REAL ESTATE

(Regulation & Development)

ACT 2016

Professional Practice - II

ARSHIA MEIRAJ | SAMAN KHUBA | SHALOM DAVID 1

TABLE OF CONTENTS

01 02 03
Introduction Applicability Objectives
The Real Estate Act 2016 Applications of the Act Main objectives of the Act

04 05 06
Salient Features Pros & Cons Conclusion
Key Features Advantages and Limitations of the Act
Disadvantages of the Act

2
INTRODUCTION
Over the past few decades, the demand for housing has increased manifold. Despite Government's
efforts through various schemes, it has not been able to cope up with the increasing demand. Taking
advantage of the situation, various private players have taken over the Real Estate Sector, who are
completely non-sensitive towards the interests of consumers.

The primary purpose of the Act is to restore the confidence of consumers in the Real Estate Sector by
introducing transparency and accountability. MYHOME
REAL ESTATE

The Real Estate (Regulation and Development) Act, 2016 aims to regulate and promote the real
estate sector by regulating the transactions between buyers and promoters of residential as well as
commercial projects. It also has provisions for establishing a regulatory authority at state level called
"Real Estate Regulatory Authority" (RERA) for monitoring the real estate sector and adjudicating
disputes relating to Real Estate Projects. The main aim of the Act is to protect buyers and help
investment in Real Estate Sector.

3
APPLICABILITY OF RERA ACT 2016

● RERA is applicable to all the real estate projects and the Promoter (builders and
developers) needs to get such projects registered with Real Estate Regulatory Authority
except in the following cases:
● Where the land proposed to be developed does not exceed 500 square meters or the
number of apartments proposed to be developed does not exceed eight inclusive of all
phases
● Where the Promoter has received completion certificate for a real estate project before the
introduction of RERA
● Where the project is for the purpose of renovation or repair or re-development which
does not involve marketing, selling or new allotment of any apartment, plot or building.

4
 OBJECTIVES FOR THE RERA ACT 2016

The Real Estate Act is intended to achieve the following objectives:

● Ensure accountability towards allottees (buyers) and protect their interest

● Infuse transparency, ensure fair-play and reduce frauds & delays
● Introduce professionalism
● Establish symmetry of information between the promoter and allottee
● Imposing certain responsibilities on both promoter and allottees
● Establish regulatory oversight mechanism to enforce contracts
● Establish fast- track dispute resolution mechanism
● Promote good governance in the sector which in turn would create investor
confidence.

5
SALIENT FEATURES OF THE RERA ACT 2016

● Applicable on Commercial and Residential Real Estate projects.

● Establishment of Real Estate Regulatory Authority (RERA)
and Appellant Authority at state and Union Territory Level.
● Bar of jurisdiction courts from entertaining complaints with
respect to matters of the bill.
● Mandatory registration of Real Estate Projects and real estate
agents. (No sale before registration).
● Public disclosure of project details at RERA site. Such as layout
plans, status of statutory approvals, name and address of real estate
agents, contractors, architect, structural engineer etc..
● Act provides for arranging Insurance of Land title, which
benefits both the consumers and developers if land titles are later
found to be defective. 6
KEY FEATURES OF THE RERA ACT 2016

1. Registration of Real Estate Agents

2. Transparency to the buyers
3. Return of amount and compensation to the buyers
4. Carpet Area Defined
5. No Diversion of funds
6. Defect Liability
7. Adherence to sanctioned plans and project specifications
by the promoter
8. Obligations of promoter regarding insurance of real
estate project
9. No deposit or advance to be taken by promoter without
first entering into agreement for sale
10. Obligation to obtain Completion Certificate
11. Liability of the allottee
12. Grievance Redressal

7
KEY FEATURES OF THE RERA ACT 2016

1. Registration of Real Estate Agents

RERA mandates prior registration of Real Estate Agents with Real Estate Regulatory Authority who are willing to facilitate
the sale or purchase of any plot, apartment or building in a real estate project registered under RERA.

By this provision, real estate agents are also covered in the ambit of RERA, thus ensuring accountability on their part.

8
 KEY FEATURES OF THE RERA ACT 2016

2. Transparency to the buyers

The promoter shall, upon receiving his Login Id and password (post registration) create his
web page on the website of the Authority and enter all details of the proposed project for
public viewing such as details of registration granted by Authority, quarterly up-to-date
status of the project etc.

With this obligation of the promoters, the buyers can stay updated about the status of the
project just by visiting and checking the website of the authority.

9
KEY FEATURES OF THE RERA ACT 2016

3. Return of amount and compensation to the buyers

If the promoter fails to complete or is unable to give possession of an apartment, plot or building
in accordance with the terms of the agreement for sale or due to discontinuance of his business as
a developer for any reason, then the buyer has two options:
● The buyer can withdraw from the project and shall get refund of the full amount paid in
advance to the promoter alongwith interest which shall be the State Bank of India highest
Marginal Cost of Funds based Lending Rate plus 2% and compensation within 45 days of
such amount becoming due.
● Otherwise, he shall be paid, by the promoter, interest for every month of delay, till the
handing over of the possession, at the State Bank of India highest Marginal Cost of Funds
based Lending Rate plus 2%.
Thus, the promoter is required to provide timely possession of the apartment, plot or building to
the buyer failure of which will cause to incur additional costs on the part of the promoter.

10
 KEY FEATURES OF THE RERA ACT 2016

4. Carpet Area defined

“Carpet area” means the net usable floor area of an apartment,
excluding the area covered by the external walls, areas under
services shafts, exclusive balcony or verandah area and exclusive
open terrace area, but includes the area covered by the internal
partition walls of the apartment.

The price of the property depends on the Carpet area. With

a clear definition of Carpet Area now, builders and developers
cannot use their own method of calculation of the same, thus the
buyers are escaped from the manipulation of the developers who
used to increase carpet area at their own will to shoot up the prices
of the property. 11
 KEY FEATURES OF THE RERA ACT 2016

5. No Diversion of f unds
● The promoter has to make sure that 70% of the
amounts realised for the real estate project from
the allottees, shall be deposited in a separate account
to be maintained in a scheduled bank to cover the
cost of construction and the land cost and shall be
used only for that project which shall be withdrawn
to cover the cost of the project, in proportion to the
percentage of completion of the project as certified by
an engineer, an architect and a chartered accountant in
practice.

● Also the promoter shall get his accounts audited within six months after the
end of every financial year by a chartered accountant in practice, and shall
produce a statement of accounts duly certified and signed by such chartered
accountant and it shall be verified during the audit that the amounts collected
for a particular project have been utilised for the project and the withdrawal has
been in compliance with the proportion to the percentage of completion of the
project. 12
KEY FEATURES OF THE RERA ACT 2016

6. Defect Liability
Any structural or 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 if brought to the
notice of the Promoter within a period of 5 (five) years by the
Allottee from the date of handing over possession, then it shall be
the duty of the Promoter to rectify such defects without
f urther charge, within 30 (thirty) days, and in the event of
Promoter’s failure to rectify such defects within such time, the
aggrieved Allottees shall be entitled to receive appropriate
compensation.

13
KEY FEATURES OF THE RERA ACT 2016

7. Adherence to sanctioned plans and project

specifications by the Promoter
● The promoter shall not make any alterations or additions in the
sanctioned plans, layout plans and specifications of the buildings or the
common areas within the project 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 building, except
minor additions or alterations as may be required by the allottee, or as
may be necessary due to architectural and structural reasons but with
prior intimation to the allottee.
● This provision prohibits the developer to make alterations or
additions in the layout plans and specifications of the building.

14
KEY FEATURES OF THE RERA ACT 2016

8. Obligation of promoter regarding insurance of

Real Estate Project
The promoter shall obtain all such insurances as may be notified by the
appropriate Government and shall pay the premium and charges in respect of the
same.

The insurance shall stand transferred to the allottee or the association of allottees at
the time of entering into agreement for sale.

15
 KEY FEATURES OF THE RERA ACT 2016

9. No deposit or advance to be taken by promoter without first

entering into agreement for sale
Sec 13(1) of RERA Act 2016 states that "A promoter shall not accept a sum more than ten percent of the
cost of the apartment, plot or building as, the case may be, as an advance payment or an application fee
from a person without first entering into written agreement for sale with such person and register the said
agreement for sale, under any law for the time being in force".

From this we can infer that this particular provision emphasizes the fact that there are two
fundamental duties of a promoter:

● First, the promoter, after taking the advance amount from the prospective buyer, has
to execute the agreement to sell.
● Secondly, the agreement to sell should be registered before appropriate authorities.

16
 KEY FEATURES OF THE RERA ACT 2016

10. Obligation to obtain Completion Certificate

Suppose you're commencing any real estate Project such building apartments or a house and beginning any other construction
specific project. In that case, one needs to apply for or obtain the completion certificate from the concerned department or
authorities. One is supposed to give away all the details such as proper structure plan, building layout, number of buildings or
apartments to be constructed, etc. If the plan submitted is verified, then a builder can obtain their builder's completion certificate.

Once the plan is taken in cognizance and gets approved, the construction will occur according to the approved list. Any disturbance
or discrepancy may lead to the cancellation of the approval and other legal complications against the builder.

Once authorities have been ensured that the construction is being laid out as per the approved plan,

they issue a completion certificate to the builder

17
 KEY FEATURES OF THE RERA ACT 2016

11. Liability of the allottee

“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 within such time, the aggrieved allottees shall be
entitled to receive appropriate compensation in the manner as provided under the
Act”

18
KEY FEATURES OF THE RERA ACT 2016

12. Grievance Redressal

● The Real Estate Development and Regulatory Act 2016 (RERA) aims to bring in
clarity and fair practices in the real estate industry.
● RERA seeks to protect the interests of buyers and impose a penalty on errant
builders.
● RERA Authorities has developed a separate system – RERA grievance redressal to
address the complaints of home buyers. Depending upon the grievance or the
issue, a RERA complaint can be filed in every state before three authorities:
RERA Authority, RERA Tribunal and RERA Adjudicating Officer.
● The forum will give an answer within 60 days except if there is a particular
purpose behind such a postponement. RERA follows some guidelines for the
application process, which a property specialist will guide you in.

19
PENALTIES UNDER REAL ESTATE

2.False information
Fine up to 5% of the estimated cost
of the project

1.Non registration 3.Other contraventions

Penalty may extend up to 10% of Fine up to 5% of the estimated cost

the estimated cost of the project of the project

20
PROS & CONS THE RERA ACT 2016

21
CONCLUSION

The Real Estate Act, 2016 is one robust step towards regulating the highly unregulated real estate sector and bringing more
transparency to real estate transactions. However, a closer scrutiny of the provisions of the Act would reveal that the Act has certain
loopholes, which ought to have been filled while enacting the same and which may make the consumers liable to suffer. Some of such
loopholes are as follows:

● The Act only covers new projects and the projects where completion certificate is not issued on the date when the Act is notified,
but not the existing projects i.e. the projects that are ongoing as on date or where partial completion certificate has been issued,
completed immediately before the Act is notified, or stuck as on date for any reason;
● The Act doesn't make any provision for selling flats/ apartments on carpet area basis, leaving a scope for promoters for
manipulation;
● Under the Act, it is not mandatory to register projects, which are smaller than 500 square meters and 8 apartments. It could lead to
the exclusion of a large number of small housing projects, which also have great share in the market.

However, despite the abovementioned loopholes, the Act will benefit both promoters as well as buyers. It is an initiative to protect the
interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects. With a clear
intention of protecting the interests of buyers, the Act helps the consumers to safeguard themselves from any foul play or
exploitation by promoters. The legislation is considered to be a game changing step in the real estate sector.

22
CONCLUSION

1. Delays in projects were one of the biggest problems faced by the buyers. This was due to range of reasons from diversion of funds to
problems in land acquisition, bad construction etc. Consequently, the courts were flooded with litigations, police registered are filled

with FIR’s against the promoters, thus choking the entire system. Therefore the coming of the RERA act will be a boon to all

home buyers who have been clamoring for transparency and accountability in the real estate sector.
2. First, the registration of projects and brokers with RERA will help the buyers not only in making informed decision but also

prevent frauds caused due to selling of projects without approval plans with developers, siphoning off money by the
brokers etc. Also it will help organize and regulate the broker segment in India. Now the broker will themselves endeavor

to choose a RERA compliant developer before selling the project.

3. The compulsory timely compensation in case of delay of projects is expected to reduce litigations in the court.

Moreover, the mandatory mention of carpet area will not provide any room to developers to employ deceiving

tactics between what they promise to give and what they actually give. Therefore the act has laid down much responsible and larger
role for the developers, thereby, ensuring greater transparency in project-marketing and execution.
23