The Real Estate (Regulation and Development) Act, 2016

Presented by
 Session
CA. Vinay T B.Com., LLB
Partner
Venu & Vinay
Chartered Accountants
Bengaluru

Online / Web Session on RERA on Wednesday, 20th

March 2019

For IBM India Private Limited – Finance

 Presentation Overview - Contents

1. Overview of the Act / Statute

2. RERA Nationwide View
3. Central Act, State Rules, Present KA Status
4. Applicability of the Act, Rules and Prior Registration of Real Estate
Projects
5. Change in Practice – Pre and Post RERA
6. Professional involvement
7. Offences & Penalty, Authorities, Adjudication etc
8. Allottees – Rights and duties
9. Q & A / Open House
 Statement of Objects and Reasons of the Act

1. Ensure Accountability Towards Allottees and Protect their Interest;

2. Infuse Transparency, Ensure Fair-play and Reduce Frauds & Delays;
3. Introduce Professionalism and Pan India Standardization;
4. Establish Symmetry Of Information between The Promoter And Allottee;
5. Imposing Certain Responsibilities On both Promoter And Allottees;
6. Establish Regulatory Oversight Mechanism to Enforce Contracts;
7. Establish Fast- Track Dispute Resolution Mechanism;
8. Promote Good Governance in the Sector which in turn would create investor
confidence;
 RERA – Nationwide View
1. 21 States and 7 Union Territories (UTs) have implemented RERA [framed rules as required under Section
84 of the Real Estate (Regulation and Development)Act]

2. Out of these, 23 states / UT’s have a fully functional online RERA portal

3. Out of these only 18 States – KA, AP, Gujarat, Maharashtra, Madhya Pradesh, Rajasthan, Punjab etc., have
established permanent Real Estate Regulatory Authority, while 10 States/ UTs have set up interim
authorities

4. Few States/ UTs have named the Appellate Tribunals under the Real Estate Act, Few States have begun the
online enlistment under the Act

5. Maharashtra has seen the maximum response in project registrations (~20,000 project registrations) with its
real estate regulatory authority

6. Uttar Pradesh ~2,600, in KA 3000 , Gujarat 4962, and Madhya Pradesh 2109

7. While deviation from the model Act is the main cause for concern, slow progress of states in
operationalizing

8. Regulators imposed fine on Promoters for delayed registration

9. Maharashtra has a conciliation forum (which has representation from Builders' and Consumers'
Associations) to speed up dispute resolution between buyers and property developers
RERA Act – 92 sections with 10 Chapters
 RERA Act and Karnataka - Snapshot
1. Central Act came into force with effect from May 1, 2017

2. Karnataka Real Estate Regulation and Development Rules, 2017 was

approved by Government of Karnataka and notified on July 10, 2017

3. Government of Karnataka appoints Principal Secretary to

Government of Karnataka, Department of Housing as the Interim
Authority - Section 20 (1)

4. To appoint one or more adjudicating officers to settle disputes and

impose interest and computation

5. Government of Karnataka appoints Karnataka Appellate Tribunal as

Interim Appellate Tribunal - Section 43 (4)
 RERA - Karnataka - Snapshot

1. Online – Applications for Registration of projects accepted through

website from 24th July 2017

2. Online – Applications for Registration of Agents accepted through

website from 24th July 2017

3. Made mandatory filing for ongoing project within 3 months from 1st
May 2017 – i.e., by 31st July 2017
RERA - Karnataka – So far – India’s Top 3
Approved – 3000 +
Under Process – 400 +
Registration time for completion lapsed - 1000
Rejected – 160 +

Projects Under
Agents Investigation-
Approved – 1300 1100
Under process 278

Judgment by RERA Judgment by

Mumbai High / SC -
KARNATAKA – Appellate Tribunal -
Court Judgment - 1
700 + 10
 Applicability of the Act

where the area of land proposed to be developed does not exceed five hundred square
meters (5382sft) 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 prior to
commencement of this Act;

for the purpose of renovation or repair or re-development which does not involve
marketing, advertising selling or new allotment of any apartment, plot or building, as the
case may be, under the real estate project.

where the real estate project is to be developed in phases, every such phase shall be
considered a stand alone real estate project, and the promoter shall obtain registration
under this Act for each phase separately.
 Ongoing Projects – KA RERA Rules
Inclusions Exceptions / Exclusions

Development is going on
for which completion
certificate has not been
issued
Layouts - Streets and civic amenities sites and other services
have been handed over to the Local Authority for maintenance
Apartments - Common areas and facilities have been handed over to the
registered Association of Allottees

Projects – all development works have been completed and 60

% sale deeds have been registered / executed

Projects – all development works have been completed and application

for CC / OC is filed (completion / occupancy)

Projects in Phases - Partial occupancy certificate is obtained in

case of projects are in phases

All ongoing projects shall be registered within 31st July 2017

 Prior Registration

Section 3. Prior registration of real estate project with Real Estate Regulatory Authority
Promoter shall not
• advertise,
• market,
• book,
• sell or
• offer for sale,
• or invite persons to purchase

without registering the real estate project with RERA Authorities

 Post RERA – Business Cycle

7 – PREAPRE
1 – Due Diligence
ALL DOC FOR
of Land and 6 – Sanction Plans
RERA
Project
APPLICATION

2 – Feasibility of
5- Apply for Noc’ 8 – RERA
the Project /
clearances REGISTRATION
Market Study etc

9 – LAUNCH /
3 – Enter MOU 4 – DA / JDA /
ADVERTISEME
with Land Owner GPA
NT ETC
 Post RERA – Customer Transactions

6 - Complete
development and 7 - Conveyance deed
1 - Booking Form
within 3 months of OC
Obtain OC

5- Formation of
Association of 8 – Title Insurance /
2 - Allotment Letter Allottees once Defect Liability for 5
majority of units are years
booked

4 - Register
3 - Enter Agreement Agreement for Sale – 9 – Handover to
for Sale if promoter collects > Association
10 % of total cost
 Post RERA – Change in Practices - Transformation
Price is escalation Quarterly update Same Rate of Consent of
Interest for the
free (except of of progress to default by promoter Allottes incase of
govt (levies) authorities or Allottee changes

PRIOR Formation of Defect Liability Obligation of

registration of Association once towards the Structure, promoter on
Real Estate major units are workmanship or veracity of
booked Services for 5 Years
Project for launch advertisement

70 % of money
Shall be in collected can be Title guarantee Agents are liable
Carpet Area drawn based on % for Lifetime - and penalized for
(against super of completion of forever wrongdoings
builtup) development

Single
Compulsory Stringent
Agreement for registration of Sale
Title Insurance is
land and agreement mandatory penalties
construction
Post RERA – Change in Practices - Transformation
Banks shutting Online
Agents are liable
and penalized for
out Builders mechanism of Conciliation
wrongdoings without RERA lodging forums
Registration complaints

Obligation of
Consent of
promoter on Detailed written
Allottes incase of Stringent Lending
veracity of agreements
changes
advertisement

Refund to Builders getting

Transfer of Regular update
Allottees with more cautious
Common Areas to on development
interest and about new
Association of project
compensation launches

Veracity / Professional
Disposal of
Advertisement RERA Annual Certifications -
complaints with
shall carry RERA Audit Checks and
in 60 days
Reg No balances
 Key Differentiators
Sec 10 Real Estate Functions of
Agent Real Estate Agent

Sec 11 Promoter Functions and Duties of Promoters

Sec 19 Allottees Rights and Duties of

Allottees
 Professional Opportunities -

Section 3 Registration of RE projects Structuring of Real Estate Project under RERA

with RERA (CA/ CS/ CWA/
Legal Practitioners Details there on based on Structuring

Section 4 CA Certification for withdrawal Based on POC

of funds

Section 4 Audit under RERA Annual Audits

Section 56 Representation Services Before AO, Tribunal
General Consultation Training, Impact Study etc
 Professional Opportunities -

Training / Education / Aware of provisions including penal consequences – to All departments

in an organization

Communication and Compliances -

Documentation – Operation, DLP, Customer conversations,

Agreements - Development, Vendors, Customers

Review /
Outsource
 Professional Opportunities - Compliances

1. Added cost of compliances may also indirectly impact pricing:

Disclosures and Transparency

Registration costs
Insurance – Construction and Title
Structural defect liability period – 5 years
Ongoing compliance costs
Restricted utilisation of funds to specific projects
Certifications and Audits
 Initially, a lot of work is to be done to get the existing and new projects
Initial Backlog registered. Details such as status of each project executed in last 5 years,
promoter details, detailed execution plans etc. needs to be prepared.

Increased Project Registration, regular update with RERA and

Cost insurance cost for construction

Land and approval costs to be meted out of internal accruals as pre launch
concept may end . It may lead to a shift in equity financing from debt financing
Tight Liquidity
prevailing currently

The cost of capital may go up as developers may now have to fund the land, the
Rise in Cost of approval cost through equity. With frequent delay in obtaining approvals, debt
Capital funding may not be an ideal route for project

With entry in the sector made difficult, the sector may witness consolidation.
Strong financial and execution capability is required to launch a project. The
Consolidation development model/agreement may gain prominence

Increase in Project The project launch time may increase since a lot of time will involve in
Launch Time finalizing finer details before launching a project. Details such as structuring
of project, financials, risk mitigation, complete drawings utilities layout, etc.
Needs to be finalized before project starts.
 Offenses and Penalties
Provision Promoter Agent Allottee
Non-registration of Up to 10% of project Penalty of INR10,000
project/agent with cost and imprisonment per day during default
RERA and continue to of 3 years for tenure up to 5% of
do so continuous default property cost

False information Up to 5% of the

while making an estimated project
application to REM cost

Non-compliance with Up to 5% of the Up to 5% of the

any provision of the Act estimated project property cost
cost
Non-compliance with Up to 5% of the Up to 5% of cost Up to 5% of cost
the aforesaid order of estimated project property cost property cost
REM cost
Non-compliance with Up to 10% of cost and Up to 10% of cost and Up to 10% of cost and
the aforesaid order of imprisonment of up of imprisonment of up of imprisonment of up of
the Appellate Tribunal up to 3 years or both up to 1 years or both up to 3 years or both
 Allottees – Rights and Duties
Right Details / Explanation

Entitled to obtain Information relating to -

1. sanctioned plans
2. layout plans
3. Specifications of project
4. such other information as provided in the Act or the rules and regulations or
the Agreement for Sale
Entitled to know Stage-wise time schedule of -
1. completion of the project,
2. including the provisions for water,
3. sanitation,
4. electricity and
5. other amenities and services as agreed to in the agreement for sale
 Allottees – Rights and Duties
Right Details / Explanation

Entitled to claim The possession of apartment, plot or building, as the case may be,
and
The association of allottees shall be entitled to claim the possession of the common areas, as
per the declaration/Affidavit given by the promoter,
Refund to allottee (a) amount paid (b) interest ( c) compensation

if the promoter -
1. fails to comply or is unable to give possession in terms of agreement for sale
2. discontinue his business
3. Suspension / revocation of registration by RERA Authorities under the Act

Entitled to have necessary documents,

plans,
common areas plan and documents,
after handing over the physical possession
 Allottees – Rights and Duties
Duties Details / Explanation
shall be 1. To make necessary payments in the manner and within the time as
responsible specified in the agreement for sale

2. shall pay at the proper time and place, the share of the registration charges

3. municipal taxes, water and electricity charges, maintenance charges,

ground rent, and other charges, if any
make necessary 1. The Promoter shall periodically intimate to the Allottee,
payments 2. the amount payable as stated in agreement (including taxes)
(Agreement 3. the Allottee shall make payment within 30 (thirty) days from the date of
Clauses) such written intimation.
 Allottees – Rights and Duties
Duties Details / Explanation

shall be liable To pay interest, at such rate as may be prescribed -

for any delay in payment towards any amount or charges to be paid

Rate of Interest As specified in respective State Rules

E.g., TN – Repo Rate + 2 %
MH – SBI highest Marginal Cost of Lending Rate + 2 %
KA - SBI highest Marginal Cost of Lending Rate + 2 %

Reduction of may be reduced when mutually agreed to between the promoter and such allottee
Interest
 Allottees – Rights and Duties
Duties Details / Explanation
shall every allottee of the apartment, plot or building
participate shall participate
towards the formation of an association or society or cooperative society of the allottees, or a
federation of the same

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

shall towards registration of the conveyance deed of the apartment, plot or building, within three
participate months from the date of Promoter obtaining occupancy certificate or with in such period as
specified in sanction plans as provided under local laws
vinay@vnv.ca
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