OVERVIEW OF THE REAL ESTATE

(REGULATION AND DEVELOPMENT) ACT,

2016 AND PROFESSIONAL OPPORTUNITIES

FOR CAs

Presented byMr. KIRIT J. HAKANI, Advocate

(B.Com., LL.M., C.A.)HAKANI LEGAL

E-mail : hakani_kirit@rediffmail.com

THE REAL ESTATE(REGULATION &

DEVELOPMENT) ACT, 2016

NEED FOR THE ACT

76,044 Real Estate firms in India

10,00,000 people buy a house annually

Banking, insurance, securities, foreign

exchange, etc. have regulators.

Lack of transparency and

professionalism

To boost investment in real estate sector

CASES THAT LED TO THE PASSING OF THE ACT

• EMERALD COURT OWNER RESIDENT WELFARE ASSOCIATION

V/s

STATE OF U.P

[Writ Petition No. 65085 of 2012]

In 2014, in Noida, where two towers of the Supertech Emerald Court group housing project were ordered to be demolished by the Allahabad High Court as construction was in violation of building plans.. The Flat buyers were left high and dry.

CAMPA COLA RESIDENT ASSOCIATION & ANR.

V/s

STATE OF MAHARASHTRA & ORS

[ Writ Petition No. 2465 of 2013]

A similar situation is presented by the Campa Cola society case in Mumbai. The Bombay High Court had ordered demolition of the illegal floors and the ruling was ratified by the Supreme Court in February 2013 following a special leave petition (SLP) by a residents’ association.

Esha Ekta Apartment Cooperative Housing Society Limited and Ors

V/s.

Municipal Corporation of Mumbai and Ors

[Civil Appeal No. 7934 of 2012]

In the instant matter the Supreme Court referred to a 2004 judgment (Friends Colony Development Committee vs.. State of Orissa) which stated that:

“Unwary purchasers in search of roof over their heads and purchasing flats/apartments from builders, find themselves having fallen prey and become victims to the designs of unscrupulous builders. The builder conveniently walks away having pocketed the money leaving behind the unfortunate occupants to face the music in the event of unauthorized constructions being detected or exposed and threatened with demolition”

COMMENCEMENT OF THE ACT

• Act received assent of the President on 25th March 2016 .

• It shall come into force on such date as the Central Government may, by Notification in the Official Gazette, appoint.

• Different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

• 69 sections out of total 92 sections have come into force with effect from 1st May, 2016 [vide Notification No. SO 1544(E) 26.4.2016]

• Under the said Notification dated 26.04.2016, following sections have been notified

Sr. No.

Sections

1 Section 2

2 Secs 20 to 39

3 Secs 41 to 58

4 Secs 71 to 78

5 Secs 81 to 92

APPLICATION OF THE ACT• The act extends to whole of India except the State of Jammu

& Kashmir

• Not affected by any other Act in force in the Union of India or any State

• Section 88 clarifies that the provisions of the Act shall be in addition to, and not in derogation of the provisions of any other law for the time being in force dealing with the similar objectives. Such a provision is also laid down in the Competition Commission Act, 2002; Consumer Protection Act, 1986. they have been interpreted as follow:

Union of India

Vs.

Competition Commission of India & Ors.

( W.P(C) 993/2012 & C.M NO.S 2178-79/2012)

Issue involved: Whether the existence of an arbitration agreement between the parties was a bar to the maintainability of the information and the proceedings arising therefrom before the Competition Commission?

Held: The Commission has been set up with special focus “to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto”. The Commission is not merely concerned with the aspect of breach of contract or with regard to implementation of the contract, its mandate is to ensure compliance of, inter alia, Sections 3 and 4 of the Act. The provisions of the Act are in addition to, and not in derogation of, the provisions of any other law for the time being in force (Section 62). This provision is para materia with Section 3 of the Consumer Protection Act, which also states that the provisions of the Consumer Protection Act shall be in addition to, and not in derogation of any other provisions of law for the time being in force.

APPLICATION OF THE ACT Contd.

• Section 89 (Act to have overriding effect) –

• The provisions of this Act shall have effect , not withstanding anything inconsistent therewith contained in any other law for the time being in force. [Thus, it supports the applicability of RERA(Central Act ) over MOFA( State act)] etc. [Shri Ram Narain v. The Simla Banking & Industrial ( 1956 AIR 614)]

PURPOSE OF THE ACT

• To establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector.

• To ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in an efficient and transparent manner.

• To protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal.

• To establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto.

SCOPE OF THE ACT• The Act applies to not only residential apartments but to all apartments, plots

and buildings whether residential or commercial.

• The Real Estate Project as defined in the Act, states that it shall include:

• Development of buildings;

• Development of buildings consisting of apartments;

• Converting existing buildings or part thereof into apartments (e.g.:- converting a bungalow or hotel into apartment);

• Development of land into plots or apartments for the purpose of selling all or some of the said apartments or plots or buildings.

Thus, it is pertinent to note that the Act is wide enough to cover within its scope development of land for buildings, apartments as well as plots. Further, the Act covers not only residential projects but also commercial projects.

WHAT THE REAL ESTATE ACT HOLDS – for buyer

• Click to edit Master text styles

• Second level

• Third level

• Fourth level

• Fifth level

Buyer- friendly Model

Contract

Consent of 2/3rd allottees for any change in project plans

Penalty on Builders same as

penalty on buyers for payment delays

Disclosure of Carpet Area must

Applies to all on going projects without

completion certificate

WHAT THE REAL ESTATE ACT HOLDS – for builders

• Click to edit Master text styles

• Second level

• Third level

• Fourth level

• Fifth level

All project details to be public

Imprisonment for violations

Penalty includes project de-registration

Liable for structural defects

for 5 years

Provision for insurance of land title- will benefit

buyers and sellers70% of sales income must for building and

land cost

Real estate Agents to register with RERA

Non- compliance with Tribunal Order could mean jail

Important terms , people and expressions

allottee• Act defines “Allottee” as the person to whom a plot, apartment or

building , as the case may be , has been allotted, sold( whether as freehold or leasehold)  or otherwise transferred by the  promoter.

• It also includes person who subsequently acquires the said allotment through sale, transfer or otherwise. But the definition of “Allottee” does not include a person to whom land or apartment is given.

• In case a developer leaves a project half way, the association of allottees will have the right to refusal and get back their money along with interest. The allottees can also demand that a government authority get the project completed either through another developer or some other means

PROMOTER• The promoter is one who constructs or causes to construct a

real estate project for sale , i.e. a) A project which involves development of land for construction of

individual buildings b) Buildings consisting of apartments c) Division of land into plots d) Conversion of an existing building into apartments

• The term also includes the Apex State Level, Co-operative Housing, Finance Society and a Primary Co-operative Housing Society ,which construct apartments or buildings for allotment to their members

• Term also includes any Development Authority or any Public Authority selling buildings, apartments or plots.

PROMOTER CONTD.• Promoter includes his assignees. Promoter includes any other

person who acts himself as a builder, colonizer, constructor, developer, estate developer, person acting as power of attorney of the runner of the land

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

• Where the person constructing the apartments etc. and the person selling them are different , the Act considers both of them as promoters who are jointly responsible for the functions of the promoters under the Act

• CARPET AREA- Under the Act, developers can sell units only on carpet area, which means the net usable floor area of an apartment. This excludes the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

• APARTMENT – Whether called block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, 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 or any part thereof, in a building or on a plot of land , used or intended to be used for any residential or commercial use SUCH AS residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified.

• BUILDING- It includes any structure or erection or part of a structure or erection which is intended to be used for residential, commercial or for the purpose of any business, occupation, profession or trade ,or for any other related activities.

• ESTIMATED COST OF REAL ESTATE PROJECT – It means the total cost involved in the development of real estate project and includes the land cost , taxes, cess, development and other charges

• COMMON AREAS mean—

(i) the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase;

(ii) the stair cases, lifts, staircase and lift lobbies, fir escapes, and common entrances and exits of buildings;

(iii) the common basements, terraces, parks, play areas, open parking areas and common storage spaces;

(iv) the premises for the lodging of persons employed for the management of the property including accommodation for watch and ward staffs or for the lodging of community service personnel;

(v) installations of central services such as electricity, gas, water and sanitation, air-conditioning and incinerating, system for water conservation and renewable energy;

(vi) the water tanks, sumps, motors, fans, compressors, ducts and all apparatus connected with installations for common use;

(vii) all community and commercial facilities as provided in the real estate project;

(viii) all other portion of the project necessary or convenient for its maintenance, safety, etc., and in common use;

THE REAL ESTATE REGULATORY AUTHORITY (RERA)

• The appropriate Government shall, within a period of one year from the date of coming into force of this Act, by notification, establish an Authority to be known as the Real Estate Regulatory Authority to exercise the powers conferred on it and to perform the functions assigned to it under this Act.

• As per the Act, the Housing Regulatory Authority and Appellate Tribunal each have a maximum of six months to dispose off cases.

• After the establishment of the Regulatory Authority, all applications, complaints or cases pending with the Regulatory Authority designated, shall stand transferred.

• Authority is to consist of a Chairperson and not less than two whole time members, appointed by the Government

FUNCTIONS OF REAL ESTATE REGULATORY AUTHORITY

• Register & regulate real estate projects/ real estate agents registered under REA.

• Publish & maintain a website of records, for public viewing, of all real estate projects for which registration has been given.

• Creation of a single window system for ensuring time bound project approvals & clearances for timely completion of the project.

• Measures to encourage grading of projects on various parameters of development including grading of promoters.

• Measures to facilitate digitization of land records and system towards conclusive property titles with title guarantee.

• Render advice to appropriate Government in matters relating to development of real estate sector.

mandatory prior registration of a real estate project

1. All real estate projects are required to be registered by the Promoter with RERA

2. Undertaking Marketing/sale with respect to a real estate project will not be permissible for promoters till necessary registration has been obtained under RERA. The mandatory registration with the RERA is not applicable to the Promoter for carrying on the following projects:

a)  Where the area of the land proposed to be developed does not exceed 500 sq. meters. Or the number of apartments does not exceed eight included in all phases.  State Government, have, however, been enabled to reduce these limits (not increase)

b)  Where the promoter has received completion certificate prior to commencement of the Act;

c)  Where the project is for renovation or repair or redevelopment which does not involve selling or new allotment of apartment, plot or building

4. Each phase shall be considered a stand alone real estate project and registration for each phase has to be obtained separately

5. Projects beyond planning area developed with permission of local authority shall be registered if directed by RERA

6. The said application shall be filed within a period of 3 (three) months from the date of commencement of this Act with respect to ongoing projects for which completion certificate is not issued

7. The RERA is required to grant or reject registration within a quick turnaround period of 15 days. If the RERA doesn’t grant or reject the application, the project is deemed to have been registered.

8. On registration, the promoter is required to fill in details of the project on the RERA website. The website will thus form a central repository of all information relating to real estate projects. If a promoter circumvents registration, for example, by allotting a flat to a consumer prior to registration of the project, he will be subject to the penalties prescribed in the Act.

ENCLOSURES WITH APPLICATION FOR REGISTRATION

ENCLOSURES WITH APPLICATION FOR REGISTRATION

ENCLOSURES WITH APPLICATION FOR REGISTRATION

UNDER THE DRAFT RULES:Pan cardAudited Balance Sheet of preceding

Financial yearIncome tax return of preceding 3 yearsNumber of open parking areasDevelopment Agreement/ Collaboration

Agreement/ Joint Development Agreement

Acceptance or refusal of registration1. Upon receipt of an application by the promoter, The RERA shall within a period of 30 days, grant or reject the registration. Application will be rejected only after giving opportunity of hearing.

2. Upon granting a registration, the promoter will be provided with a registration number, including a login Id and password for accessing the website of the Regulatory Authority and to create his web page and to fill in the details of the proposed project.

3. Validity of Registration -The Registration, if granted, will be valid UNTIL THE PERIOD OF COMPLETION of the project as committed by the promoter to the Regulatory Authority. This period shall be extended by the RERA is delay is attributable.

4. Deemed Registration - If the Regulatory Authority fails to grant or reject the application of the promoter within the period of 30 days, then the project shall be deemed to have been registered.

5. Extension of Registration - The period of registration may be extended beyond the validity period (i.e. time taken for completion of the project as undertaken by the Promoter) by the RERA due to force majeure. Apart from force majeure, period may be extended by RERA in reasonable circumstances for reasons to be recorded in writing but such extension or aggregate of extensions shall not exceed a period one year.

Revocation or lapse of registration & consequence thereof

1. The Regulatory Authority may revoke the registration granted on receipt of a complaint or suo moto or on the recommendation of the competent authority in case :

(i) The promoter makes a default in doing anything required under the Act or the rules or regulations made thereunder

(ii) The promoter violates any terms of condition of the approvals granted for the project by the competent authority

(iii) The promoter is involved in any kind of unfair practice or irregularities.  

2. UNFAIR PRACTICE - the term "unfair practice means" a practice which, for the purpose of promoting the sale or development of any real estate project adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:—

(A) the practice of making any statement, whether in writing or by visible representation which,—

(i) Falsely represents that the services are of a particular standard or grade

(ii) Represents that the promoter has approval or affiliation which such promoter does not have;

(iii) Makes a false or misleading representation concerning the services;

B) the promoter permits the publication of any advertisement or prospectus whether in any newspaper or otherwise of services that are not intended to be offered

3. Revocation only after hearing the Promoter & issuing S.C.N of not less than 30 days.

4. In the event the registration is revoked by the RERA or it lapses / expires (not extended) , the authority shall:

•

Debar the promoter from accessing its website in relation to the project, specify his name in the list of defaulters & publish his photograph on its website and also inform other Regulatory Authorities in other States and Union territories about such cancellation;

•

Facilitate the remaining development works to be carried out by competent authority or the association of allottees or in any other manner as may be determined by the Regulatory Authority. However, the association of allottees shall have a first right of refusal for carrying out the remaining development works; [Note: Direction, decision , order of RERA will take effect only after expiry of time limit to file appeal against revocation/ rejection of extension]

• Direct the scheduled bank holding the project bank account, to freeze the account and thereafter take such further necessary actions, including consequent de- freezing of the account, for facilitating the remaining development works.

• Issue such directions as it deems fit

5. Instead of revocation , RERA may put additional terms and conditions

STANDARD FORMAT OF AGREEMENT FOR SALE

• The Agreement for Sale shall contain the following details:-• specify the particulars of development of the project

including the construction of building and apartments, along with specifications and internal development works and external development works,

• the dates and the manner by which payments towards the cost of the apartment, plot or building, as the case may be, are to be made by the allottees and

• the date on which the possession of the apartment, plot or building is to be handed over,

• the rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default

REAL ESTATE AGENT

• As per the Act, Real Estate Agent means any person,:• who negotiates or acts on behalf of one person in a transaction of

transfer of his plot, apartment or building, as the case may be, in a real estate project,

• by way of sale, with another person or

• transfer of plot, apartment or building, as the case may be, of any other person to him and

• receives remuneration or fees or any other charges for his services whether as commission or otherwise and

• INCLUDES a person who introduces, through any medium, prospective buyers and sellers to each other FOR negotiation for sale or purchase of plot, apartment or building, as the case may be,

• and includes property dealers, brokers, middlemen by whatever name called;

registration of REAL ESTATE AGENT 1. To be a real estate agent one has to be registered under section 9 of the

said act.

2. Can deal only with respect to real estate projects which are registered.

3. Every real estate agent shall make an application to the Authority for registration in such form, manner, within such time and accompanied by such fee and documents as may be prescribed.

4. The Authority shall, within such period, in such manner and upon satisfying itself of the fulfillment of such conditions, as may be prescribed-(a) grant a single registration to the real estate agent for the entire State of Union

territory, as the case may be;

(b) reject the application for reasons to be recorded in writing, [only after granting an opportunity of hearing].

9. Deemed registration

10.Registration can be revoked if obtained by misrepresentation or fraud [only after granting an opportunity of hearing].

Important functions & duties of a promoter

1) To get the proposed real estate project registered with the RERA;

2) To create a webpage and display the project on the website of RERA so as to make the details therein available on public domain;

3) Not to advertise or make offer for sale without registering the project;

4) The Promoter shall make available certain documents at the time of booking and issue of allotment letter such as:

sanctioned plans, layout plans, along with specifications, approved by the competent authority, by display at the site or such other place as may be specified by the regulations made by the Authority;

the stage wise time schedule of completion of the project, including the provisions for civic infrastructure like water, sanitation and electricity.

5) To obtain the completion certificate and the occupancy certificate from the relevant competent authority as per local laws or other laws for the time being in force and to make it available to the allottees individually or to the association of allottees, as the case may be

6) To obtain lease certificate, where the real estate project is developed on a leasehold land, specifying the period of lease, and certifying that all dues and charges in regard to the leasehold land has been paid, and to make the lease certificate available to the association of allottees;

7) To refund the amount received in case of failure to give possession in time;

8) To compensate the allottees for loss due to defective title of the land etc ;

9) No deposit of advance of a sum more than 10 % of the cost of the apartment, plot or building can be taken without first entering into written agreement for sale.

This COST OF APARTMENT refers to the agreed sale price of the apartment and not the cost price of constructing the apartment as is clear from co-joint reading of Section 13 and Section 19(6) of the Act. If it is literally to be taken as cost of apartment then it shall result in absurd conclusions

10) Consequences in case of Misleading advertisements/ prospectus :The Act provides that if any person (who has made an advance or a deposit based on the notice, advertisement, prospectus or model apartment to the promoter) suffers any loss or damages by reason of any incorrect, false statement included in the notice, advertisement or prospectus, or on the basis of any model apartment plot or building, then he shall be compensated by the promoter. Further, if he desires to withdraw from the proposed project then he shall be returned his entire investment with interest and compensation

11) No structural alteration without prior written consent of two-third of the allottees, excluding the Promoter.

12) The Promoter is also not allowed to transfer or assign majority of its rights and liabilities in a project to a third party, without prior consent of two-third of the allottees, along with the RERA's prior written approval. New promoter to independently comply with pending obligations. No extension of time to new promoter.

13) The Promoter is responsible for structural defects or other deficiencies for a period of 5 years from the date of delivery of possession without further charge. Defect to be rectified within 30 days or else allottees to be compensated.

14) Cannot mortgage or create charge after the execution of agreement for sale: The Promoter is prohibited from creating any charge or encumbrance on any apartment after executing an agreement for the same. In the event such charge or encumbrance is created, it will not affect the right and interest of the concerned consumer.

15) Escrow Account:

Seventy percent of the amount realised for the real estate project from the allottees from time to time shall be deposited in the separate account to be maintained in a Schedule Bank to cover the cost of land and construction. The amount from this account shall be utilised for payment of land cost and for cost of construction. The safeguard is provided for proper utilisation of such project receivables, by permitting its withdrawal by the promoter only after certification by the Engineer, Architect or Chartered Accountant and that the withdrawal is in proportion to the percentage of the completion of the project. This is one of the best measures for protection of interest of the allottee. The fund from this account can be utilised for completing the project by the RERA or authorities or agency appointed by it.

The Act does not specify that the fund obtained by mortgaging the property also needs to be deposited in such separate account. This is the main drawback of this provision and may affect the interest of the allottee.

16) Various assurances and insurance:

The Promoter is required to declare that it has legal title to the project land or authenticate validity of title, if such land is owned by another person. The Promoter is also required to obtain insurance for title and buildings along with construction insurance.

17) To provide and maintain essential services an reasonable charges till handing over to the association of allottees

18) To execute registered conveyance in favour of allottees and their association along with the undivided proportionate title in the common areas to the association of allottees or competent authority, as the case may be, and handover physical possession. Time limit – as per local Laws or in absence of local laws , within 3 months from the date of issue of occupancy certificate.

19) Pay all outgoings till transfer of physical possession

20) To enable the formation of an Association or Society or Co-operative Society, as the case may, of the allottees, or a federation of the same under the laws applicable. Provided that in absence of local laws, the Association of allottees, by whatever name called, shall be formed within a period of 3 months of the majority of allottees having booked their plot or apartment or building, as the case may be, in the project.

Moreover, if the Promoter fails to discharge any other obligations imposed on him under the proposed legislation or the rules or regulations made thereunder, he shall be liable to pay such compensation to the allottees, in the manner as provided under the proposed legislation.

Rights of allottees 1) Right of information in relation to promoter and real estate project  

2) Right to receive Completion Certificate/Occupancy certificate

3) Right to remedy of approaching RERA against wrongful cancellation of allotment by promoters( Builders and Developers)

4) Right to claim compensation or interest from promoters for breaches of agreement of sale

5) Right to withdraw from the project and claim return of investment with interest and compensation in case of false advertisement or non fulfillment of any conditions mentioned in the agreement

6) Right to claim compensation from the promoters in case of loss caused to allottees due to defective title

7) Right to execution of Agreement for Sale, before payment of 10 % of cost of flat/ apartment/ gala/land etc.

Rights of allottees contd.8) Right to statutory remedy of filing compliant with

adjudication authorities for enforcement of rights

9) Right to execution of registered conveyance deed by the promoters

10) Right to physical possession

11) Right against alteration of project without their consent.

12) Right against transfer or assignment of project by the promoters to third party without consent of allottees or association of allottees Right to charge same rate of interest for default in payment as promoters will be charges in case of breach of any clauses of the Agreement of Sale.

OBLIGATIONS OF ALLOTTEES

1) Responsibility to pay interest for delay in payment according to Agreement of Sale;

2) Responsibility to participate in formation of Association of Allottees;

3) Responsibility to take physical possession of the apartment, plot or building as the case may be , within a period of two months of the issue of Occupancy certificate;

4) Responsibility in participating in execution & registration of conveyance deed;

5) Responsibility to pay penalty for breach of any order of the Competent Authority;

Central advisory council

• Section 41 prescribes for the establishment of a Central Advisory Council.

• The Minister to the Government of India in charge of the Ministry of the Central Government dealing with Housing shall be the ex officio Chairperson.

• Council shall consist of 10 members

• Council shall advice and recommend the Central Government on all matters concerning implementation, major policy questions, growth of real estate sector ,or any matters assigned to it by the Central Government.

Power to adjudicate

• Section 71 of the Act - For adjudicating compensation under Sections 12, 14, 18 and section 19, the Authority shall appoint in consultation with the appropriate Government one or more judicial officer as deemed necessary, who is or has been a District Judge to be an adjudicating officer for holding an inquiry in the prescribed manner, after giving any person concerned a reasonable opportunity of being heard

FUNCTION OF ADJUDICATING AUTHORITY • The function of the adjudicating authority is to adjudge the

compensation/damages for loss sustained due to :• incorrect, false, misleading statement in the advertisement

or prospectus,

• failure of the promoter to rectify the structural defect or any other defect in workmanship, quality or provision of service or any other obligations of promoter under the agreement for sale within 30 days.

• Failure of promoter to complete or inability to give possession of the apartment within stipulated period as mentioned in Section 18(1) of the Act or due to defective title of the promoter to the land and failure of promoter to discharge his obligations under the Act, Rules or Regulations and in terms of the Agreement for sale.

ADJUDICATING AUTHORITY

• Application for compensation to be disposed off within a period of 60 days.

• If not disposed off then reasons to be recorded in writing.

• Where complaint on matters covered under Section 12,14, 18 and 19 is pending before the Consumer Forum, same may be withdrawn and application be filed before Adjudicating Officer.

Establishing Real Estate Appellate Tribunal

• Any relief mentioned in the legislation is meaningless until the same can be enforced within a reasonable time. MOFA provides for obligations on the promoter but the aggrieved allottees could approach only the civil courts or the consumer forums for redressal of his grievance. The Maharashtra Housing Act (which has been repealed) appreciated this problem and provided for setting up of a special Tribunal referred to as Housing Appellate Tribunal to hear appeals against the orders and directions of the Housing Regulatory Authority.

• This Act also has provided for setting up of a Real Estate Appellate Tribunal to be established by the respective State Governments or the Union Territory within a period of one year from the date of coming into force of the Act.

• The Tribunal will function in benches and each bench shall consist of one judicial member and one Technical or Administrative member. The chairperson will be a sitting or retired judge of a High Court

• The aggrieved party including the appropriate Government or the Competent Authority (MHADA, CIDCO, and DDA) and Local Authority can prefer appeal against the order of the Regulatory Authority or the adjudicating officer. The appeal has to be filed within sixty days and is expected to be disposed of within sixty days. In case it is not disposed of within sixty days the Tribunal will have to record reasons for not disposing of within time.

• It is also provided that in case the appeal is filed by the promoter against any penalty ordered by the Authority, it will be entertained only after he deposits with the Tribunal at least 30% of the penalty imposed or such higher amount as may be determined by the Tribunal. In case the appeal is against any amount payable to the allottee including the interest and compensation, the appeal can be entertained only after the total amount is so deposited by the promoter.

• Every order of the Tribunal shall be executable as a decree of the civil court and therefore, it will have all the powers of a civil court. All proceedings before it will be judicial proceedings. The Tribunal has also the power to transmit any of his order to a civil court to be executed as if it is an order of the court. Further appeal from the orders of the Tribunal shall lie to the High Court.

• The Tribunal will not be bound by the procedure laid down in the Civil Procedure code but shall be guided by principle of natural justice. It shall also not be bound by the rules of evidence in Indian Evidence Act.

• Appellate Tribunal has the power to pass interim orders as it deems fit.

RIGHT TO LEGAL REPRESENTATION

• Before the RERA, Adjudicating Authority and Appellate Tribunal the Applicant or Appellant may either appear in person or authorize one or more Chartered Accountants or Company Secretaries or Cost Accountants or legal practitioners to present his or its case.

APPEAL TO HIGH COURT

• Any person aggrieved by any decision or order of the Appellate Tribunal, may, file an appeal to the High Court, within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal, to him, on any one or more of the grounds specified in section 100 of the Code of Civil Procedure, 1908

Penalty for a promoter

OFFENCE PENALTY

Contravention of the provisions of Section 3 i.e.., making any

invitation for sale without getting the project registered with RERA

(Section 59)

Penalty up to 10% of estimated cost of the project.

For the continued default imprisonment up to three years or with further fine up to 10% of

the cost , or with both

Contravention of Section 4 i.e.., failure to make application for registration, submitting false

information, failure to keep 70% in separate bank account etc.

(Section 60)

Penalty up to 5% of the estimated project cost

OFFENCE PENALTY

Contravention of any other provision of the

Act/Rules/Regulations (Section 61)

Penalty up to 5% of the estimated project cost

Failure to comply with the directions/orders of the

Regulatory Authority(Section 63)

Penalty for every day of the default which can cumulatively

go up to 5% of the estimated project cost

Failure to comply with the orders, decisions of the Appellate

Tribunal(Section 64)

Imprisonment up to three years or with fine for every day of

default which can cumulatively go up to 10% of the estimated

cost of the project, or with both.

Penalty for allottees

OFFENCE PENALTY

Failure to comply with orders of the Authority (Section 67)

Penalty per day of the default which can cumulatively go up to

5% of the cost of building/plot or apartment

Failure to comply with decision or orders of the Tribunal

(Section 68)

Punishment of imprisonment up to one year or with fine for each day of default cumulatively going up to 10% of the cost of building/

apartment or plot, or with both.

Penalty for an agent

OFFENCE PENALTY

Failure to comply with order or direction of the Authority

(Section 65)

Penalty for every day of default which can cumulatively go up to 5% of the estimated cost of the

building/ apartment or plot

Failure to comply with order or direction of the Tribunal

(Section 66)

Punishment with imprisonment up to one year or with fine for each

day of default which can cumulatively go up to 10% of the

cost of the building/ apartment or plot, or with both

COMPOUNDING OF OFFENCE• If any person is punished with imprisonment, the

punishment can be compounded by the Court either before or after the institution of prosecution.

• UNDER DRAFT RULES:

OFFENCE MONEY TO BE PAID FOR COMPOUNDING THE OFFENCE

Imprisonment under Section 59 and 64

10% of the estimated cost of the Real Estate project

Imprisonment under Section 66 and 68

10% of the estimated cost of the Plot, Apartment or Building

Role of chartered accountant• Amounts from the separate account maintained for deposit of amounts

received from allottees shall be withdrawn by the promoter after it is certified by an engineer , an architect and chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.

• The promoter shall get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such CA. During the audit it shall be verified that the amounts collected for a particular project have been utilized for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project.

• Chartered Accountants can be appointed as legal representative before the Appellate Tribunal or the Regulatory Authority

• Can be appointed as member of Central Advisory Council, Chairperson or member of RERA, Technical Member of Real Estate Appellate Tribunal

Secondary role of a CA

• Application for Registration of real estate project --- Application shall be made in prescribed form with the prescribed fee and shall include details of promoters, projects launched in past five years, approval letters/certificates to commence project, lay out plan, allotment letter, agreement for sale proforma, garage , declaration to legal title etc.

• Registration of real estate agents --- No real estate agent shall be able to facilitate the sale or purchase in a real estate project registered without obtaining registration under new Act. The registration shall be given by the Authority for the entire State/ Union Territory.

BAR OF JURISDICTION

• No Civil Court shall have jurisdiction to entertain any Suit or proceeding in respect of any matter which the authority or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

The Maharashtra(regulation and development)act , now a lost cause

• Maharashtra is the only state to recognize the right to title of housing societies. With the Centre’s real estate Act, the Maharashtra Housing (Regulation and Development) Act (MHA), 2012, stands repealed.

• About 45,000 housing societies in the state are yet to be handed ownership of the lands and would be impacted by the Centre’s move

• MOFA was not able to control malpractices in the building industry because of lack of an implementing arm and other deficiencies, hence, the Government of Maharashtra passed Maharashtra Housing (Regulation and Development) Act, 2012.  As per Section 56 of that Act, MOFA was to stand repealed on and from the date of notification for such repeal.  The Act was to come in force from the date to be notified.

• However, the Section 92 of the Real Estate Act has repealed the Maharashtra Housing Act.  The Maharashtra Housing Act itself having been repealed, MOFA will continue to operate. Thus, State Act MOFA and Central Real Estate Act both will be enforceable simultaneously in the State of Maharashtra and might open up an area of judicial intervention in reconciling the provisions of the two Acts.

Rera over mofa? Or A

combination of two?

Comparison

MOFA RERA

Advance booking amount not more than 20% without an Agreement

Advance Booking amount not more than 10% without an agreement

Parties to approach Magistrate court and High court for further appeals

Real Estate Tribunals to be set up in respective states in addition to the existing courts and tribunals

For any contravention penalty by promoter will be imprisonment up to one year with fine up to Rs.10,000

Penalty up to 10% of the estimated project cost in case of any contravention by promoter and imprisonment upto 3 years

Regulated construction and sale of Flats only

Governs buildings, apartments and even plots developed for sale

MOFA can be found in the state list RERA can be found in both, State list and Concurrent List

Combination of rule making power

• Since the applicability of RERA, provisions of the Central Act will be followed.

• Only in cases where provisions of RERA are not complying enough, MOFA will be referred as an act for a dispute.

• In certain cases both RERA and MOFA can be used, as and when the matter demands.

Shortcomings of the Act• Capital efficiency --- The mandatory requirement to deposit 70% of sale

proceeds in a separate account will impact the utilization of project receivables and increase promoter reliance on institutional capital such as private equity or bank finance (which can be expensive). This is could lead to an escalation in project costs, which may then be passed on to the consumers.

• Approvals process --- Under the Act, all necessary approvals are required to be obtained prior to project launch, instead of certain specific approvals as previously required. This may delay project initiation and restrict supply of new properties. There is no single-window clearance approval process which could further add to the delays in project launch. Also, the Act does not assign liability for project delays attributable to state agencies.

• Systemic issues --- The Act neither establishes a conclusive title system for land, nor addresses the issue of availability of housing stock across all income categories or the practice of using black money in real estate transactions

THANK YOUCredits:

Mr. Rahul Kirit Hakani, (LL.M., C.A.)

Mrs. Niyati Nihar Mankad (Hakani) (LL.M., C.A.)

Miss. Ashna Jha, Student of Rizvi Law College (4th year of V year LL.B. Course)

HAKANI LEGAL

103, 1st Floor, Natwar Chambers,

Nagindas Master Road, Opp. Dwarka Hotel,

Fort, Mumbai- 400 001

Tel. No. : 022 66101236

Mob. No. 9820219249

Email ID:- hakani_kirit@rediffmail.com