THE REAL ESTATE (REGULATION AND DEVELOPMENT) BILL, 2016

Presented By-Vaishali Mahlyan

09-03-2016

Background

Lack of standardisation - constraint to the healthy and orderly growth of industry. Consumer Protection Act, 1986 is available as a forum to the buyers in the real estate

market, Recourse provided - only curative and not adequate to address the concerns of buyers and

promoters in that sector.

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Objective:Establish the Real Estate Regulatory Authority for: Regulation and promotion of the real estate sector and ensure sale of plot,

apartment or building, in an efficient and transparent manner; and Protect the interest of consumers in the real estate sector; and Establish the Appellate Tribunal to hear appeals from the decisions, directions

or orders of the Authority.

Applicability:Extends to the whole of India Except the State of Jammu and Kashmir

Definition (Section 2)‘‘Real Estate Project’’ (S. 2(zi)) development of a building consisting of apartments, or converting an existing

building or a part thereof into apartments, development of a colony into plots or apartments, for the purpose of selling the said apartments or plots or buildings and includes the development works thereof;

‘‘Immovable Property’’ includes land, buildings, rights of ways, lights or any other benefit arising out of land and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, standing crops or grass;

(whether called block, chamber, dwelling unit, flat, premises, suite, tenement, unit or by any other name)

means a separate and self-contained part of any immovable property including one or more

rooms or enclosed spaces, located on one or more floors, in a

building or on a plot of land,

used or intended to be used for residence, office, shop, showroom or godown or for carrying on any

business, industry, occupation, profession or trade of for any other type of independent use

ancillary to the purpose specified and

includes any covered garage or room, whether or not adjacent to

the building in which such apartment is located provided by

the promoter for the use of the allottee for parking any vehicle,

or as the case may be, for the residence of any domestic help employed in such apartment

‘‘Building’’ includes any structure or erection intended to be used for residential, commercial or for the purpose of any industry or business, occupation, profession or trade or for any other type of independent use ancillary to the purpose specified or other related purposes;

‘‘Apartment’’

‘‘Competent Authority’’ the local authority or any authority created under any law made by the appropriate Government which exercises authority over land under its jurisdiction, and has powers to give permission for development of such immovable property;

‘‘Local Authority’’ means the Municipal Corporation or Municipality or Panchayats or any other Local Body constituted under any law, for providing municipal services or basic services, in respect of areas under its jurisdiction

ALLOTTEE

Person to whom a plot, apartment or buildings, has been allotted, sold or transferred by the promoter

Includes - person who subsequently acquires the said allotment through sale, transfer or otherwise

Does not to the person to whom such plot, apartment or building, is given on rent

REAL ESTATE AGENT

Person, who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building in a real estate project, by way of sale or transfer , with another person and receives remuneration or fees or any other charges for his services whether as a commission

Person who introduces prospective buyers and sellers to each other for negotiation for sale or purchase of plot, apartment or building

Includes property dealers, brokers, middlemen by whatever name called

• person who constructs independent building (or building consisting of apartments, or converts an existing building into apartments), for the purpose of selling to other persons and

• includes his assignees and

• also includes a buyer who purchases in bulk for resale;

• person who develops land into a project, (whether or not he also constructs structure on any of the plots), for the purpose of selling to other persons plots in the said project, whether with or without structures thereon

• any development authority or any other public body in respect of allottees of—

• buildings or apartments, constructed or plot owned by such authority or body on lands owned by them or placed at their disposal by the Government, for the purpose of selling

PROMOTER (S. 2(zf))

• an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or allottees

• any person who acts as a builder, colonizer, contractor, developer, estate developer or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale.

• Such other person who constructs building or apartment for sale to the general public.

• Explanation.— where the person who constructs or converts a building into apartments and the persons who sells are different persons, both of them shall be deemed to be the promoters;

PROMOTER (Contd.)

Section. 2(zb)‘‘Person’’ includes,—

◦ an individual;◦ a Hindu undivided family;◦ a company;◦ a firm;◦ a competent authority;◦ an association of persons or a body of individuals whether incorporated or not;◦ a co-operative society registered under any law relating to co-operative societies;◦ any such other entity as the appropriate Government may, by notification specify in

this behalf;

Registration of real estate project with RERA

where the project is to be developed in phases, every such phase to be considered as a stand alone real estate project, and the promoter shall obtain registration for each phase separately.

No promoter to book, sell or offer for sale, or invite to purchase any plot, apartment or building, in any real estate project, without registering the project with the Real Estate Regulatory Authority

No such registration required:

Where the area of land

proposed to be developed does not exceed one

thousand square meters or the number of apartments

does not exceed twelve,

(inclusive of all phases)*

Where the promoter has

received completion

certificate for project prior to

commencement of the Act;

For the purpose of renovation or

repair or re-development

which does not involve

marketing, advertising,

selling and new allotment

70% of the amount collected from buyers for a project - maintained in a separate bank account within a period of fifteen days of its realisation and must only be used to cover the cost for construction of that project.

The appropriate government can alter this amount to less than 70%.

Mandatory Compliance

Registration of real estate agents.

No real estate agent to sale or purchase or facilitate the sale or purchase of any plot, apartment or building, of the real estate project registered with Authority, being sold by the promoter in any planning area, without obtaining registration.

Every agent registered, shall be granted a registration number, which is to be quoted in every sale facilitated by him.

Every registration to be valid for such period as prescribed, and shall be renewable on payment of such fee as may be prescribed

Not to facilitate the sale or purchase, in a real estate project, being sold by the promoter, which is not registered

with the Authority

Maintain and preserve books of account, records and documents as may be prescribed;

Not involve himself in any unfair trade practices

Facilitate the possession of all information and documents, which the allottee is entitled to, at the time of booking

Discharge such other functions as may be prescribed.

FUNCTIONS OF REAL ESTATE AGENTS

Unfair Trade Practices

Unfair Trade Practices

Practice of making any statement, whether orally or in writing or by

visible representation

Falsely represents that the services are of a particular standard or

grade

Represents that the promoter has approval or affiliation which such

promoter does not have

Makes a false or misleading representation concerning the

services

Permitting the publication of any advertisement whether in any

newspaper or otherwise of services that are not intended to be offered

FUNCTIONS AND DUTIES OF PROMOTER

The promoter upon receiving his Login Id and password

Create his web page on the website of the Authority and enter all details of the proposed project:

• details of the registration granted by the Authority;• quarterly up-to-date status of the project; and• such other information and documents as specified by the regulations of Authority.

The advertisement or prospectus issued or published by the promoter shall mention the website address of the Authority, where all details of the registered project have been entered.

The promoter, upon entering into an agreement of sale with the allottee have to make available the information

• site and layout plan, approved by the competent authority, by display at the site;• the stage-wise time schedule of completion of the project

The promoter shall be

• responsible to obtain completion certificate and to make it available to the allottees;• responsible for providing and maintaining the essential services specified in the service level agreements, on reasonable

charges, till the taking over of the maintenance of the project by the association of the allottees;• take steps for formation of association or society or co-operative society, of the allottees.

The promoter may cancel the allotment only in terms of the agreement of sale:

• Allottee may approach the Authority for relief, if aggrieved by such cancellation and cancellation is not in accordance with the terms of the agreement of sale, unilateral and without any sufficient cause

The promoter shall prepare and maintain all such other details as specified by regulations made by the Authority.

Obligations of promoter regarding veracity of advertisement or prospectus.

Where any person makes an advance or deposit on the basis of the information contained in the advertisement or prospectus; andsustains any loss by reason of any incorrect, false statement, he shall be compensated by the promoter: If the person affected intends to withdraw from the proposed project – return of

entire investment + interest at rate prescribed

No deposit or advance without first entering into agreement of sale.

A promoter shall not accept a sum more than ten per cent. of the cost of the apartment, plot, or building, as an advance payment or application fee, without entering into a written and registered agreement for sale.

Agreement shall specify:

Particulars of development of the project,

Dates and manner of payments towards the cost of the apartment, plot, or building, to be made by the allottees

Likely date on which the possession is to be handed over and such other particulars, as prescribed.

Adherence to approved plans and project specifications by promoter.

Proposed project shall be developed and completed in accordance with the plans and structural designs and specifications as approved by the competent authorities.

The promoter shall not make, any addition or alteration in the plans : which are agreed to be taken, without the previous consent of that person which are not agreed to be taken, without previous written consent of at least two-third of the

allottees, other than promoter who have agreed to take apartment in such building.

In case any structural defect is brought to the notice of the promoter within a period of two years from the date of handing over possession

• promoter to rectify such defects without further charge, within reasonable time, and in the event of promoter's failure within time, the aggrieved allottees to be entitled to receive appropriate compensation.

Transfer of title.

Promoter to take all necessary steps to execute a registered conveyance deed in favour of the allottee with undivided proportionate title in the common areas.

After obtaining the completion certificate and handing over physical possession to the allottees - promoter to hand over the necessary documents and plans, to the association of the allottees.

In the absence of any local law - conveyance deed in favour of the allottee shall be carried out by the promoter within three months from date of handing over of physical possession.

Return of amount and compensation.

If promoter fails to complete or give possession— in accordance with the terms of the agreement due to discontinuance of his business as a developer on account of suspension or

revocation of his registration or any other reason,he shall be liable on demand to the allottees, to return the amount received by him with interest at such rate as prescribed, including compensation in the manner provided under the Act.

RIGHTS AND DUTIES OF ALLOTTEES

Obtain information relating to site and layout plans

Know stage-wise time schedule of completion of the project

Claim possession as per the declaration given by the promoter

Claim refund of amount paid, from the promoter, if he fails to comply or is unable to give possession, as per agreement

Have the necessary documents and plans, areas, after handing over the physical possession, to the allottee by the promoter.

Every allottee, shall be responsible to make payments in manner and time specified in agreement

Allottee to pay proportionate share of the registration charges, municipal taxes, water and electricity charges, maintenance charges, ground rent,

and other charges, in accordance with agreement

Allottee shall be liable to pay interest, at rate prescribed, for any delay in payment

The obligations of the allottee and the liability towards interest may be reduced when mutually agreed to between the promoter and allottee

Every allottee after taking possession, shall participate towards the formation of an association or society or co-operative society of the

allottees

Every allottee after taking possession, shall participate towards registration of the conveyance deed (section 15(1))

THE REAL ESTATE REGULATORY AUTHORITY The appropriate Government, within a period of one year from the date of coming

into force of the Act, by notification, establish an Authority to be known as the Real Estate Regulatory Authority.

The appropriate Government of two or more States or Union territories may, establish one single Authority or, establish more than one Authority in a State or Union territory.

Authority - body corporate, having perpetual succession and common seal, with the power to acquire, hold and dispose of property (both movable and immovable), and to contract, and shall, by the said name, sue or be sued.

Powers of Authority. Call for information and conduct investigations Issue directions from time to time Impose penalty, in regards to any contravention of obligation casted upon

promoters, allottees and real estate agent Regulate its own procedure

Functions of Authority.

Register and regulate real estate projects and real estate agents registered under the Act

Publish and maintain website of records of all projects for which registration has been given, with details,

Maintain database, on website, and enter the names of promoters as defaulters including the project details, registration for which has been revoked or have been penalised under the Act, with reasons therefor, for access to the general public;

Maintain a database, on its website, and enter the names of real estate agents who have applied and registered, with details, including those whose registration has been rejected or revoked;

Fix through regulations for each areas under its jurisdiction the standard fees, to be levied on the allottees by the promoter or the association of allottees;

Ensure compliance of the obligations cast upon the promoters, the allottees and the real estate agents

CENTRAL ADVISORY COUNCIL

The Central Government, by notification to establish a Council to be known as the Central Advisory Council.

ex officio Chairperson of the Central Advisory Council shall be the Minister of Government in charge of the Ministry of the Central Government dealing with Housing.

Council shall consist of representative of various Ministry Not more than ten members to represent the interests of real estate industry, consumers,

construction labourers, non-governmental organisations and academic and research bodies in the real estate sector.

Functions of Central Advisory Council

The functions of Council shall be to advise and recommend the Central Government—◦ On matters concerning the implementation of the Act;◦ On major questions of policy;◦ Towards protection of consumer interest;◦ To foster the growth and development of the real estate sector;◦ On any other matter as assigned to it by the Central Government.

The Central Government may specify the rules to give effect to the recommendations of the Central Advisory Council.

THE REAL ESTATE APPELLATE TRIBUNAL The appropriate Government, within a period of one year from the date of coming into force of this

Act, to establish an Appellate Tribunal to be known as the ---- (State/Union territory) Real Estate Appellate Tribunal:

Appropriate Government of two or more States or Union territories may, establish one single Appellate Tribunal.

Person aggrieved by any direction or decision or order of the Authority or by an adjudicating officer may prefer an appeal before the Appellate Tribunal which shall have jurisdiction over the matter.

Composition of Appellate Tribunal:

The Appellate Tribunal - consist of a Chairperson and two other Members of which one shall be a Judicial Member and other shall be a Technical or Administrative Member, appointed by the appropriate Government.

Orders passed by Appellate Tribunal to be executable as a decree

Order made by Appellate Tribunal shall be executable as a decree of civil court.

Tribunal may transmit any order made by it to a civil court having local jurisdiction, and such civil court shall execute the order as if it was a decree made by that court.

Appeal to High Court

Any person aggrieved by decision of Appellate Tribunal, may file an appeal to the High Court, within a period of 60 days from the date of communication of the decision,

No appeal shall lie against any decision made by the Appellate Tribunal with the consent of the parties

OFFENCES AND PENALTIES

Liable to a penalty which may extend up to ten per cent. of the estimated cost of the real estate project as determined by the Authority.

If promoter does not comply with the orders, decisions or directions issued - punished with imprisonment up to three years or with fine which may extend to a further ten per cent. of the estimated cost of the project, or with both.

Punishment for non-registration

Penalty for contravention of section 4 (Application to Authority.)

If promoter knowingly provides false information or contravenes the provisions of section 4 - liable to a penalty up to five per cent. of the estimated cost of the real estate project, as determined by the Authority

Penalty for contravention of other provisions of this Act.

If promoter contravenes any other provisions (other than under section 3 or section 4) - liable to a penalty up to five per cent. of the estimated cost of the real estate project as determined by the Authority

Penalty for non-registrationand contravention under sections 9 and 10 (Function)

If any real estate agent wilfully fails to comply with or contravenes the provisions - he shall be liable to a penalty of ten thousand rupees for every day during which such default continues;

which may cumulatively extend up to five per cent. of the cost of plot, apartment or building, of the real estate project, for which the sale or purchase has been facilitated.

Penalty for wilful failure to comply with orders or directions by Promoter • Authority - penalty for every day during which default continues, which may

cumulatively extend up to five per cent, of the estimated cost of the real estate project.• Appellate Tribunal - penalty for every day during which default continues, which

may cumulatively extend up to ten per cent. of the estimated cost of the real estate project

Penalty for wilful failure to comply with orders or directions by Allottee • Authority - penalty which may cumulatively extend up to five per cent. of the plot,

apartment or building cost• Appellate Tribunal - penalty which may cumulatively extend up to ten per cent. of

the plot, apartment or building cost

Penalty for wilful failure to comply with orders or directions by Real Estate Agent• Authority - penalty which may cumulatively extend up to five per cent. of the plot,

apartment or building, for which sale or purchase has been facilitated• Appellate Tribunal - penalty which may cumulatively extend up to ten per cent. of

the plot, apartment or building, for which sale or purchase has been facilitated

Where an offence has been committed by a company:

Every person in charge or responsible at the time of commission of offence; and the company, shall be liable to be proceeded against and punished accordingly.

No such person is liable to any punishment, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Where it is proved - offence has been committed with the consent or due to any neglect on the part of any director, manager, secretary or other officer , such officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Offences by Companies

Power to AdjudicateFor the purpose of adjudging compensation, the Authority to appoint officer not below the rank of Joint Secretary to the State Government to be an adjudicating officer for holding an inquiry.

Application for adjudging compensation, shall be dealt as expeditiously as possible and dispose of the same within a period of 60 days from the date of receipt of such application:

Where any application could not be disposed of within 60 days, the officer shall record reasons in writing for not disposing of the application within that period.

While holding inquiry - power to summon, enforce the attendance of any person acquainted with the facts and circumstances to give evidence, or produce any document relevant to the matter of the inquiry and if, on inquiry, he is satisfied that the person has failed to comply, he may direct to pay such compensation or interest, as he thinks fit.

Sums realised by way of penalties

◦ amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

◦ amount of loss caused as a result of the default;◦ repetitive nature of the default;◦ Such other factors which the officer think necessary to the case in furtherance of justice.

(Section 62) Factors to be taken into account by adjudicating officer for quantum of compensation

• All sums realised, by way of penalties, imposed by the Appellate Tribunal or the Authority, in the Union territories, shall be credited to the Consolidated Fund of India.

• All sums realised in a State, shall be credited to such account as the State Government specify.

FDI Policy in Real Estate Business

FDI is not permitted in an entity engaged or proposes to engage in real estate business.

“Real estate business” as per FEMA Notification means,dealing in land and immovable property with a view to earning profit or earning income therefrom; and

It does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.

For Construction- development projects - 100% FDI through Automatic route.

Major Highlight of the Bill

Registration of real estate project and real estate agent Prior approval before launch and advertisement Mandatory deposit of fund Disclosing of mandatory information Restriction on taking advance Liability/ Penalty Real estate regulatory authority

The End…