THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

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This article was written by Ankita Sharma a student of M.S.Ramaiah College of Law, Bangalore

  1. INTRODUCTION

The Real Estate (Regulation and Development) Bill, 2016 presented by MR. Venkaiah Naidu (Minister of Housing and urban poverty alleviations) after being passed by Rajya Sabha on 10th March, 2016 received the assent of President and became “THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016” on 26th March, 2016.

Parliament passed the Real estate (Regulation and Development) Act during the Budget session and made the   registration of real estate developer/agents and projects compulsory and also that it can be revoked in case it is found that the projects are fraudulent and agents have been indulged in fraudulent practices.

This Act amplifies to regulate the sectors and bring in clarity for both developers/promoters and buyers in respect of the real estate projects. It seeks to protect the interest of numerous house buyers and also exemplifies the credibility of construction industry by elevating transparency, accountability and efficiency in implementation of projects. This Act also seeks to put in place an efficacious regulatory mechanism for orderly growth of the sector which is the second largest employer after agriculture.

 Maharashtra being the first state in the country to make a regulatory act for the real estate sector, never enforced it because state failed to appoint an authority or a tribunal as required by the legislation

  1. OBJECTIVES

The Act aims to establish the Real Estate Regulatory Authority for ensuring the execution of real estate projects timely and effectively. The Act embarks the following objectives;

  1. Regulation and promotion of real sector and to ensure that the sale of plot, apartment or building or sale of real estate is in efficient and transparent manner.
  2. To protect the interest of the consumers.
  3. Speedy Dispute Resolution scheme as an adjudicating mechanism through appellate tribunal/Adjudicating officers.
  4. Enhance and improve the accountability of developers/promoters in real estate.
  • SUBSTANTIAL DEFINITIONS
  1. Allottee[1]

Allottee in reference to the Act is a person to whom the promoter allots/ transfers/ sells the plot, apartment or building, as the case may be, and thus he acquires the same.

  1. Authority[2]

Authority here means the Real Estate Regulatory Authority established under sub-section (1) of section 20 of the Act.

  1. Estimated cost of the Real Estate Project[3]

It is total cost initially involved in the development of the real estate projects and thud includes land cost, taxes, cess, development and other inclusive evident charges.

  1. Interest[4]

In case of default by allottee, interest charged shall be equal to the rate of interest to which the promoter shall be liable to pay to allottee.

  1. Promoter[5]

A promoter is basically a person who acts as a builder, colonizer, contractor, developer and initiates the construction as per the real estate project for the purpose of allotting or selling. He develops land into a project, prepares layouts, etc.

  1. Real Estate Agent[6]

Real Estate Agents are licensed professionals who negotiates and acts on behalf of sellers or buyers in relation to the transfer of plots, apartments, buildings, as the case may be, and receives remunerations or charges for his service.

  1. Real Estate Project[7]

It means development of building, encompassing activities that range from development to renovations of said apartments, plots, as the case may be. Developer takes an initiative to initiate the real estate project undertaken by him.

CREDENTIALS OF THE ACT STATING IMPORTANT PROVISIONS AND STATUTORY REGULATIONS

  1. REGISTRATION PROCEDURES
  1. Promoter without registering the real estate project with the real estate regulatory authority cannot advertise or invite purchasers and if the project is an ongoing project on commencement of the Act then within 3 months from the date of commencement promoter must make an application to authority for registration.[8]
  2. The registration of the real estate project is not required:
  3. If the proposed land does not exceed 500 square meters.
  4. If the proposed number of apartments does not exceed 8 in numbers.
  5. If completion certificate has already been received by the promoter.
  • If the Government finds it necessary, it can reduce the threshold as it deems fit.
  • Promoter is entitled to enclose all necessary documents along with the application[9]. It includes:
  1. Name and photographs of the promoter with particulars of registration and brief details of enterprise and the projects promoters are indulged or has undertaken in past 5 years.
  2. Authenticated copies of approvals, highlights of project, Plans of development works to be executed, location details, number of apartments for sale, names and address of his real estate agents, name and address of contractors, structural engineers.
  3. A declaration which is supported by affidavit and duly signed by promoter or any such person authorised to do so must be submitted and it must state the following:
  • That the promoter has legal title over the land and also that the land is free from all encumbrances and time period that he requires in completing the project undertaken.
  • 70% of the amount received from allottees with regard to the project and cost of production is to be deposited in separate bank account and thus this will help in ensuring transparency in work.[10]

The separate account with regard to this must be within 6 months after the end of every financial year.

  1. Within 30 days after receiving the application, authority grants registration and provides with a registration number, login Id and password for the assessing the website. Application can be rejected by authority provided that the applicant whose application is being rejected must be given an opportunity of “Audi alteram partem”.
  1. REAL ESTATE REGULATORY AUTHORITY
  1. Real Estate Regulatory authority consists of chairperson and not less than 2 whole time members being appointed by the Government.[11]
  2. The chairperson and the members are entitled to hold the office for a term of 5 years.
  3. The maximum age limit to hold the office under authority is 65 years and after expiry of such term, members are not eligible for re-appointment.[12]
  4. If there is any vacancy in the office of chairperson or any member of the authority then within 3 months it is required to be filled up.
  5. The chairperson also has the administrative powers of general superintendence and in conduct of general affairs of the authority therein.[13]
  6. The chairperson or the other members can be removed from the office on ground of being insolvent, or having been convicted of an offence, or has become physically and mentally incapable of acting as a member, or having abused the power conferred on him. Such person cannot be removed except by order given by Government and also giving such person an opportunity of being heard.[14]
  7. The real estate regulatory authority also conducts meetings in order to discuss relevant matters regarding the rules and regulations to be followed with regard to the Act. All questions put forth in the meeting must be dealt simultaneously and must be disposed of within 60 days from the date of the receipt of the application.[15]

Functions of Real Estate Authority[16]

  1. To protect the interest of promoters as well as the allottees and agents of real estate.
  2. To ensure that the projects approval and clearance are timely done, a single window system has been created.
  3. To ensure that there is no omission or commission of any act on part of the authorities, a transparent and grievance redressal mechanism has been created to keep an indirect check.
  4. To encourage investment and construction of houses or buildings that is environmentally sustainable.
  5. To facilitate amicable conciliation of disputes and digitalization of land records.
  6. The authority is entitled to register and regulate the projects.
  7. To maintain the records of all the projects registered on web page for public reviewing.
  1. CERTIFICATES

Under this Act, the following certificates are issued:

  1. Commencement certificate[17]

The competent authority is entitled to issue commencement certificate to promoter which is generally the permission certificate to start with the development work as per the sanctioned plan/layout. Thus the commencement certificate should certify clearly that it permits the promoter or developer of the real estate project to initiate the development of plots, buildings, as the case may be.

  1. Completion certificate[18]

The competent authority issues the completion certificate in which it certifies that the sanctioned layout as per the real estate project is developed and thus approves the same. Thus the completion certificate states that the undertaken project of estate by the promoter has been successfully completed within specified period stated therein under the sanctioned project.

  1. Occupancy certificate[19]

The competent authority issues occupancy certificate through which it permits the occupation of any buildings having provisions for civic infrastructure such as sanitation, water and electricity.

  • PROMOTER
  1. After receiving login id and password, promoter must enter all details of the real estate project in which he is indulged.
  2. Prospectus issued by the promoter must have the proper website address where all details of estate project have been entered including a registration number of the same.[20]
  3. At the time of issue of allotment letter, it is the duty of promoter to provide allottees with all details regarding the projects. It includes sanctioned layout plan approved by the competent authority, time period that is to be required in execution of the project, etc.[21]
  4. It is the responsibility of promoter to get the completion/occupancy certificates of the project undertaken from the authority and execute a registered conveyance deed.
  5. It is also the duty of the promoter to get the lease certificate by the competent authority if the real estate project is developed on any leasehold land.[22]
  6. It is promoter’s duty to provide for some essential services on reasonable charges and also to pay all outgoings till the allottees takes the possession of estate. Hence it becomes an obligatory duty for him to perform such a role as a care taker.
  7. On the veracity of the prospectus issued by the promoter, if any person advances any payment then promoter will be liable for the same and also shall compensate them[23]and promoter shall also compensate the allottees if any loss is caused due to defective title over the land.[24]
  8. Promoter is entitled not to accept any deposit exceeding more than 10% of the cost of the estate without entering into a written agreement of sale.[25]

  • ALLOTTEES
  1. The allottee has a right to obtain all the details with regard to the layout of the proposed project and to see whether the same has been approved by the competent authority.
  2. The allottee is entitled to know the time period till when the project shall be completed.
  3. The allottee is entitled to ask for refund with interest if promoter fails to comply with the terms and conditions of the real estate project.
  4. It is the duty of allottee as well as his right to have all necessary documents of the possession he holds, given by the promoter[26] and also allottee himself is under duty to pay interest, if there is any delay in payment of which he is obliged to make.[27]
  1. REAL ESTATE APPELLATE TRIBUNAL
  1. Real Estate Appellate Tribunal shall consist of a chairman and not less than 2 whole time members in which 1 should be an administrative member in every bench [28]and other shall be Judicial member and if any person is affected by any act of the authority then such person can file an appeal before Appellate Tribunal which has jurisdiction.[29]
  2. The Tribunal is guided by principles of Natural Justice and has power to regulate its own procedure but is not bound by[30]:
  • Code of civil Procedure Code, 1908
  • Indian Evidence Act, 1872
  1. The Appellate tribunal proceedings are considered as judicial proceedings within IPC under sections 193, 219 and 228 for the purpose of section 196 of IPC[31] and is deemed to be civil court under chapter xxvi of CPC, 1973[32] and also the orders passed by tribunal is executed as a decree of civil court.[33]
  2. Any person can file an appeal in HC[34] within 60 days from the orders passed by Appellate Tribunal.
  3. OFFENCES AND PENALTIES

 

  1. PROMOTER
  2. Promoter is liable to penalty up to 10% of the estimated estate project and also with imprisonment extending up to 3 years, in case if he violates the provisions of section 3 of the Act which talks about registration of the Real estate project[35] and further if any false information is stated then he is liable up to 5% of the real cost of estate project.[36]
  3. If promoter fails to comply with any decisions of the Appellate tribunal,[37] then he is liable to punishment up to 3 years and fine extends every day till he continues the default which may at the end be of 10% of the real cost of the project.

 

  1. ALLOTTEE
  2. Allottee is liable to punishment i.e. with imprisonment up to 1 year or fine which may extend up to 10% of the cost of the estate, building, as the case may be if he defaults or fails to comply with the orders of Appellate Tribunal.[38]
  3. If allottee fails to comply with any directions of authority then he shall be liable to penalty upto 5%of the real cost of the estate.[39]

  1. COMPANY

If any offence has been committed by a company, then every person who is in the company at the time the offence has been committed will be responsible for the same and shall also be published accordingly.

  1. FUNDS, ACCOUNTS AND AUDITS
  2. The Government shall constitute of Real Estate Regulatory Fund[40] in which the amount is to be credited of;
  3. All grants of Government which authority receives.
  4. Fees received.
  5. Interest that is accrued by the same.
  6. The authority is entitled to prepare proper accounts and keep proper records of the same and must also prepare annual statement in the prescribed form and the same should be audited by Comptroller and Auditor General of India.[41]
  7. The annual report is to be prepared by the concerned authority once in every year as prescribed by the Government [42]and must include;
  8. A detail of all the activities to which authority was indulged in previous year.
  9. Previous Year Annual Accounts.
  10. Any programmes of work for the coming year.
  11. The copy of the annual report must also be submitted before each house of the parliament or state legislature.

CONCLUSION

The Real Estate Act will have overriding effect, notwithstanding anything inconsistent therewith contained in any other Law for the time being in force.[43]This Act seems to revitalize the confidence of the consumers and provide considerable relief to them.

Article 254(2) – The Constitution of India

“Where a law made by the Legislature of a State with respect to one of the matters enumerated in the concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State.”

[1] Section 2 (d) of The Real Estate (Regulation and Development) Act, 2016

[2] Section 2 (i) of The Real Estate (Regulation and Development) Act, 2016

[3] Section 2 (v) of The Real Estate (Regulation and Development) Act, 2016

[4] Section 2 (za) of The Real Estate (Regulation and Development) Act, 2016

[5] Section 2 (zk) of The Real Estate (Regulation and Development) Act, 2016

[6] Section 2 (zk) of The Real Estate (Regulation and Development) Act, 2016

[7] Section 2 (zn) of The Real Estate (Regulation and Development) Act, 2016

[8] Section 3 of The Real Estate (Regulation and Development) Act, 2016

[9] Section 4 of The Real Estate (Regulation and Development) Act, 2016

[10] Section 4(2)(l)(D) of The Real Estate (Regulation and Development) Act, 2016

[11] Section 21 of The Real Estate (Regulation and Development) Act, 2016

[12] Section 23 of The Real Estate (Regulation and Development) Act, 2016

[13] Section 25 of The Real Estate (Regulation and Development) Act, 2016

[14] Section 26 of The Real Estate (Regulation and Development) Act, 2016

[15] Section 29 of The Real Estate (Regulation and Development) Act, 2016

[16] Section 32 of The Real Estate (Regulation and Development) Act, 2016

[17] Section 2 (m) of The Real Estate (Regulation and Development) Act, 2016

[18] Section 2 (q) of The Real Estate (Regulation and Development) Act, 2016

[19] Section 2 (zf) of The Real Estate (Regulation and Development) Act, 2016

[20] Section 11 of The Real Estate (Regulation and Development) Act, 2016

[21] Section 11 of The Real Estate (Regulation and Development) Act, 2016

[22] Section 11(4)(c) of The Real Estate (Regulation and Development) Act, 2016

[23] Section 12 of The Real Estate (Regulation and Development) Act, 2016

[24] Section 18(2) of The Real Estate (Regulation and Development) Act, 2016

[25] Section 13 of The Real Estate (Regulation and Development) Act, 2016

[26] Section 19(5) of The Real Estate (Regulation and Development) Act, 2016

[27] Section 19(7) of The Real Estate (Regulation and Development) Act, 2016

[28] Section 43(4)of The Real Estate (Regulation and Development) Act, 2016

[29] Section 43(5) of The Real Estate (Regulation and Development) Act, 2016

[30] Section 53 of The Real Estate (Regulation and Development) Act, 2016

[31] Indian Penal Code

[32] Section 53(5) of The Real Estate (Regulation and Development) Act, 2016

[33] Section 57 of The Real Estate (Regulation and Development) Act, 2016

[34] High Court – It means High court of any state or union territory in which project is to be initiated.

[35] Section 59 of The Real Estate (Regulation and Development) Act, 2016

[36] Section 60 of The Real Estate (Regulation and Development) Act, 2016

[37] Section 64 of The Real Estate (Regulation and Development) Act, 2016

[38] Section 68 of The Real Estate (Regulation and Development) Act, 2016

[39] Section 67 of The Real Estate (Regulation and Development) Act, 2016

[40] Section 75 of The Real Estate (Regulation and Development) Act, 2016

[41] Section 77 of The Real Estate (Regulation and Development) Act, 2016

[42] Section 78 of The Real Estate (Regulation and Development) Act, 2016

[43] Section 89 of The Real Estate (Regulation and Development) Act, 2016

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