Addressing the press conference here, ISE REIT Board of Directors Chairman Zahid Latif Khan highlighted the issues faced by the real estate investment trust

What are the highlights of the new Real Estate Act in India? How is it that the Union has passed a law on real estate?

The Real Estate(Regulation and Development) Bill 2016 was passed by both the houses of the Parliament.

Highlights of the Real Estate law are –

Registration mandate (For Promoters and Real Estate Agents)

  • The Law mandates that all residential projects, with some exceptions, be registered would be registered with the Regulatory Authority.
  • Promoters shall not book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project, or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act
  • Registration is not required for projects that: a) are less than 1000 square metres, or b) where the promoter has received all requisite approvals and the commencement certificate for the development of the real estate project prior to commencement of this Act c) for the purpose of renovation or repair or re-development which does not involve re-allotment and marketing of the real estate project

In order to register, the promoter must provide details enumerated in the law to the Authority. If the applicant doesnot hear back from the Authority within 15 days of the application forregistration, the project will be considered deemed registered.

  • The Authority shall provide a registration number, including a Login Id and password to the applicant  (Promoter) for accessing the website of the Authority and to create his web page and to fill therein the details of the proposed project
  • Real Estate Agents must now register with the Authority in order to facilitate transfer of property that is registered. Every real estate agent who is registered as per the provisions of this Act or the rules and regulations made thereunder, shall be granted a registration number by the Authority, which shall be quoted by the real estate agent in every sale facilitated by him under the Act.

Duties of the Promoter –

  • 70% of the amount collected for the project from buyers must be used only for construction of that project and must be kept in a separate bank account. Also, the deposit of 70% is for both construction cost and land cost, and if the land cost has already been incurred the promoter can withdraw to that extent. This provision has been provided to ensure that project funds are not diverted and projects are completed on time.
  • The promoter shall, upon receiving his Login Id and password from the authority, upload the details of the project online.
  • Promoter shall be responsible for making available to the buyer, site and layout plans of the project, the schedule of completion of the project and other documents enumerated in the law.
  • A promoter shall not accept a sum more than ten per cent. 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 a written agreement for sale with such person. The proposed project shall be developed and completed by the promoter in accordance with the plans and structural designs and specifications as approved by the competent authorities.
  • In case a buyer incurs a loss because of false advertising, and wishes to withdraw from the project, the promoter must return the amount collected, with interest.

Rights and duties of the Allottees –

  • The allottee shall be entitled to obtain the information relating to site and layout plans along with the specifications, approved by the competent authority from the Promoter
  • The allottee shall be entitled to know stage-wise time schedule of completion of the project, including the provisions for water, sanitation and electricity.
  • The allottee shall be entitled to have the necessary documents and plans, including that of common areas, after handing over the physical possession of the apartment or plot or building, as the case may be, to the allottee by the promoter.

TheReal Estate Regulatory Authority (RERA)

  • All states and union territories (UTs)must establish state level regulatory authorities, called Real Estate Regulatory Authorities (RERAs) within one year of the Act coming into force.Two or more states or UTs may set up a common RERA. A state or UT may also establish more than one RERA. The Authority shall be a body corporate by the name aforesaid having perpetual succession and a common seal.
  • Functions of a RERA include: (a)ensuring that residential projects are registered, and their details uploaded on the RERA website, (b) ensuring that buyers, sellers, and agents comply with obligations under the Act, and (c) advising the government on matters related to the development of real estate.
  • RERA shall consist of a Chairperson and not less than two whole-time Members to be appointed by the appropriate Government.
  • The Central government may also constitute a Central Advisory Council for the implementation of the Act, to determine questions of policy, to foster the growth and development of the real estate sector, to protect consumer interest among other things.
  • The government shall also establish,within a period of one year from the date of coming into force of this Act, a Real Estate Appellate Tribunal, for hearing appeal of any person aggrieved by the decision of the RERA.

Offenses and Penalties –

  • In case the promoter fails to register the property, he may be penalised up to 10% of the estimated cost of the project.
  • Failure to register despite orders issued by the RERA will lead to imprisonment for up to three years, and/or an additional fine of 10% of the estimated cost of the project.
  • The promoter will have to pay up to 5%of the estimate cost of the project if he violates any other provisions of the Act.
  • Real estate agents will have to pay a fine of Rs 10,000 for violating any provisions of the Act, for each day the violation continues.

Thus, the Real Estate bills aims to provide a comprehensive framework that will regulate the real estate sector and bring about transparency as well as customer satisfaction.

Now comes the juicy part –

Parliament’s jurisdiction to pass this law –

There are various state laws governing the real estate sector throughout India. In the state of Maharashtra, ‘Maharashtra Housing (Regulation and Development) Act, 2012’governs real estate sector.

Contentions have been made that the Parliament cannot pass a law governing  Real Estate because under Entry 18 of the State List (7th schedule of the Constitution of India), only states can make laws related to land, or rights in or over land; land improvement; and colonization of land.

However, the scope of this Act is limited to contracts between buyers and promoters, and transfer of property. Both these items fall within the Concurrent List and therefore,Parliament has the right to pass this law.

Does this law repeal the state laws?

Section 77 and 78 of the Real Estate Act make it clear that the provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.

It further states that wherea State has enacted a law for regulation of the real estate sector, and suchState law is not inconsistent with this Act, then, the State Government, tothat extent, may not apply the provisions of this Act in the State

Therefore, only incases where the state law is inconsistent with the provisions of this law, thislaw will be made applicable and the state law’s provision will be inapplicable.This Act will supersede the provisions of state laws.

Inconsistency between state and union laws under the Constitution of India –

Interesting questions arise when a state law has been passed with President’s assent instead of the Governor’s. In such a case, which law prevails? The Real Estate law in the state of Maharashtra has President’s assent.

Article 254 (2) of the Constitution of India states –

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.

Thus the Proviso of the article makes it clear that the Parliament shall have the power to add, amend, vary or repeal a state law.

CaseLaws –

1.M Karunanidhi V. Union of India (1)

In this case, the SC held –

“Where, however,a law made by the State Legislature on a subject covered by the Concurrent List is inconsistent with and repugnant to a previous law made by Parliament, then such a law can be protected by obtaining the assent of the President under Article 254 (2) of the Constitution. The result of obtaining the assent of the President would be that so far as the state act is concerned, it will prevail in the State and overrule the provisions of the central act in their applicability to the State only. Such a state of affairs will exist only until Parliament may at anytime make a law adding to, or amending, varying or repealing the law made by the State Legislature under the proviso to Article 254″

2.Grand Kakatiya Sheraton … vs Srinivasa Resorts Ltd. & Ors (2)

In this case, the Sc held that where the President’s assent is sought for a state law under Article 254 (2), the assent ought to be examined with reference to that exact inconsistency therein and would be applicable only in context to that.

“The impugned judgment is a complete answer to the question raised regarding Article 254 (2). There can be no doubt that both the Central Act and the impugned State act operate in the same field in as much as, the “service compensation” is nothing, but the “gratuity”, though called by different name. Under such circumstances, unless it was shown that while obtaining the Presidential assent for the State Act the conflict between the two Acts was specifically brought to the notice of the President, before obtaining the same, the State could not have used the escape route provided by Article 254 (2) of the Constitution. We fully agree with the High Court when the High Court held that the two Acts occupy the common field and were in conflict with each other.The contention of the appellant that Article 254 (2) would save the impugned provisions is, therefore, rejected.”

Thus, in the state of Maharashtra too, the Union law will prevail wherever there are inconsistencies.

I laud the Modi government for bringing this one.

For more of my answers and posts on Indian laws, follow – Blawgniti

(1) 1979 AIR 898, 1979 SCR (3) 254

(2) (2009) 5 SCC 342, AIR 2009 SC 2337