Realty Affairs in The Recent Times
The Passing of the Real Estate (Regulatory & Development) Act 2016 Brings Joy to Buyers!
The Real Estate (Regulatory & Development) Act 2016 (RERA) has been passed by the Rajya Sabha recently, much to the joy of real estate buyers in India. The 2013 version of the Act was in dire need of amendments as far as consumers were concerned, and the passing of the 2016 Act is indeed a great victory for them!
Although different parts of the Act will be implemented in phases (as is usually the case), the collective provisions of RERA will go a long way in protecting the interests of purchasers and allottees. The Act is expected to bring transparency and accountability to the construction process. RERA is also expected to hold real estate companies accountable for inefficiencies and delays from promised timelines.
The Act also holds promoters accountable for several things, including non-registration with the Real Estate Regulatory Authority, misinformation about projects through misleading advertising, and providing insufficient information to buyers. The new Act also brings real estate brokers involved in the sale of property within its gamut; this should put an added responsibility on agents to be vigilant about permissions, committed timelines and so on.
Listed below are some reasons why REMA is expected to bring a lot of relief to buyers of real estate:
In the application for registration, the promoter must disclose certain useful information that will help prospective buyers in understanding their track record. This information includes details about other projects launched in the last few years and their current status and information on pending cases and pending payments.
Certifications of approval and commencement will have to be produced for all phases of construction. All specifications of the project, including complete sanctioned plan, layouts including that of the facilities and their location details have to be furnished. Documents such as allotment letter, sale agreement, sale deed and conveyance deed to be signed with allottees also have to be produced. Promoters are also required to furnish details on the number of apartments, carpet area and the number and areas of garages. Moreover, the details of real estate agents, contractors, architects, and structural engineers affiliated with the project should also to be included. All of this information should help buyers in making an informed decision.
A declaration will also be required by the promoter supported by an affidavit stating that he has a legal title to the land, along with details of encumbrances, if there are any, on the land.
A declaration of the time period within which the promoter intends to complete the project is also mandated.
70% of the moneys received for the project from allottees is necessitated to be deposited and maintained in a separate bank account and are to be used solely to cover the costs of land and construction. This process will ensure that money sought from buyers for a said project will be used specifically for that project, and not for some other project of the promoter. Withdrawals have to be sanctioned by an Engineer, Architect and Chartered Accountant and can only be done so in proportion to the percentage of project completion. All accounts will be audited as per the new laws.
Developers will only be able to sell units based on carpet area. This excludes balcony areas, but includes internal walls.
In the case of revocation of registrationfor some reason, the Regulatory Authority will facilitate the carrying out of the remaining development works by appointing a competent authority. This means, buyers no longer have to worry about incomplete projects.
A buyer will be entitled to compensation for promises made in advertising literature, but not fulfilled, or if the seller withdraws from a project, in a manner as provided in the Act.
Structural defects will have to be rectified by the promoter at no charge as long as it is brought to the notice of the promoter by the allottee within a period of five years from the date of possession, or compensation will have to be given.
The promoter will not be able to transfer or assign their majority rights and liabilities to a third party without obtaining prior written consent from two-thirds of the allottees and without prior written approval of the Regulatory Authority.
The promoter will be responsible for providing and maintaining the essential services, on reasonable charges, till the taking over of the maintenance of the project by the association of the allottees. The promoter will have to hand over possession and all the necessary documents within a specified period.
In addition to the establishment of the Regulatory Authority, the Bill also proposes to establish a Real Estate Appellate Tribunal (Appellate Tribunal) within one year from the date of commencement of the Act. Any person aggrieved by a decision made by the Regulatory Authority or an adjudicating officer can appeal to the Appellate Tribunal within a period of 60 days from the date of receipt of a copy of the order or direction.
Stern punitive provisions have been made under the Act against promoters in case of any breach of provisions of the Act or orders, decisions and directions of the Regulatory Authority or the Appellate Tribunal.