss caused to Allottee due to
Defective Title of the Land and such Claim for Compensation shall not be barred
by Limitation.
4. If Promoter fails to hand over possession of the Unit to the Allottee:
(i) In accordance with the terms of the Agreement for Sale; or
(ii) Due to Discontinuance of his Business as a Promoter; or
(iii) Revocation of his Registration; or
(iv) For any Other Reason
Promoter shall be Liable, on Demand being made by the Allottee, to Refund the
Amount received from Allottee with Interest and Compensation as per RERA.
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Penalties
REGULATORY AUTHORITY Penalty
Not taking Prior Registration under Section 3 Up to 10% of Estimated Cost of the Project as
decided by the Authority
Not paying Penalty imposed as above - Imprisonment upto 3 years
Or - Further penalty of 10% of Estimated Project Cost
Continues to violate Section 3 - Or Both
Giving False Information to Authority/ Allottees Up to 5% of Estimated Cost of the Project as
Or Contravention of Provisions of Section 4 decided by the Authority
Any OtherViolations of RERA or Rules Up to 5% of Estimated Cost of the Project as
decided by the Authority

APPLELLATE TRIBUNAL Penalty


Promoter fails to comply with, or contravenes, - Imprisonment upto 3 years
any of the orders or decisions of the Appellate - Penalty of 10% of project cost
Tribunal - Or Both
Appeal will be heard only after deposit of 30% of Penalty or such higher percent as decided by the
Appellate Tribunal or Amount to be Paid to Allottee including interest & compensation or both.
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Expected Impact of RERA on Cost of Project
Provision Impact
Cost of Consultants such as Chartered Accountant, Cost of all Consultants will have to be incurred
Engineer and Architect, etc. regularly to fulfil the stringent requirements under
RERA.
Sale of Project after Registration Capital of Promoter will get locked for the 1-2 years
from Land Acquisition to Launch of Project after
Sanction & Registration with Authority.
Entire Project to be Sanctioned at Start; Change in Layout will require permission of 2/3rd
No Prelaunch/ Pre-Booking Allottees; Promoters may have to pay all Premiums and
Charges & get Full Layout Sanctioned upfront
Deposit of 70% Collection from Allottees into Separate Capital can be withdrawn in Proportion to Completion
Bank Account of the Project; Hence, capital will remain locked up
even after launch
Insurance for the Project This will add to the cost of the project
Completion has to be done within Time Declared by Since there shall be Penalties for Delayed Possession,
Promoter in the Application for Registration Promoter will have to invest in New Technology, Better
Contractors etc.
5 Year Warranty for Defects Since the Promoter will have to rectify defects for up to
5 years of handover of possession, provisions shall have
to made to cover the cost for the same.
First Things to be Done by Developers/Builders of Meerut
 Make a List of All Existing/Ongoing Projects meeting the 500/8 Rule:
- Projects of more than 500 sq.m. Planning Area.
- Number of Plots/Apartments/Shops is more than 8.

 Arrange the Projects in Order of Date of M.D.A. Approval

 Note the Date of Last Sale Deed Executed/Advance Taken in the Project

 Make an Assessment of Actual Percentage Completion of your projects as per Internal


Development Estimate submitted with M.D.A.

Try to obtain Full or Partial Completion Certificate from M.D.A., wherever possible

 Review internal processes as per RERA including your typical Buyer Agreements/ Deeds

 Wait for the Rules to be drafted under RERA for more clarity as there are several
discrepancies/ difficulties in the Act which need to be removed

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12 April, 2016 For Private Circulation Only

DISCLAIMER
All views and opinions expressed in this presentation are personal views and opinions of the Author based on information available till this date and his
understanding of the subject matter.
The Author is not responsible/liable in any manner if any facts/details/information emerge which may be contrary to views expressed by him in this
presentation.
The viewer/reader is advised to place utmost caution while following in any manner any of the advices, opinions or views of the author as presented in this
presentation.
The viewer/reader is advised to strictly follow the Act [“Real Estate (Regulation and Development) Act, 2016”] and the rules and regulations which may be
framed thereunder and any other law of the land as may be applicable before committing any action/deed in respect to matters under the Act. The author of
this presentation is not liable in any manner for commission/omission of any act by the reader/viewer/third party on the basis of this presentation.
Several matters in respect to the Act have not been covered under this presentation as per Author’s discretion.