How to get a project registered under RERA Act.
Author: Adv. Binay
Editor: Ms. Paavni Thareja
The real estate sector of an economy is one of the major contributors in the inclusive growth of the nation. With a view to signify the performance of the Real Estate Industry with the rights and liabilities involved in the transactions, there was a calling for a proper policy and regulation of the real estate sector. This led to the enactment of the Real Estate (Regulation and Development) Act, 2016
Objective of the Act:
- To protect the rights and interests of the consumers.
- To bring about promotion of uniformity and
- To standardize business practices and transactions in the real estate sector.
Applicability of the Act:
The Act came into force from May 1st 2017 and extends to all over India except the State of Jammu & Kashmir. It applies to the transaction of sale (whether as freehold of leasehold of apartments, buildings or plots only in residential and commercial projects.
It is compulsory to register a real estate project under RERA Act. There are different websites for different states in order to apply for the registration. For example, Search Maharashtra RERA in the web browser for registration of projects in Maharashtra, Delhi RERA for those in Delhi and so on. The basic steps to complete a registration under the new law is discussed under the following heads:
Disclosure by promoter:
The promoter also known as builder in this context shall have to apply for registration of a real estate project accompanied by documents and disclosures:
- The promoter has to furnish the details of his name, PAN No., address along with the name and address of his Project Head, if applicable and the details of the projects done by him in the last 5 years.
- He has to disclose the details of the project, its type and status, duration of the project, project area including garage, parking etc and the total estimated project cost.
- He has to submit the performa of the allotment letter, agreement for sale and the conveyance deed to be signed by the allottees.
- He has to disclose the number, type and carpet area of the apartments including area of the exclusive balcony or verandah and terrace area.
- Names and address of his real estate agents.
- Names and address of the contractors, architect, structural engineer, if any.
- The promoter has to maintain a separate account, say an Escrow Account, and he shall deposit 70% of the amount received or realized in that account from the allottee in different intervals.
- He can withdraw the amount from the Escrow Account which shall comply with the proportion of the percentage of the completion of the project after due certification by an engineer, an architect and Chartered Account stating that withdraw is in proportion to the percentage of completion of the project.
- Further it is the duty of the promoter to get the Account audited within six months after the end of every financial year by a Chartered Account in practice.
Grant of Registration:
The Authority, shall on receipt of the application within a period of six months, may either:
- Grant registration to the applicant and provide him with the registration number, a Login ID and password for accessing the website of the Authority and to fill in the details of the projector
- Reject the application with reasons in writing if the application does not conform to the provisions of the Act.
Where the Authority fails to grant registration or rejects the application without any reasons in writing, the project shall be deemed to have been registered and the Authority shall within seventy days of the expiry of the said period of thirty days provide a registration number, Login ID and password for accessing the website of the Authority and to fill in the details of the project.
Extension of Registration:
The time period of registering a project under the RERA Act may be extended by the authority on an application made by the promoter due to force majeure and such extension shall not exceed a period of one year.
In the Act Force Majeure has been defined as a situation arising out of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the development of the real estate project.
Registration of Agents:
Every real estate agent must apply for registration under the RERA Act and cannot facilitate sale or purchase of projects without obtaining a registration from the Authority.
The Authority may grant a single registration to the real estate agent for the entire state or reject the application for reasons to be recorded in writing.
The registration agent must mandatorily quote his registration number obtained from the Authority in every sale or purchase facilitated by him. Further he is not allowed to facilitate the sale or purchase of any plot, apartment or building which is not registered under the Act.
Benefits to the consumers:
- Without the written consent from the buyer, the developer cannot make any changes to the sanctioned plan. Thus the developer is prohibited from increasing the cost of their projects arbitrarily.
- The real estate project has to be completed in scheduled duration and if it is not the case, the developer is bound to pay interest on the amount paid by the buyer.
- Under the new law, registration is compulsory where the land is over 500 square metres or includes eight apartments and which is under-construction.
- Where the real estate project is developed in terms of phases, every phase is to be considered as a standalone real estate project and for each phase separate registration is to be obtained.
- Every State Government has to establish a State Real Estate Regulatory Authority where the buyers could approach for redressal of their grievances.
- One of the most important advantages to the buyers under the new law is that the sale or purchase of a real estate project is based on carpet area and not on super built up area. If this rule is not adhered by the developers legal action can be taken against them.
- Where the developer does not register his project, he shall be penalized up to 10% of the project cost and a repeated violation of this provision could land the developer in jail.
- After the purchase if the buyer finds any shortcomings in the purchased project, he can contact the developer in writing within one year of taking the possession.
- If the developer violates the order of the appellate tribunal of the RERA the Act has a provision of maximum jail term up to three years with or without fine.
- The developer will have to deposit 70% of the amount received from the buyers from time to time in a separate escrow account and the amount shall be utilized to meet the cost of construction of the project. This is a major win-win for the buyers as it will keep a check on developer’s money who tend to divert the money in a separate project instead of finishing the one for which the money was collected. At the same time it will also ensure that the respective project is completed on time.
RERA has certainly set the benchmark for reformation in the real estate sector. As India has geographical diversity and economic inequity among different states, RERA is still a hard road to achieve uniformity in the broker-buyer landscape.