THE REAL ESTATE

(REGULATION AND DEVELOPMENT)

ACT, 2016 and Draft Rules

Jash Vaidya

ILS Law College Pune

Blog: www.jashvaidya.wordpress.com

Mail: jashvaidya.vaidya@gmail.com

11th July 2016

Real Estate Act 2016 is Divided into 92 Sections

(22 Sections are not Notified as on 11-07-2016)

Chapter III

Functions and

Duties of Promoter

Section 11 –18

(Yet to be notified)

Chapter-I

Preliminary Section

Section 1-2

ChapterII

Reg of RE Projects and

Agents

Section 3 –10

(Yet to be notified)

Chapter IV

Rights and Duties of

Allottees

Section 19

(Yet to be notified)

ChapterV

The Real

Estate Regulatory

Authority

Section 20 – 40

Chapter VI

CentralAdvisory

Council

Section 41 – 42

Chapter VII The

Real Estate

AppellateTribunal

Section 43 – 58

Chapter IX

Finance,Accounts,

Audit and Reports

Section 73 – 78

Chapter X

Miscellaneous

Section 79 – 92

(Sec 81-92 notified)

Chapter VIII

Offences, Penalties

and Adjudication

Section 59 – 72

(Sec 71/ 72 notified)

Object of this Act

Transparency in Real Estate

Transactions

Protection of Consumer Interest

Establishment of an

adjudicating mechanismfor

speedy dispute redressal

Establishment of Real Estate

Regulatory Authority

Nature & Structure of RERA 2016

Structure

RERA is a Central Act with some authority delegated to State Government just like the Electricity Act 2003 Created

under Entry 6 & 7 of the Concurrent List in 7th Schedule of the Constitution of India

History of the Act

Timeline Step

1963 MOFA Enacted – First Act in India on Real Estate Regulation

1963 & 1972

KSRA Act 1960 , KAOA Act 1972 , Karnataka Apartment Ownership Rules

1974 & Karnataka Owners Flats Rules 1975.

2012

MHRA 2012 replaces MOFA . MHRA provided for establishment of the

Regulatory Authority , the Housing Appellate Tribunal & Deemed Conveyance !!!

20th Aug 13 Rajya Sabha - Real Estate Regulation and Development Bill Introduced

9th Sept 13 Lok Sabha -Bill Referred to Standing Committee

13th Feb 14 Lok Sabha - Standing Committee submits its report

7th Apr 15 Union Cabinet ( NDA ) Gives approval to amendments in the Bill,

6th May 15

Rajya Sabha Bill introduced referred to its standing Committee / Select

Committee

30th July 15 Rajya Sabha - Select Committee submits report after 17 sittings in all.

10th Dec 15 Union Cabinet accepts 20 major amendment's to the bill

10th Mar & 15th Mar 16 Rajya Sabha and Lok Sabha Pass the Bill

25th Mar 16 The Real Estate (Regulation and Development) Act, 2016 published in the Gazette

Act can come into force sooner as Powers given to State Government

6

Step Timeline

Publishing of Act in Official Gazette 26th March 2016

Date of Act Coming in Force 26th April 2016 MHUP Notified 69/ 92

Sections 22 Sections not Notified

Effective date 1.5.2016

Ministry of HUPA to Frame rules for UT without

legislatures Ministry of Urban Development to frame

Rules for Delhi .

Under Section 84. (1) within a period of six months of

the commencement

MHUPA – Draft Rules for public comments

published on 24th June 2016 inviting public

comments by 8th July 2016 .

State Government to frame Rules Under Section 84. (1) Within 6 months of Notification i.e by

31.11.2016

State Government MUST setup Real Estate

Regulatory Authority

1 year from act coming into force

(April 2017)

State Government to setup Real Estate App.

Tribunal

1 year from act coming into force

(April2017)

Status of RERA as on 8.7.2016

6

Status of RERA - Sections not notified

• The sections notified are related to establishment , incorporation , Composition of The Real Estate

Regulatory Authority (RERA) , Term of office , Salary and allowances payable to Chairperson

and Members and Framing or rules .

• Framing of rules under Section 84. (1) within a period of six months of the commencement

precedes importance over all activities .

• Section related Obligations, Functions and duties of promoters , Rights and duties of Allottees ,

Penalties for contravention of any section will be notified once regulation and rules are notified

Section Comment

Section 11

Section 17

Section 19

Section 59 - 70

Functions and duties of the promoter

Transfer of title by the promoter

Rights and duties of Allottee

Punishment for Offences . Penalties and Adjudication

RERA Act- Hits and Misses – Consumers

Hits Misses

• Increased focus on the timely completion

• A step towards safeguarding investment, as

70 per cent of the sales receipt will now be

locked in an escrow account.

• Improved quality of construction due to a

defect liability period of five years.

• Balanced builder-buyer agreements.

• Faster dispute resolution mechanism through

dispute settlement forums and appellate tribunal.

• Sale on the carpet area to help improve

transparency.

• An increasingly-regulated broker environment.

• Greater visibility into the developer’s

delivery track record , availability consents and

permits , Approved plans .

• Carpet Area not an Accurate measure …. FSI ?

• Past completed Projects of Developer not

included . Opacity on past Track Record

• Escape route of floating multiple group

companies for each project . Doctored project

information and balance Sheets

• The timelines of approvals by regulatory

authorities have not been defined.

Can lead to blame game and prolonged

tripartite litigation

• Slightly higher prices of properties due to the

reduced competition.

• Longer Waiting period . Higher EMI Costs ?

RERA Act Hits & Misses (Promoters/Agents )

Hits Misses

• A better regulated sector brings efficiencies =

Higher investments (FDI) and possible reduction

of the cost of funds

• Elimination of fly by night operators =

Consolidation of players

• Greater visibility into the developers’

delivery performances

• Higher focus on project delivery capabilities

• Power of RERA disproportionately

Coercive .

• Fixing a rigid capital reserve ratio (70 percent

deposit and 10 percent booking amount) in

the statute itself imposes greater liquidity

constraints on developers …more black

money Transaction's ?

• Conflicting Sec 88 and 89 Allottee hapless

and Promoter can take recourse to litigation

under a less stringent rule ? Ex Deemed

Conveyance in the repealed MHRA ?

Judicial Mechanism under RERA

Source : Black arrow Masterclass – Real Est outlook 29.6. 2016

Draft Rules – Open Issues and teething troubles

RERA Section Draft Rule

Sr.

Comment

Sec 13 S/s 2 and

Sec 84/2/h

9 While RERA mandates a balanced Agreement with precise details ( s/s

2 ) Draft rule 9 does not provide a model agreement with balanced

and harmonized terms . Annexure A reads “ to be inserted “ Can lead

to builders pushing lopsided agreements ? Law is silent if RERA has

powers to moderate /amended / reject whole or part of Agreement

proposed by builder .

Sec 88 and Sec 89 ?? Rules are silent on this contradiction . Section 88 Vs 89 of RERA –

Contradictory – Provisions of RERA will be in addition to and not in

derogation to any other law currently applicable

If MOFA / KFOA has a stronger provision in favour of Allottee should it

prevail ? Would Promotor take recourse to a less stringent provision and

litigate ?

3 (a) and

(b)

If the promoter company is a joint venture or partnership , all partners

must follow the procedure of giving details .

Rules must specify Balance sheet should be last years Statutory Balance

Sheet an audited one for tax purpose . Loophole to be plugged .

Rules seem to be published in haste .Chapters not aligned between Act and

Rules so make a difficult reading .

Ex. Chapter IV of Act = Rights and duties of Allottees – Chapter IV – Rules –

Details to be published by Promoter on Website of Authority

RERA Section Draft Rule Sr. Comment

4 ( 1 ) and ( 2) (b) 4 (1 ) and ( 2 ) Rules must clarify that this information must also include

all enterprises with whom promoters / Key management

personnel have had significant No of Transactions during

last 5 years

31 ( 1 ) 36 and 37 Definition of Aggrieved person should be alike insurance

industry ( insurable interest ) including Voluntary consumer

association ( not related to the property ) as aggrieved

would Excessive litigation and cause delays in project .

59 ( 1 ) 35 ( 2 ) The RERA Act Cl 59(1) already lays a fine equal to 10% of

the cost of the project. If that is not paid, or if the violation

continues, RERA has three options for imposing an additional

penalty: (a) An additional fine of 10% of the cost of the

project (b) Imprisonment of “up to” 3 years c) both (a) and

(b) above.

Instead of giving a “crime-vs-penalty” look-up table that

acts as a guide based on the scale/gravity of the crime. The

rules have “commuted” the prison term into a fixed rate:

10% of the project cost. How can the Rules overturn the Act,

and make it impossible to follow it??

Draft Rules – Open Issues and teething troubles

Critical Analysis of the Act

• Escalation of Project Costs

• Neglects Commercial Projects

• Does not deal with menace of Black Money

• Conflict between the State Law and Central Law

• Definition of Allottee

• Section 88 vs Section 89 of the Act – Contrary

Provisions

• Act does not cover flats below 500 sq m & 8 Flats

– small real estate projects aren’t covered within

ambit of the act

References Bare Acts / Government Notification's

1.The Real Estate ( Regulation and Development ) Act 2016 NO. 16 of 2016 dated 25.3.2016

2. MHUPA Notification SO 1554( E) notifying 69/92 Sections of the act

3. Report of Select Committee of Rajya Sabha dated 30th July 2015 on the Real Estate ( Regulation& Development) Bill 2013

4. MHUPA Draft rules titled “Union Territories of Chandigarh, Andaman and Nicobar Islands, Daman and Diu, Dadra and

Nagar Haveli,

Lakshadweep’ Real Estate (Regulation and Development) Rules, 2016. (0-17034/18/2009-H (Vol. IX) (Part III) / FTS No.

15980)2

Law Firms

1. Lexology India 3rd June 2016 “Does attempt to regulate the real estate sector help “ Sudip Mallik Khaitan and Co

2. Juris Corp, Highlights of Real Estate Bill 2016

3. AR Gupta & Associates, Real Estate (Regulation & Development) Act 2016, Indian Property Show at London

4. Samvad Partners Real Estate (Regulation & Development Act) 2016

5. Vaish Associates, Power to buyer- the new Real Estate (Regulation & Development) Act 2016

Consultant’s / Industry Bodies / Advocacy Groups

1. CREDAI and NAREDCO presentations at various chapters

2. Fight for RERA - Karnataka Chapter Google Group . Discussions and presentations by Mr Nagaraj Aras

News Articles / Audiovisual Material

1. NAREDCO Knowledge Seminar on Real Estate (Regulation and Development) Bill 2016 (18th March 2016) - Presentation

by Mr Parimal Shroff Decoding the RERA Act and panel discussions

2. Money life foundation presentation by Mr Pranay Vakil ( MD Knight Frank India ) and Mr Parimal Shroff 2011