Legal view of RERA Law in India
In India, the real estate laws are governed by both State-specific laws and Federal laws. As per the Constitution of India, ‘Land’ falls under the State List while ‘Transfer of property and registration of deeds and documents’ falls under the Concurrent List and hence both the State as well as the federal laws govern it.
Article 254 (2) of the Constitution of India mentions that state laws under the concurrent list which have received Presidential assent shall prevail in the state; however, the proviso to this Article gives plenary powers to the Centre to amend, vary or repeal the particular state law. Hence, the buying and restriction of property in India seem to be a bit complicated and challenging.
The Real Estate (Regulation and Development) Act, 2016 (RERA): Protection to buyers
The Act governs the development, marketing, and sale of real estate projects. The Act was enacted to protect the interests of the consumers in the real estate sector. It ensures a mechanism for speedy dispute redressal through the Authority and the Appellate Tribunal. The Act also mandates the compulsory registration of projects and key players in the real estate sector.
The Act has been acclaimed as progressive legislation as it addresses the concerns of buyers, and provides penalties that are to be imposed on the promoters, maintenance of licenses, disclosures, etc. The Act disrupts existing sector practices to raise the efficiency of the real estate market and is likely to benefit all stakeholders by imposing financial and operational discipline, accountability, and diligence[i].
In Bindu R Jaisingh v. Ekta Parksville Homes Pvt. Ltd.[ii]– The complainant was a buyer to whom the builder promised that he would receive the flat’s possession in June 2017. However, there was a delay in giving possession, and being aggrieved the complainant filed a complaint. The respondent sought time for handing over the possession mentioning that the delay was beyond his control. In certain exceptional circumstances, the Authority may consider the plea of the developers where it finds that there is a genuine concern.
Jurisdiction of RERA
The Act came into force on 1st July 2017, and it is not restricted to new projects that are to be started after the implementation of the RERA Act it also covers ongoing projects during the commencement of the Act and that had not received a completion certificate from the concerned Authority.
An issue arose before the Maharashtra RERA Authority i.e. whether the termination of the agreement before the implementation of the RERA Authority attracts the jurisdiction of the RERA authority?
The issue was answered in the case of Chauthiprasad S. Gupta v. M/S Nahalchand Laloochand Pvt. Ltd.[iii] where the home buyer had made a substantial payment to the builder, and a sale agreement was executed. The buyer alleged that the builder terminated the agreement of sale unilaterally through a termination letter without giving any opportunity of being heard by the buyer. It was prayed by the buyer that the builder must be directed to withdraw the termination letter and compensation must be awarded. It was stated in this case that the builders cannot escape their liability by alleging the shelter under the non-maintainability of the complaint if the project is registered under the RERA and has not received an Occupational/ Completion certificate yet.
Regarding the issue of jurisdiction of the RERA tribunals, the authorities opined that the tribunal will not entertain any cases which that are pending in any other tribunal. A similar issue was dealt with by the court in Sh. Sukhbir Singh Grewal v. M/s. MVL Ltd.[iv] wherein the buyer filed a case against the builder for delay in handing over the possession. The builder submitted that cause of delay was due to an interim order passed by the SEBI, and that the buyer challenges the order in the Security Appellate Authority (SAT). It was ordered by the authority that the tribunal established under RERA cannot entertain this case as the matter is already in SAT.
Impact of RERA and benefits for buyers
After the enactment of the Act, the enforcement and registration of the sale deed of a project unit cannot be done in the office of the sub-registrar without obtaining the occupancy certificates or completion certificates. Some of the following are the impacts of the Act:
- The Act maintains a check on the builders/ developers/ promoters and there are lower chances of fraud against buyers hence dishonest builders will disappear as they won’t be able to sustain after implementation of the Act.
- The provisions of the Act encourage financial discipline in the real estate sector.
- The Act imposes several formalities on the builder if they require making any changes to the project.
- The Act provides confidence to buyers and they can invest freely now.
The project which shall come under the RERA includes the following:
- Commercial and residential projects including plotted development.
- Projects measuring more than 500 sq. meters or 8 units.
- Projects without Completion Certificate, before the commencement of the Act.
It must be noted that the projects that only include repair, renovation, or re-development not requiring marketing, selling, new allotments, etc. will not fall under the ambit of RERA.
Whether a complaint is filed after possession/ Occupancy Certificate (OC)?[v]
As per the RERA Act, the complainant is permitted to file the complaint about the following even after getting the completion certificate for-
- The breach of the agreement between complainant and respondent,
- The complaint by the Limitation Act, 1963.
However, there is no fixed rule of the same; in a case,[vi] the complainant who was the homebuyer filed a complaint after possession of flat in an apartment. The complaint was filed regarding the pending work as per the brochure of the project. The RERA Authority denied entertaining the said complaint as the possession was already handed over to homebuyers. Respondent put forth that all amenities in the apartment which were given to homebuyers are already completed and remaining will be completed in the reasonable remaining time. Maha RERA Authority directed the developers to complete the remaining amenities immediately.
What issues are addressed under the RERA Act in addition to the aforesaid concerns?
The Act addresses the following concerns:
- Delay in construction and
- Quality of construction
If a builder disdain the norms of RERA, the builder will be liable to compensate the buyer for the loss. The compensation is decided in the initial agreement signed between the parties. It also specifies the amount of interest payable by the builder in case of construction delays.
Ongoing projects and impact of RERA
The developers of the projects that are still under construction may face certain difficulties due to the Act. According to the Act, all ongoing projects now must register first with the regulatory authority before moving further in completing the project. There is also a prohibition on advertising or promoting the property before registration and hence this may cause a delay in the construction and sale of the existing property. The Act also mandates the developers to issue an occupation or completion certificate before handing over possession to the buyer.
Another point of concern for the developers is the issuance of the certificates on time which depends on the Municipal Corporation for the projects under the planning area and on the Gram Panchayat for the non-planning area. Where the developers seek an extension, the period granted for project completion is dependent upon the authority as a fine is charged by the authority for the delay in the project.
Impact of the Act on Agents and brokers[vii]
The Act has made a mandate for the brokers to register themselves to facilitate a transaction. Before the enactment of the Act, there were a huge number of unregistered agents/brokers that were unorganized and unregulated in the real estate sector. The Act bards the brokers to make promises regarding any amenities or services that are not mentioned in the documents. They are now bound to provide all information and documents to the buyers, at the time of booking.
Penalties under the Act
| Applicable sections | Offenses committed | Applicable penalties |
| Section 9 (7) | Registration secured through misrepresentation or fraud Breach of terms for which registration obtained | Revocation of Agent Registration Number |
| Section 62 | Contravention of Section-9 & Section 10 | The penalty of INR 10,000/-day during which the default continues extending up to 5% of the cost of unit sold |
| Section 65 | Contravention of orders of RERA authorities | Penalty up to 5% of the cost of unit sold |
| Section 66 | Contravention of orders of Appellate tribunal | Imprisonment for up to 1 year or with a fine extended up to 10% of the cost of the unit sold |
The buyers who invest their life savings to purchase homes or invest in the property for them inordinate delays in getting possession are a matter of worry. The brokers, builders, and promoters make false promises regarding the quality of construction and completion; they take advantage of approaching homebuyers. Oral commitments are made regarding property documents that are usually missing or incomplete. Even the agents conceal the status of properties and do not disclose that it is under litigation. Hence, the Act was enacted to deal with such concerns of the buyers and investors.
[i] https://www.hindustantimes.com/real-estate/does-rera-have-an-overriding-effect-on-state-laws/story-gflTANpWZd6hpa1cWIQj8K.html
[ii] 2018/MH/Centrik/44/MAHARERA
[iii] https://www.centrik.in/blogs/jurisdiction-rera-authority-case-termination-agreement-implementation-rera-act/
[iv] 2018/GN/Centrik/1/HRERA
[v] https://www.legalserviceindia.com/legal/article-3336-rera-what-is-rera-importance-and-related-issues.html
[vi] https://economictimes.indiatimes.com/wealth/real-estate/wont-entertain-complaints-post-flat-possesion-maharera/articleshow/63583158.cms?from=mdr
[vii] https://www.legalserviceindia.com/legal/article-4003-rera-a-boon-or-bane-for-real-estate-sector.html
