real estate(regulation and development) act, 2016 – an …€¦ · real estate(regulation and...
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By CA Ashok Raghavan, N.c.s. raghavan and co., Chartered accountants bangalore
Real Estate(Regulation and Development) Act, 2016 – An Insight
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▶ The Real Estate (Regulations and Development) Act, 2016 received the assent of the President on 25th March, 2016.
▶ Notified by the Circular dated 26th March, 2016 issued by the Ministry of Law and Justice.
▶ Certain Sections were notified by S.O. 1544( E), dated 26th April, 2016 issued by Ministry of Housing and Urban Poverty Alleviation.
• Section 2 – Definitions
• Section 20 – 39 – Chapter V – Real Estate Authority
• Section 41 – 58 – Chapter VI – Central Advisory Council
- Chapter VII – Real Estate Appellate Tribunal and Appeal to High Court
• Section 71 – 78 – Powers to Adjudicate(Section 71 and 72)
- Finance, Accounts, Audits and Reports(Section 73-78)
• Section 81 – 92 – Miscellaneous Provisions
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▶ Balance of Sections were notified by S.O. 1216( E) dated 19th April, 2017 issued by Ministry of Housing and Urban Poverty Alleviation.
• Section 3 to 19 – Registration of Real Estate Project and Real Estate Agent ( Section 3 to 10).
- Functions and Duties of Promoters ( Section 11- 18)
- Rights and Duties of Allottees (Section 19)
• Section 40 - Recovery of Interest, Penalty or Compensation
• Section 59 – 70 - Offences, Punishments and Adjudication
• Section 79 – 80 - Bar of Jurisdiction and Cognizance of Offences
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State Notifications▶ Tamil Nadu has issued the Tamil Nadu Real Estate
(Regulations and Development) Rules, 2017 on 22-6-2017 under the powers conferred under Section 84 of the Real Estate (Regulations and Development) Act, 2016 (Various Forms and the draft Agreements as prescribed by the State of Tamil Nadu are Annexed thereto in the said Rules)
▶ Other States that have notified Real Estate Rules are Karnataka, Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh, Bihar, Rajasthan, Kerala, Uttarakhand, Punjab, the National Capital Territory of Delhi and the Union Territory of Chandigarh , Daman And Diu, Andaman and Nicobar and Lakshadweep
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Objectives of the Act
▶ To ensure transparency and efficiency of the sale of a plot, apartment, building or real estate project.
▶ To protect the interest of the consumers in the real estate sector by providing an adjudicating mechanism for speedy dispute redressal.
▶ Providing severe penalties for contravention of the provisions of the Act by the promoters.
▶ Providing measures to ensure that enough funds are retained by the promoters to be fully dedicated to the Real Estate Project to ensure timely completion.
▶ To provide uniformity by standardization of procedures and documentation in the Real Estate Sector.
▶ To ensure that the status of the Project is uploaded by the Promoters on the website of the Authority regularly for information of the general public and the Allottees.
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Applicability of the Act
▶ The various Sections of the Act shall come into force on the dates notified as detailed earlier – Section 1(3)
▶ The Act will apply to all on going projects on the date of commencement of the Act for which Completion Certificate has not been obtained from the competent authority – Section 3(1)- Some states have issued notifications to dilute the definition of ongoing projects
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Important definitions under the Act – Section 2
▶ “Allottee” – Section 2(d) – does not include a tenant
▶ “Apartment” – Section 2(e) – exhaustive definition but should be a separate and self contained part of an immovable property.
▶ “Carpet Area” – Section 2(k) – means net usable floor area and excludes exclusive balcony or verandah area and exclusive open terrace.
▶ “Common Area” – Section 2(n) –includes the land for the Real Estate Project and other areas as defined.
► “Immovable Property” - Section 2(z) – Similar to General Clauses Act definition.
Note that exclusive balcony, verandah and terrace area is neither a part of carpet area or common area.
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▶ “Person” – Section 2(zg) – includes LLP.
▶ “Promoter” – Section 2(zk) – A person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees ; any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name 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 any building or apartment for sale to general public.
Explanation – for the purposes of this clause where the person who constructs or converts a building into an apartment or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified under this act or the rules or regulations made thereunder.
A real estate agent can also therefore be deemed to be a promoter.
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▶ “Real Estate Agent” – 2(zm) – Definition would include the E-portals, online real estate agencies and other agencies - could be regarded as a promoter by the virtue of a explanation to Section 2(zk).
▶ “Real Estate Project” – Section 2(zn) – will include both apartments and plotted land development and converting existing buildings and apartments.
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Registration of Real Estate Project – Section 4
▶ Promoter to register the real estate project with the Real Estate Regulatory Authority.
▶ Real Estate Regulatory Authority can also bring within its scope projects beyond the planning area for compulsory registration.
▶ The project is to be registered and not the Owner/Developer.
▶ Registration of certain projects to be exempted u/s 3(2)
• land less the 501 sq. mts.
• project upto 8 apartments
• projects which have received completion certificate prior to the commencement of the Act.
• Repairs, renovation or redevelopment of apartment, plot or building which does not involve marketing, advertising, selling or new allotment.
► Application for registration to be made in the prescribed form with the prescribed fee – Section 4(1).
► Documents to be submitted along with application – Section 4(2) includes commencement certificate.
► Section 4(2)(l)(D) of the Act requires a declaration to be signed and submitted by the promoter, that Seventy Percent (70%) of the amounts realised for the real estate project form the Allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.
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Grant of Registration - Section 5
▶ Registration to be granted by authority within 30 days from the date of application.
▶ Application to be rejected in writing and after giving opportunity of being heard.
▶ Deemed registration if authority does not act within 30 days.
▶ Registration to be granted for a period mentioned by the promoter in the application.
▶ Registration granted may be extended by the authority due to conditions force majeure.
▶ Registration cannot be extended for a period of more than one year – Section 6.
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▶ Registration can be revoked by the authority on receipt of complaint or suo moto if the promoter has defaulted in complying with the rules and regulations made under the act or if he violates the terms and conditions of approval.
▶ Registration can also be cancelled if the promoter is involved in any kind of unfair or fraudulent practice.
▶ On revocation of registration of a project, the remaining development works may be carried out by a competent authority or the Association of Allottees or in any other manner determined by the authority. Association of Allottees to be given first right of refusal.
Revocation of Registration – Section 712
Registration of Real Estate Agents – Section 9
▶ Real estate agents to compulsorily obtain registration for marketing a real estate project registered under Section 3 of the act.
▶ Authority can grant single registration for entire State or Union Territory.
▶ Authority can reject the application after giving an opportunity of being heard.
▶ Deemed registration if application is not registered within the prescribed time.
▶ Every registration is valid for such period as may be prescribed and on payment of the prescribed fee.
▶ Authority may revoke registration of agents under certain circumstances.
▶ Functions of the real estate agent detailed in Section 10 – includes a stipulation that they shall not indulge in unfair trade practice.
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Functions and duties of promoter – Section 11
▶ To create his webpage on the website of the authority and provide details of the project for public viewing.
▶ Provide information to the allottees at the time of booking and issue of allotment letter including sanction plans, approval of competent authorities and stage wise completion of the project.
▶ Be responsible for all the obligations, responsibilities and functions under the provisions of the act and rules made thereunder or to the allottees and/or to the Association of Allottees till the conveyance of all the apartments, plots or buildings.
▶ To be responsible to obtain the Completion Certificate or Occupancy Certificate from the competent authority.
▶ Enable the formation of Association of Allottees, such association to be formed within a period of three months of the majority of the allottees having booked their units in the project.
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▶ Execute and register conveyance deed in favour of allottee along with undivided proportionate title in common area to the Association of Allottees.
▶ Not to create a mortgage/charge on the unit after he executes an Agreement for Sale with an allottee- practically the financial institution which has financed the project will give an NOC to the promoter and the allottee in favour of the institution which is providing the housing loan and will give the release letter at the time of entering into the deed of conveyance.
▶ Pay all outgoings till he transfers the physical possession of the real estate project to the allottees or Association of Allottees, as the case may be.
▶ To compensate and allottee who has advanced or deposited money for allotment of a unit based on advertisement of prospectus or on the basis of model apartment if it is proved to be incorrect or false – Section 12.
▶ Not to accept more than 10% of the cost of the unit from the allottee without entering into a written agreement duly registered which shall be in form as may be prescribed – Section 13.
▶ To strictly adhere to sanction plans and project specifications – Section 14.
▶ Promoter not to make addition or alter the sanction plans and specifications - except with the prior consent of the allottee – except minor additions or alterations due to structural reasons.
▶ Consent of 2/3rd of the allottees other than the promoter is required to make alteration or addition in the sanction plan, layout plan, building specs and common areas.
▶ Defect liability period is 5 years for construction – no defect liability period for title of land
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Transfer of Real Estate Project to a third party – Section 15▶ Promoter cannot transfer or assign his majority rights and liabilities in
respect of the real estate project to any third party without the prior consent of the 2/3rd of the non-promoter allottees and written approval of the authority.
▶ New promoters to comply with all pending obligations and to complete the project within the period specified at the time of registration.
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Promoter to obtain insurance – Section 16
▶ In respect of title of land and building as a part of real estate project- – whether such a product is available in India
▶ In respect of the Construction of the real estate project.
▶ To handover insurance papers to the Association of Allottees and transfer insurance benefit to the association or allottees, as the case may be at the time of the Promoter entering into an Agreement for Sale with the Allottee.
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Transfer of Title – Section 17▶ Promoter to execute registered Conveyance Deed :
• Of the unit in favour of the allottee,
• Of the undivided proportionate title in the common area to the Association of Allottees / the competent authority as the case may be- as land is part of common area the entire land pertaining to the project has to be conveyed to the association of allottees and not to the individual allottees.
• Although the Act indicates that only carpet area can be conveyed to the allotees and the common area including the land is to be conveyed to the Association of Allottees, the Tamil Nadu RERA Authority has framed Rules which continue to permit the transfer of undivided share of right, title and interest in land along with a construction agreement for the super built area.
► Promoter to handover possession of the units to the allottee and common area to the association within three months from the issue of Occupancy Certificate.
► The Rules formulated by various States also stipulate that the Conveyance Deed to be executed in favour of the allottee shall be only after obtaining the Occupancy Certificate.
► Promoter to handover all the documents and plans to the Association of Allottees or the Competent Authority within 30 days from date of obtaining the Occupancy Certificate.
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Return of amount and compensation – Section 18
▶ If the promoter fails to complete or is unable to give possession of the unit to the allottees as per the terms of the agreement or due to discontinuance of business or on account of suspension or revocation of registration under the act or for any other reason, he shall return the amount received from the allottees towards the unit with interest at such rate as may be prescribed in case the allottee wishes to withdraw from the project.
▶ If the allottee does not wish to withdraw form the project he shall be paid interest for every month of delay at such rates which may be prescribed.
▶ The promoter shall compensate the allottees for defective title of the land and the claim for compensation shall not be barred by limitation.
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Rights and Duties of Allottees – Section 19
▶ The allottees shall be entitled:
§ . To obtain all relevant information relation to the project
• To know about the stage wise schedule of completion
• To claim possession of the unit
• To claim refund of amount paid along with interest
• To have the necessary documents and papers after obtaining physical possession of the unit
► The allottees shall be responsible
• For timely payment of the amounts as per agreement of sale
• For payment of interest in case of delayed payments
• To participate in the formation of the association of the allottees
• To take physical possession of the unit within two months of the issue of Occupancy Certificate
• To participate towards registration of conveyance deed of the unit.
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The Real Estate Regulatory Authority – Section 20
▶ The Government shall, within a period of One Year from the date the Act coming into force establish an Authority – will be known as Real Estate Regulatory Authority.
▶ The Appropriate Authority shall be a Body Corporate with the power to acquire and dispose of property in its own name, capable of being sued and to sue.
▶ Composition of the Authority – Section 21
• The Authority shall consist of a Chairperson and not less than two whole time members to be appointed.
► Qualifications of Chairperson and members of the Authority – Section 21.
► Vacancies, etc., not to invalidate proceeding of Authority – Section 30
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Filing of Complaints with the Authority or Adjudicating Officer – Section 31
▶ Aggrieved person can file complaint against Promoter, Allottee or Real Estate Agent
▶ Aggrieved person includes any voluntary Consumer Association.
▶ The Appropriate Government to make Rules and Forms for complaints.
▶ Complaints for violations of the Act to be made before the Authority.
▶ Complaints for Adjudication for Compensation under Section 12,14,18 and 19 to be made before the Adjudicating Officer.
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Functions of the Authority for promotion of Real Estate Sector – Section 32
▶ In order to facilitate the growth and promotion of a healthy, transparent real estate sector, the Authority shall make recommendation to the appropriate government or the competent authority on.
• (a) protection of interest of the allottees, promoter and real estate agent;
• (b) creation of a single window system for ensuring time bound project approvals and clearances for timely completion of the project;
• (c) creation of a transparent and robust grievance redressal mechanism against acts of omission and commission of competent authorities and their officials;
• (d) measures to encourage investment in the real estate sector including measures to increase financial assistance to affordable housing segment;
• (e) measures to encourage construction of environmentally sustainable and affordable housing, promoting standardisation and use of appropriate construction materials, fixtures, fittings and construction techniques;
• (f) measures to encourage grading of projects on various parameters of development including grading of promoters; Meetings of Authority.
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• (g) measures to facilitate amicable conciliation of disputes between the promoters and the allottees through dispute settlement forums set up by the consumer or promoter associations;
• (h) measures to facilitate digitization of land records and system towards conclusive property titles with title guarantee;
• (i) to render advice to the appropriate Government in matters relating to the development of real estate sector;
• (j) any other issue that the Authority may think necessary for the promotion of the real estate sector.
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Functions of the Authority – Section 34
• (a) to register and regulate real estate projects and real estate agents registered under this Act;
• (b) to publish and maintain a website of records, for public viewing, of all real estate projects for which registration has been given, with such details as may be prescribed, including information provided in the application for which registration has been granted;
• (c) to maintain a database, on its website, for public viewing, and enter the names and photographs of promoters as defaulters including the project details, registration for which has been revoked or have been penalised under this Act, with reasons therefor, for access to the general public;
• (d) to maintain a database, on its website, for public viewing, and enter the names and photographs of real estate agents who have applied and registered under this Act, with such details as may be prescribed, including those whose registration has been rejected or revoked;
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• (e) to fix through regulations for each area under its jurisdiction the standard fees to be levied on the allottees or the promoter or the real estate agent, as the case may be;
• (f) to ensure compliance of the obligations cast upon the promoters, the allottees and the real estate agents under this Act and the rules and regulations made thereunder;
• (g) to ensure compliance of its regulations or orders or directions made in exercise of its powers under this Act;
• (h) to perform such other functions as may be entrusted to the Authority by the appropriate Government as may be necessary to carry out the provisions of this Act.
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▶ Power to interim orders – Section 36
- In the event of contravention of this Act –
- The Authority may, by order, restrain any promoter, allottee or real estate agent from carrying on such act until the conclusion of such enquiry of until further orders, without giving notice, where the authority deems it to be necessary.
▶ Power of Authority to issue directions – Section 37
- For the purpose of discharging its functions under the provisions of the act or rules or regulations issue such directions from time to time, to the promoters or allottees or real estates agents, as the case may be, as it may consider necessary and such directions shall be binding on all concerned.
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Powers of Authority – Section 38▶ (1) The Authority shall have powers to impose penalty or interest, in regard to any
contravention of obligations cast upon the promoters, the allottees and the real estate agents, under this Act or the rules and the regulations made thereunder.
▶ (2) The Authority shall be guided by the principles of natural justice and, subject to the other provisions of this Act and the rules made thereunder, the Authority shall have powers to regulate its own procedure.
▶ (3) Where an issue is raised relating to agreement, action, omission, practice or procedure that—
• (a) has an appreciable prevention, restriction or distortion of competition in connection with the development of a real estate project; or
• (b) has effect of market power of monopoly situation being abused for affecting interest of allottees adversely,
then the Authority, may suo moto, make reference in respect of such issue to the Competition Commission of India.
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Central Advisory Council – Chapter VI▶ Establishment of Central Advisory Council – Section 41
• (1) The Central Government may, by notification, establish with effect from such date as it may specify in such notification, a Council to be known as the Central Advisory Council.
• (2)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 of the Central Advisory Council.
• (3)The Central Advisory Council shall consist of representative of various Ministries and Housing Boards, Five Representatives of the Real Estate Regulatory Authority to be selected by rotation and any other Central Government Department as notified.
• (4)The Central Advisory Council shall also consist of not more than ten members to represent the interests of real estate industry, consumers, real estate agents, construction labourers, non-governmental organisations and academic and research bodies in the real estate sector.
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▶ Functions of Central Advisory Council – Section 42
(1) The functions of the Central Advisory Council shall be to advise and recommend the Central Government,—
(a) on all matters concerning the implementation of this Act;
(b) on major questions of policy;
(c) towards protection of consumer interest;
(d) to foster the growth and development of the real estate sector;
(e) on any other matter as may be assigned to it by the Central Government.
(2) The Central Government may specify the rules to give effect to the recommendations of the Central Advisory Council on matters as provided under sub-section (1).
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The Real Estate Appellate Tribunal – Chapter VII
▶ Establishment of Real Estate Appellate Tribunal – Section 43
(1) The Appropriate Government shall within one year from the date of coming into force of this Act establish the Real Estate Appellate Tribunal. For Example : Tamil Nadu State Real Estate Appellate Tribunal
(2) Government may establish one or more benches of the Appellate Tribunal in the State/ Union Territory whenever it deems necessary. Every bench shall consist of at least one Judicial Member and one Administrative or Technical Member.
(3) Any person aggrieved by any direction or decision or order made by the Authority or Adjudicating Officer may prefer an appeal before the Appellate Tribunal
- Aggrieved person to include Association of Allottees and voluntary Consumer Association.
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(4) Provided, the appellant being a Promoter has to deposit at least 30% of penalty or such higher percentage/the amount including interest and compensation imposed on him payable to the allottee as the case may be before the said appeal is heard.
► Application for settlement of disputes and appeals to the Appellate Tribunal – Section 44
▶ An appeal to be preferred within a period of Sixty Days from the date on which a copy of the direction/order/decision is received – accompanied by the prescribed form and fee.
▶ The Tribunal shall endeavor to dispose of the Appeal within 60 days of its receipt.
- Provided that where any such appeal could not be disposed of within the said period of Sixty Days, the Appellate Tribunal shall record its reasons in writing for such non disposal of the appeal.
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▶ Composition of the Appellate Tribunal – Section 45
• One Chairperson, one Judicial Member and one Technical or Admin Member.
• Chairperson to be a sitting or former Judge of a High Court.
▶ Qualification of Appointment of Chairperson and Members – Section 46
▶ Term of Office of Chairperson and Members – Section 47
▶ Salary and Allowances paid to Chairperson and Members – Section 48
▶ Removal of Chairperson and Members from Office in certain circumstances – Section 49
▶ Restrictions on Chairperson or Judicial Member or Technical or Administrative Member on employment after cessation of Office – Section 50
▶ Officers and other employees of Appellate Tribunal – Section 51
▶ Vacancies – Section 52
Formation, Composition of the Real Estate Appellate Tribunal
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▶ Powers to Tribunal – Section 53
- The Appellate Tribunal not be bound by procedures laid down by the CPC, 1908 but shall be guided by the principles of natural justice.
- Shall have the power to regulate its own procedure.
- Shall not be bound by the rules of evidence contained in the Indian Evidence Act, 1872
- Shall have the same powers as are vested in a Civil Court for the purpose of discharging its functions under the Act in respect of certain matters.
▶ Administrative Powers of Chairperson of Appellate Tribunal – Section 54
▶ Vacancies – Section 55
▶ Right to Legal representation – Section 56 – (includes “Chartered Accountant” and other Professionals)
▶ Orders passed by Appellate Tribunal to be executable as a decree of the Civil Court or transmitted to Jurisdictional Civil Court for execution– Section 57
▶ Appeal to High Court against orders of the REAT – Section 58 – within 60 days or further time if HC is satisfied that the Appellant was prevented by sufficient cause to file the appeal in time.
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Redressal mechanism under RERA 35
Offences, Penalties and Adjudication – Chapter VIII –
Section Offence Penalty
Section 59 Punishment for Non- Registration under Section 3
If the non compliance continues
(1)May extend upto 10% of the estimated cost of the project
(2)Imprisonment which may extend upto 3 years and/or fine which may further extend upto 10% of the estimated cost of the project
Section 60 Penalty for providing false information or Contravention of Section 4 – application for registration
May extend upto 5% of the estimated cost of the project
Section 61 Penalty for Contravention of Provisions other than Section 3 and 4
May extend upto 5% of the estimated cost of the project
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Section Offence Penalty
Section 62 Penalty for Non – Registration and contravention under Section 9 and 10
Rs.10,000/- for every day during which the default continues – could cumulatively extend upto 5% of Plot, Apartment, Building of the project.
Section 63 Penalty for failure to comply with orders of authority by promoter
Liable for every day during which the default continues which may extend upto 5% of the estimated cost of the Project
Section 64 Penalty for failure to comply with orders of Appellate Tribunal by promoter
Imprisonment which may cumulatively extend upto 3 years and/or fine which may extend upto 10% of the estimated cost of the project.
Section 65 Penalty for failure to comply with orders of authority by Real Estate Agent
Liable for every day during which the default continues which may cumulatively extend upto 5% of the estimated cost of the Project
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Section Offence Penalty
Section 66 Penalty for failure to comply with orders of Appellate Tribunal by Real Estate Agent
Imprisonment which may extend upto 1 year or fine with fine for every day during which such default continues, which may extend upto 10 % of the Estimated Cost of Project.
Section 67 Penalty for failure to comply with orders of Authority by Allottee
Cumulatively may extend upto 5% of the plot, apartment or building cost as the case may be.
Section 68 Penalty for failure to comply with orders of Appellate Tribunal by Allottee
Imprisonment which may extend upto 1 year or fine with fine for every day during which such default continues, which may extend upto 10 % of the plot, apartment or building cost as the case may be.
Section 69 Offences by Companies ( person/s authorized – including director, manager, secretary or any other officer of the company)
Shall be proceeded against and punished accordingly
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Section Offence Penalty
Section 70 Compounding of offences If any person is punished with imprisonment under this act may, either before or after prosecution be compounded by the court to pay any such sums as may be prescribed(provided such sums does not exceed the maximum amount of fine prescribed)
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Power to Adjudicate – Section 71
▶ For the purpose of adjudging the compensation to be paid under Section 12, 14, 18 and Section 19 – An Adjudicating Officer shall be appointed by the Central Government.
▶ The Adjudicating Officer should be or should have been a district judge.
▶ All pending disputes to be withdrawn from Consumer Redressal Forums and an application to be filed before the Adjudicating Officer – it shall be dealt by the Officer within 60 days from the date of receipt of application – wherein the Officer has not dealt with the same within the prescribed time he shall communicate in writing the reasons for the same.
▶ Power to summon and enforce attendance of any person acquainted with the facts of the case.
▶ If the Officer is not satisfied he may direct to pay such compensation or interest he deems fit according to the provisions of the act.
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Miscellaneous – Chapter X▶ Bar of Jurisdiction – Section 79
- 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.
► Cognisance of Offences – Section 80
(1) No court shall take cognizance of any offence punishable under this Act or the rules or regulations made thereunder save on a complaint in writing made by the Authority or by any officer of the Authority duly authorised by it for this purpose.
(2) No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under this Act
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▶ Power of Appropriate Government to make Rules – Section 84
(1) The appropriate Government shall, within a period of six months of the commencement of this Act, by notification, make rules for carrying out the provisions of this Act.
Under the circumstances, whether the State can formulate Rules which dilute/dilate the provisions of the Act and frustrate the objectives of the enactment?
• The list of matters on which Rules could be framed by the appropriate Government is listed in Section 84(2).
• The Government of Tamil Nadu has vide notification dated 22nd June 2017 notified the Tamil Nadu Real Estate (Regulation and Development) Rules, 2017.
• It is to be noted that the Rules can be notified by the appropriate government only on procedural matters and not on the substantive provisions of the Act – for Example: The rate of interest payable can be notified by the appropriate Government but whether the quantum of penalties prescribed under Chapter VIII come within the purview of the Rules to be notified by the appropriate Government is a matter of debate.
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Matters of concern, for debate and discussion under the Act
▶ Who is the promoter under Section 2(zk) of the Act?
▶ Who does the exclusive balcony, verandah and terrace area belong to?
▶ As the land is part of the common area to be transferred to the Association of Allottees, at what point of time should the land be conveyed and who owns the land till it is transferred to the Association of Allottees?
▶ How does the payment flow for the land between the Allottee, the Association of Allottee and the Owner/ Promoter. Income Tax implications arising out of transfer of land to Associations of Allottees for no consideration or inadequate consideration – applicability of the provisions of Section 56(2)(x) of the Income Tax Act, 1961?
▶ Whether the construction of a commercial building with an object of leaving it out to tenants on rental , should be registered under RERA?
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▶ Take over of the balance project by the Association of Allottees – is it practical?
▶ Insurance obtained to be transferred to the Allottee after Agreement to Sell – How Is it workable when the Allottee is not even the Owner.
▶ In the case of a Development Agreement in the Area Sharing model – Whether the land owner should deposit 70% of the amounts received by him from buyers of Apartments(Allottees) pertaining to the Owner’s Share in a designated bank account. The RERA Authority in Maharashtra has clarified by issuing a Circular to the effect that it would be necessary for the Land Owners to also deposit 70% amount received from their Allottees in a designated bank account.
▶ For the limited purpose of Title to the Property under development and depositing of a specified percentage of moneys received from the Allottees into a designated bank account, should the Owner become a Co Promoter Under RERA.
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▶ The Association of Allottees is to be formed within three months of the majority of Allottees having booked their plot or apartment or building?
- What happens to the land pertaining to unsold stock ? Should it also have to be transferred to the Association of Allottees?
▶ Can the Association of Allottees refuse to admit buyers to membership?
▶ The Act prohibits the Promoter for raising loans after entering into the Agreement to Sell with the allottee. In practice the Developer obtains finance by securing the Developer’s share in land with the lending institution which in turn releases the mortgage pro rata as and when conveyance deeds are executed in favor of the Allottees. This could lead to practical difficulties.
▶ Terms used such as “issued” and “obtaining” are inconsistent and needs to be standardized.
▶ Should agreements entered into before the commencement of the Act where more than 10% of the advance has been taken from the Allottees also be registered as provided in Section 13 of Act?
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High lights of the Tamil Nadu Real Estate(Regulation and Development) Rules, 2017
▶ Can the Rules dilute, dilate or change the basic definitions under the Act as the Powers conferred on the State Government as per Section 84 of the Act is only to make Rules for carrying out the provisions of the Act?
▶ Definitions changed to include “Association”, “Layout Plan”, “Ongoing Projects”, “Project Land”, “Parking” and “Reserved Car Park”.
▶ Association of Allottees to be formed, registered and governed under the Tamil Nadu Apartment Ownership Act 1994.
▶ Rules state that words and expressions not defined under the said Rules shall have the same meaning assigned in the Act.
▶ Drafts of the Agreements to be entered into i.e., Draft Agreement for Sale and Construction Agreement have been notified as an Annexure to the said Rules. The Agreements for Sale indicate that the land can continue to be conveyed in undivided shares to the Allottees which is in contradiction to the provisions of the Act which provides for conveying the common area which includes the entire land pertaining to the real estate project to be conveyed to the Association of Allottees.
▶ The Rules exempt certain “on going projects “ as defined under explanation to Section 2(h) of the said Rules. This is in order to dilute the effect of the proviso to Section 3(1) of the Act which has mandated the registration of all ongoing projects which have not received the completion certificate as on the date of commencement of the Act.
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▶ The definition of ongoing project under the Rules seeks to exempt the following projects
▶ In layout projects i.e., where land is developed into plots, the roads and open spaces gifted to the local body concerned;
Our Comment: it is noted that the handover to the local body should be before the date of issue of notification and it does not matter whether the Common Areas to be developed as per the Sanctioned Plan have been completed or not as on the date of issue of notification,
▶ The projects in Chennai Metropolitan Area for which application for completion certificate has been filed with Chennai Metropolitan Development Authority subject to furnishing certificate from the architect/licensed surveyor/structural engineer associated with the project to the effect that all the buildings in the projects have been structurally completed i.e. all the columns, beams and slabs have been erected supported with photographs. Chennai Metropolitan Development Authority will issue, completion certificate for those projects in compliance with Completion Certificate norms prescribed. In Completion Certificate filed cases, if the Completion Certificate is rejected by Chennai Metropolitan Development Authority for violation of norms, such projects will be intimated to the Real Estate Regulatory Authority and will be bound for registration with Real Estate Regulatory Authority. The details of all projects where Completion Certificate application has been filed with Chennai Metropolitan Development Authority prior to notification of these rules will be disclosed to the public by publishing the list of all such 2 projects on the website of Chennai Metropolitan Development Authority and Real Estate Regulatory Authority immediately after notification of these rules.
Our Comment: This will apply in all cases wherein application for completion certificate has been filed with the Chennai Metropolitan Development Authority accompanied by a certificate from the architect/licensed surveyor/structural engineer associated with the project that the structural works have been completed. This appears to be a complete dilution of the object of the Central Act as a project were structural works have been completed will not be regarded as an ongoing project and consequently need not be registered under RERA and it may happen that the subsequent works in the said project are not completed or inordinately delayed thereby frustrating the objective of the Act.
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▶ In the case of projects under execution outside Chennai Metropolitan Area, as no provision and procedure has yet been prescribed for issue of completion certificate, if the construction is structurally completed meaning that all the columns, beams and slabs have been erected and certified by the architect or structural engineer/licensed surveyor associated with the project supported with photographs. Such projects shall be intimated to the concerned Local Planning Authority or Regional Deputy Director of the Town and Country Planning Department within 15 days from the date of notification of these rules with a copy marked to the office of the Director of Town and Country Planning. The Director of Town and Country Planning will make public the list of all such projects in his official website, on the 16th day of notification of the rules besides publication of the same in the website of Real Estate Regulatory Authority.
Our Comment: It is noted that in the case of projects outside the Chennai Metropolitan Area, a mere intimation to the concerned authority evidencing the completion of the project is enough within 15 days from the date of issue of the notification and all projects which are notified by the Director of Town and Country Planning on the 16th day from the date of issue of notification will not be considered as ongoing project. This appears to be another dilution made in the rules which will frustrate the objectives of the Act.
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2. For the purpose of withdrawal of funds from a separate bank account, the term “land cost” and “Construction cost” means
“For the purposes of sub clause (D) of clause (l) of sub-section (2) of section 4 of the Act, the land cost shall be the market value of the land including the costs incurred by the promoter towards the stamp duty and the registration fees for acquiring ownership over the land either for freehold or leasehold” and the term “Construction Cost” includes the cost incurred by the promoter, towards the on-site expenditure for the physical development of the project including the cost incurred by way of fees/charges paid towards obtaining necessary statutory clearances including cost of Transfer of Development Rights, premium Floor Space Index charges, Finance Cost for the construction of the project and professional consulting charges.
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▶ It is to be noted that in Rule 3(5), wherein the Promoter applies for withdrawal of application for registration of the project before the expiry of the period of thirty days specified under Section 5 (1) of the Act, the registration fee paid as prescribed under the Rules will be retained as processing fee and balance if any , will be refunded.
Note: The Act does not provide for withdrawal of application for Registration.
▶ The Rules framed therein requires details of pending cases to be detailed in Form –A (Application for Registration of Real Estate Project), which is Annexed to the said Rules , whereas, the Act does not specify or require the same as detailed above.
▶ The Appropriate Government has opened a Website having a domain address of http://www.tnrera.in to register the Real Estate Projects under RERA.
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CA Ashok Raghavan
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