Author Name:   vineetsahay

Real Estate (Regulation and Development) Bill: The next step is to table it in parliament this Monsoon season. Though does not provide complete solution but certainly the first step towards addressing the above problems.

The Real Estate (Regulation And Development) Bill-The First Step Towards Real Estate Reform

The growth of any country can be measured by the growth of its real estate sector. However this sector in India is far from transparency, disclosure and commitment. The Sector is unable to go with its robust growth attained during last decade. This sector is bias towards Builders / Promoters / Developers / Real Estate Brokers etc., the purchasers are not at par level with the promoters. We can compare this sector with the capital market during the pre-regulated and pre-SEBI era.

The industry is suffering with the following irregularity:
1. The project is not vetted by one single authority, but by different authorities from different angles.
2. There is no provisions which compel the builders to utilise the fund raised from a project shall not be diverted to another project;
3. The actual area under sale are not uniform and open for manipulation by the builders;
4. Multiplicity of brochures and advertisement material for project which often misguide the purchasers;
5. Clearances for constructions are not known to investors/purchasers;
6. Lack of efficient and transparency during the construction period;
7. Interest of consumer are not secured and they cannot enforce their advance against the property i.e. land during the construction period if the land is mortgaged to Bank/Financial Institutions.
8. Multiple laws and regulations which are not known to investors
9. Common law are not sufficient to address the grievances of real estate investors or client;
10. Non registration of Real Estate broker;

The Government, economists and civil society felt that a separate body is required to regulate and administer this sector.

The first draft of Real Estate (Regulation and Development) Bill has come 5 year ago and now the Union cabinet of ministry has passed much awaited Real Estate (Regulation and Development) Bill on 4th June, 2013. The next step is to table it in parliament this Monsoon season. Though does not provide complete solution but certainly the first step towards addressing the above problems.

This bill is aim to register a real estate project and establish the Real Estate Regulatory Authority for regulation and planned development in the real estate sector and to ensure sale of immovable properties in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and establish an Appellate Tribunal to adjudicate disputes and hear appeals from the decisions or orders of the Authority.

The arrangements of the Bill are as below:
Arrangement Of Bill
The Real Estate (Regulation & Development) Bill, 2011
From the bird view, we can imagine that the main regulatory portions of the proposed act are Chapter I, Chapter II and Chapter III and remaining portion of the bill are important for administration of the bill.

-Chapter II-
Registration of Real Estate Project and Transfer of Immovable Properties with Real Estate Regulatory Authority.
1. After commencement of this act every project developed on land having more than 4000 Sq. Metre will required to be registered. However this area may be increased or decreased by notification of Central Govt. with consultation with State Govt. of Union Territory Govt. This area may be differing from state to state/Union territory.
2. Every existing project not more than one year old will also required to be registered. The registration will required to be done within 6 month from the date of commencement of this act.
3. The project must be registered or refused to be register within 30 days from the date of submission an application for such registration. On refusal the reason(s) for refusal must be recorded and communicated to the applicant and opportunity of being heard also will granted to the applicant.
4. The bill also provides a brief procedure of making application alongwith the list of documents/annexure filed alongwith the application. However a detailed guideline and regulation is expected to come after enactment of this bill.
5. Once the project gets registered, it shall be listed on the portal of web-site of the Real Estate Regulatory Authority (RERA).
6. The registration shall be valid for the period for which the project approved by the appropriate govt. (Town and Country Planning Dept of the State in which the project is located). This time period may be renewed for one year (maximum total renewal will not more than 2 year) at a time subject to such extension already granted by concerned appropriate govt.
7. After laps of the registration the RERA will intimate the same to the appropriate govt.
8. On the violation of terms and condition or any other violation, the registration will be cancelled and the same will be intimated to competent authority. The web-site of the RERA mentioned the de registration and name of the promoter put into the defaulter list.

-Chapter III-
Obligations of Promoter and Allottee.
1. The promoter shall not issue or publish an advertisement or prospectus, or invite any member of the public to buy or book in such projects to be developed or take advances or deposits without obtaining a copy of certificate of registration with the Authority.

2. 70% of the booking amount received by a promoter shall be deposited in a separate bank account maintained in a schedule bank and withdrawal from the account shall only be made for the purpose to meet expenditure towards the project.

3. The promoters shall be liable to manage his page of web-site of RERA, the page will contain every details of the promoters and the project, such page shall be updated every fortnightly.

4. The promoter shall adhere with the approved plan and cannot deviate from it. The allottee is entitle to get rectified any deviation even after getting possession of the property but before expiry of one year from the date of the possession.

5. The conveyance deed will be executed by the promoter only after getting the occupational certificate.

6. The entire amount shall be refundable to the applicant with interest in the case of the project cannot be completed by him, in addition to the above interest the promoter also shall be liable to pay penalty.

-Chapter IV-
The Real Estate Regulatory Authority
1. The State Govt. / Central Govt. will establish a Real Estate Regulatory Authority for administration and regulation the Real Estate business in the respective state.
2. The power and functions of the RERA shall be defined at the time of constitution.
3. The RERA will be act as main administrator and regulator of the Act.

-Chapter V-
Appellate tribunal
1. The Central Government shall, by notification in the Official Gazette, establish an Appellate Tribunal to be known as the Real Estate Appellate Tribunal (REAT).

The function of the REAT will be
(a) adjudicate any dispute
(i) between a promoter and a allottee;
(ii) between a promoter and Authority;
(iii) between Appropriate Government and the Authority.

(b) hear and dispose of appeal against any direction, decision or order of the Authority under this Act.

2. An appeal shall lie against any order of the Appellate Tribunal to the Supreme Court on one or more of the grounds specified in section 100 of that Code of Civil Procedure within 90 days of the order.

· The interlocutory order is not appealable.

-CHAPTER VII-
Offences and Penalties
Section 50
Contravenes the provisions of section 3 - imprisonment for a term upto three (03) year or a penalty upto ten per cent (10%) of the estimated cost of the real estate project, or with both.

Section 51
Any offence other than contravention of Section 3 - a penalty upto Five per cent (5%) of the estimated cost of the real estate project.

Section 52
Fails to comply with, or contravenes any of the orders or directions of the Authority- Rupees. One Lac per day of contravention upto the maximum amount of Five per cent (5%) of the estimated cost of the real estate project.

Section 53 Offence made by Company

Section 54 Compounding of offence.

Chapter VIII and IX are mainly deal with the administration of RERA.

Therefore the bill covers almost every unregulated area where an effective regulatory mechanism has been required.

However the proposed bill is failed to address the following areas:
1. The bill does not make any difference between residential and commercial project;
2. The bill but not that of other important stakeholders in a real estate project like
a. Government agencies/authorities at centre, state and municipal level;
b. Financing agencies like Bank/Financial Institutions
c. Brokers, Underwriters and Bulk Purchasers
3. Does not provide any mechanism transfer of booking during the period of construction.
4. The bill does address effective step toward curbing black money investment in the real estate business.
5. The bill does not provide additional securities for retail purchasers.

With a few anomalies the Real Estate (Regulation & Development) Bill will improve buyer confidence and boost demand for residential real estate.

The  author can be reached at: vineetsahay@legalserviceindia.com

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