By Aashish Agarwal. A lot has been discussed about the impact of technology on real estate, but the most profound change brought about by technology is the
What is RERA or Real Estate (Regulation and Development) Act of 2016? How does it affect the Real Estate industry in India?
Gone are the days for the flyby night operators, gamblers, developers, builders, property owners, fraudsters, cheaters and easy money makers, to fleece and loot the home buyers. Thousands of gullible investors in properties lost their money in past. But now, someone has come to rescue and its state, by way of the promulgation of new act called “The Real Estate [Regulation and Development Act] 2016 or RERA. Here are the reasons why this act will now be feared by the unscrupulous property developers who would think ten times before first entering in business of property development .
1. Applicability: This act is made by the central government and not state government where the developers had good contacts with bureaucracy and politicians. The state governments all over India, Except Jammu & Kashmir would need to follow this act of union.
2. Effective from: The respective state governments have to notify in special official gazette. Once this process is done, the act would come in force. Even if they want they can give effect to part provisions of this act. The Central Government has done its duties and pushed this ball in the courts of state government to implement it.
3. Now First Registration and then Launch of the Project: Earlier, the developer would summon the Printer and order printing of the brochures with catchy English word and portray of pictures in colors launch bookings. This nonsense will now be stopped. No one can advertise, market, offer for sales any apartment or building unless the Project is first registered with RERA.
The question naturally rises as to what about the projects where construction is yet to start or is in progress or completed or not yet occupied. Well, such projects also have to be registered with RERA. This is going to send shiver in spines of those developers who have been purposely delaying construction or possession. He would now need to manage money and complete the ongoing projects.
4. Exemption: If the plot size of the project is less than 500 Sq Mtrs, or where the number of apartments are less than 8, this project need not to be registered.
Where the work of the construction has finished and the completion certificate has been issued by the authority, such projects would also not fall under the RERA. Naturally, there is no cause of action because the construction is complete.
If a building is going through redevelopment or reconstruction, this project would also be exempted because there is no sale of apartments to new people. In Mumbai area, the Rehabilitation building of tenants may not fall under this but Sale building would surely.
Yes again, if there is large parcel of the land and the development is in phases, than each phase would need registration with RERA. [Very clever and far sighted]
5. Application for Registration: The RERA is sort of judicial tribunal. The Developer has to first approach planning authority, Municipality, Municipal Corporation with the proposal of construction. If the proposal is in order, the authority issues Commencement Certificate [CC] meaning permission to start the work is given. But now with this CC, he has to approach RERA for Registration. So now the developers cannot Presale the area in bulk but have to rush to RERA for Registration. Please Now looks at RERA’s condition to promoters before registration.
[a] Give details who you are and where you stay. What is form of your company and who are your partners. Attach photograph of the promoters. [Who ever big is promoter is, we can now see their photographs]
[b] Give details about status of projects launched in last five years. Are they completed or still under completion? Also disclose court cases pending and payments pending.
[c] Attach the copy of the Plan approved by the Municipality and also attach the commencement certificate issued. The plan includes sanctioned plan, layout plan and project specification.
[d] Show how you are going to execute the work. From where you are going to bring water for consumption? How would you use renewable energy? How would rescue occupants if there is fire in building?
[e] Show clear cut boundaries of your plot including its longitude and latitudes.
[f] We would like to see the draft of agreement to sale drafted by your lawyers. We also want to see language of allotment letter and also conveyance deed that you would entered with flat buyers.
[g] Show flat wise carpet area. Also show balcony and verandah [These areas are free from Floor Space Index or FSI which the developers fraudulently sell] . Show the map of terrace [Now he can’t sell terrace to advertisement, mobile towers companies] . The terrace is supposed to be open for use by members.
[h] Now big blow to brokers. We would like to see who are agents and brokers who would be selling or marketing this project.
[i] Off course Mr. Professionals on the projects, you cannot take your fee and go away without any responsibilities. Give us names of Contractors like civil, Mechanical, electrical, Plumbing who will be working on the projects. We also want to know who is architect and structural engineer.
[j] Dear promoter signs an affidavit. Declare that you have correct title to the land, the land is free from encumbrances, if encumbrances who are they and what are their rights. We want to know in how much time you will complete the project.
Mr. Promoter, open a separate bank account for this project only. The money you are taking from the buyers can’t be taken to your personal account but only to be deposited in this special account to open with scheduled bank [scheduled bank means that bank prescribed in Reserve Bank of India Act of 1934]. Please the money that come in this account, use only for this project [Please don’t indulge in Iski Topi Uske Sir] . Please note Mr. Promoter, you cannot spend more that 70% money from this account. Please don’t spend money in one stroke but spend as per the percentage of project [No more only work till plinth or Skelton Khoka concrete structure to show to buyers that work is going on and take from them hundred percent money].
Wait Mr Promoter; don’t rush to bank to withdraw money. Mr. Architect, engineer, and Mr. Chartered Account, certify that the percentage of money Mr. Promoter wants to withdraw is proportionate to completion of work in that percentage [Good and bad news for these three professionals. Good news is that naturally you would demand clearance of your fee first and the bad news is that in case you certify falsely, you would lose your practice. You have to now on take fee from Promoter but your loyalty is with buyers..baji palat gayi hai]
Mr Chartered Accountant, carry out audit of the promoter within six months after end of financial year and certify that amount collected from buyers is used only for this project and withdrawn from bank proportionately.
6. Online Registration: Now the RERA would have web based Online System for registration of projects. After the promoter has submitted for registration, the project, the RERA has following obligations.
[a] Give Login id and password to Promoter for accessing the website of RERA.
[b] Create Webpage for the promoter and fill details of the project in the page.
[c] Approve or Reject the Registration. Give reasons of rejections if any. Follow the principles of natural justice. Hear Mr. Promoter first and then give your order in writing.
[d] If RERA doesn’t complete approval or rejection process in thirty days, than Mr. Promoter has reasons to dance and be happy because after expiry of seven days period [after thirty days] the project will have deemed approval [some clerk or officer in RERA would face music if he deliberately help but no developer will dare to start work with deemed approval because at every stage, he would need to explain buyers that he has deemed approval. The investor may not be impressed. They would love to see the clear registration].
[e] Very clever…. The registration to the project is valid only till the period that the promoter himself has asked for completion of project.
But RERA is human and sympathetic also. RERA will extend registration period of the project if the promoter proves that the reasons for delay were beyond his control.
7. Revocation of Registration: The RERA on its own or on the request of Municipality or on receipt of the complaints can cancel the registration. RERA would not appreciate following.
[a] promoter has defaulted and violated provisions of act and rules made there under.
[b] Promoter has violated the approved plan and indulged in construction beyond what is approved.
[c] Promoter is involved in unfair practices and irregularities. The unfair practices means he falsely represented particular standards or grade [My interpretation is that promoter would have to use now IS marked material in the construction]
[d] Falsely claimed he has all the approvals from authorities which actually he doesn’t have.
[e] Has published in brochure, advertisement, newspapers such services which he does not actually have.
[f] Promoter has indulged in fraudulent practices.
The RERA would follow principles of natural justice mean it will offer opportunity of being heard and once the guilt of promoter is established, than punishment will follow. First, debar promoter from access to website of RERA, His name will flash on RERA website among list of defaulter, His lovely photograph will also pop up on all the websites of all the RERA of all States of India, RERA will write to bank to freeze the bank account, Wow.. Long live RERA
Naturally the question appears what will be status of the project since Mr Promoter has left from scene?. The RERA will consult the appropriate authorities and find out if the authorities can complete the construction or whether to allow the buyers to form association and let them complete the project.
8. Real Estate Agents: Mr Brokers, Please do not market the project until the project itself and you, yourself are registered with RERA. You would need to apply for registration to RERA. If RERA is satisfied with your antecedents, it may grant you single registration for whole state or entire India [except Jammu and Kashmir] . Before rejection of application, you will be heard. If after registration, the agents are found lacking in their duties, registration will be cancelled after due process of law.
The real estate agents now cannot flaunt how their business is without investment but with huge returns. Now they will have to keep books of accounts, records and documents prescribed by RERA. And off course in his lust for money or brokerage, he shouldn’t be seen falsely representing on own or on behalf of promoter all such things which don’t exists.
9. If the RERA law imposes duties on Promoters, there are duties imposed on buyers also.
For further reference, please go through the act which can be downloaded from the web. The investors, if they want their hard earned money, to be safe from loss, must invest only in those projects registered with RERA. The RERA has been approved recently and all state governments are supposed to notify in gazette and implement it by constituting the RERA in state. Some states have constituted RERA while some are delaying due to reasons unknown reasons.