6 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

What RERA
will entail
for different
stakeholders?
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 7

The important Real Estate (Regulation and Development) Act 2016, was recently passed in the Parliament and it received the assent of the
President of India on 25 March 2016. It has paved the way to setting up of a real estate regulator, which is proposed to be set up within one
year from the date of coming into force of the Act, to deal with commercial and residential realty. In the interim, the appropriate government (i.e.
WKHFHQWUDORUVWDWHJRYWVKDOOGHVLJQDWHDQ\RWKHUUHJXODWRU\DXWKRULW\RUDQ\RIFHUSUHIHUDEO\WKHVHFUHWDU\RIWKHGHSDUWPHQWGHDOLQJZLWK
housing, as the regulatory authority.

JLL INDIA AND KHAITAN & CO ATTEMPT TO

PRE-EMPT IMPLICATIONS OF RERA ON DIFFERENT
STAKEHOLDERS
This is a major reform, which promises to bring in the much-needed transparency and accountability in
the real estate sector. It will enhance consumer protection by facilitating that the consumer gets the product
and on time as promised, thereby increasing FRQVXPHUFRQGHQFH as well as helping to create lasting
developer brands strong on quality and timely delivery of their projects.

Once it is implemented, RERA will reduce the contrast seen in this sector in form of piling unsold inventory
JHQHUDOO\IDFHGE\\E\QLJKWGHYHORSHUVDQGSULFHULVHLQSURMHFWVE\UHSXWHGGHYHORSHUVVLQFHWKH\KDYH
INDUSTRY UHODWLYHO\OHVVXQVROGLQYHQWRU\DQGEXLOGWKHWUXVWEDFNIURPLWVFXUUHQWVLWXDWLRQRIWUXVWGHFLWEHWZHHQ
the two most important stakeholders builders and buyers. RERA will provide a positive impetus towards
DFKLHYLQJWKHKRXVLQJIRUDOOYLVLRQZKLOHHQVXULQJDOHYHOSOD\LQJHOGIRUGHYHORSHUVDQGEX\HUV

$VWKHUHZLOOEHVWULFWSXQLVKPHQWIRUHUUDQWGHYHORSHUVDVZHOODVQHVIRUSURMHFWGHOD\VDQGIDVWHU
redressal to consumer complaints, the problem of over structuring as is rampantly prevalent in the industry
will be addressed. All in all, it will help make this sector more mature.

It will disallow the common practice among many developers of pre-launching projects without getting
requisite approvals from the local authorities and it will make mandatory project registration with the
regulator. Developers will also have to disclose approval status, project layout and timeframe for completion
to the regulator as well as customers.

The developer will now have to deposit 70% of the project funds in a separate account, which can only be
BUYERS used for the earmarked project. Diversion of funds to other projects was a major reason for project delays
and this will address it effectively.

Now, the buyers and developers will be liable to interest at the same overriding their agreement clauses.
Buyers would also have the option to continue with compensation or to exit from a project that is delayed.
%X\HUZLOODOVRKDYHWKHEHQHWRIVHFXULW\UHJDUGLQJWLWOHRIWKHODQGDQGEXLOGLQJLQZKLFKWKHXQLWVWKH\DUH
interested in is being constructed which is required to be insured by the developer without prejudice to the
continuing obligation of the developer to be liable to the buyer for defect in title of the land.
8 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

The developer has to register their project (residential as well as commercial) with the Regulatory
Authority before starting the sale process in such projects. In case a project is to be promoted in phases,
then each phase shall be considered as a standalone project, and the promoter shall obtain registration for
each phase.
DEVELOPERS
Further, in case of ongoing projects on the date of commencement of the Act, which have not received
DFRPSOHWLRQFHUWLFDWHSULRUWRWKHFRPPHQFHPHQWRIWKH$FWWKHSURPRWHURIVXFKSURMHFWLVUHTXLUHGWR
make application to the Regulatory Authority for registration of their project within a period of three months
of the commencement of the Act.

The following types of projects shall not be required to be registered before the Regulatory
Authority:

i. Where the area of land under development does not exceed 500 square meters or the number of
apartments to be constructed in the project does not exceed eight apartments. This threshold has
ensured that very small projects remain out of the ambit of this regulation; and we believe that even for
those small projects, their developers will voluntarily abide by the RERA conditions to ensure that these
projects do not fall out of favour of buyers and to remain competitive. Also, the appropriate Government
(Central and State Govt) may, if it considers appropriate, reduce the threshold limit below 500 square
meters or eight apartments;

LL 3URMHFWVZKHUHWKHFRPSOHWLRQFHUWLFDWHKDVEHHQUHFHLYHGSULRUWRWKHFRPPHQFHPHQWRIWKH$FW
developers are likely to focus on faster completion of their projects under construction and secure
FRPSOHWLRQFHUWLFDWHSULRUWRWKHIRUPDWLRQRI5(5$RUWKHUHOHYDQWERG\IURPWKHKRXVLQJGHSDUWPHQW
to be formed in the interim) and thus risk of project delays may come down along with slight increase in
supply, both factors acting in favour of buyers.

iii. Projects for the purpose of renovation or repair or re-development which does not involve marketing,
advertising, selling and new allotment of any apartment plot or building.

The application for registration must disclose the following information:

i. Details of the promoter (such as its registered address, type of enterprise such proprietorship, societies,
partnership, companies, competent authority for securing permissions);

LL $EULHIGHWDLORIWKHSURMHFWVODXQFKHGE\WKHSURPRWHULQWKHSDVWYH\HDUVZKHWKHUDOUHDG\FRPSOHWHG
or being developed, as the case may be, including the current status of the projects, any delay in its
completion and reasons for the delay, details of disputes yet to be resolved or legal cases pending,
details of type of land and payments pending etc.;

LLL $QDXWKHQWLFDWHGFRS\RIWKHDSSURYDODQGFRPPHQFHPHQWFHUWLFDWHUHFHLYHGIURPWKHFRPSHWHQW
authority and where the project is proposed to be developed in phases, an authenticated copy of the
DSSURYDODQGFRPPHQFHPHQWFHUWLFDWHRIHDFKRIVXFKSKDVHV

LY 7KHVDQFWLRQHGSODQOD\RXWSODQDQGVSHFLFDWLRQVRIWKHSURMHFWSODQRIGHYHORSPHQWZRUNVWREH
executed in the proposed project and the proposed facilities to be provided thereof and the locational
details of the project;
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 9

v. Proforma of the allotment letter, agreement for sale and conveyance deed proposed to be signed with
the allottees;

vi. Number, type and carpet area of the apartments and the number and areas of garages for sale in the
project;

vii. The names and addresses of the promoters real estate agents, if any, and contractors, architects,
VWUXFWXUDOHQJLQHHUVDIOLDWHGZLWKWKHSURMHFWDQG

YLLL$GHFODUDWLRQE\WKHSURPRWHUVXSSRUWHGE\DQDIGDYLWVWDWLQJWKDW

a. he has a legal title to the land, free from all encumbrances, and in case there is an encumbrance,
then details of such encumbrances on the land including any right, title, interest or name of any party
in or over such land along with the details;

b. the time period within which he undertakes to complete the project or the phase; and

c. 70% of the amounts realised for the real estate project from the allottees, from time to time, shall be
deposited in a separate account to be maintained in a scheduled bank which shall be used to cover
FRVWRIFRQVWUXFWLRQDQGODQGRIWKDWVSHFLFSURMHFWRQO\7KHIDFWWKDWRIWKHDPRXQWUHDOL]HG
from allottees/unit purchasers is to be used for land and cost of construction coupled with the fact
developer launching the project and registering the project is entitled to declare encumbrance of
the land gives the impression that money received from allottees/unit purchases may be used for
repayment of cost incurred for acquisition of land as well as cost incurred for construction. The fact
that money has to be deposited in a separate account and used for the cost incurred towards project
only will bring out transparency and encourage NBFCs and lenders to invest more in this sector.
10 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

CARPET AREA
Developers can sell units only on carpet areaZKLFKLVWKHQHWXVDEOHRRUDUHDRIDQDSDUWPHQW
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.

Some prominent developers have started quoting by carpet area, the rates for which are naturally
higher than prices quoted for saleable/ built-up area. In some metro cities like Mumbai, this trend is
already visible. Developers in other cities could follow suit, soon.

RERA will also help tier-II and tier-III developers in tier-I cities and tier-I developers in tier-II and
tier-III cities as they will be able to attract PE funding with the increase in transparency owing to this
Prominent Act. Currently, around 80-85% of PE funds invest in the tier-I developers of the country as they
have a good corporate governance structure and maintain transparency.
developers in
tier I cities have Tier-II and tier-III cities, which mostly do not appear on the PE investment radar currently, also
stand to gain from the increased transparency in the sector. This will help developers operating
already aligned
in these cities. Once developers start maintaining transparency and improve their track record,
and started demand is bound to return to the market in a big way. This will result in buyers starting to have more
quoting prices FRQGHQFHLQWLHU,,DQGWLHU,,,GHYHORSHUV
by carpet area.
Others will soon
follow suit.
RESTRICTION ON CHANGING PLANS
The promoter cannot make any other addition or alteration in the approved and sanctioned plans,
VWUXFWXUDOGHVLJQVDQGVSHFLFDWLRQVRIDQDSDUWPHQWZLWKRXWWKHSUHYLRXVFRQVHQWRIWKHDOORWWHH
who has agreed to take the apartment. The promoter also cannot make any other addition or
DOWHUDWLRQLQWKHDSSURYHGDQGVDQFWLRQHGSODQVVWUXFWXUDOGHVLJQVDQGVSHFLFDWLRQVRIWKHEXLOGLQJ
and common areas within the project without the previous written consent of at least two-thirds of
the allottees, other than the promoter, who have agreed to take apartments in such a building.

STRUCTURAL DEFECT
In case any structural defect or any other defect in the workmanship, quality or provision of
services or any other obligations of the promoters is brought to the notice of the promoter within a
SHULRGRIYH\HDUV by the allottee from the date of handing over possession, the promoter shall
rectify such defect without any further charge, within thirty days. If the promoter fails to rectify such
defect within such time, the aggrieved allottee shall be entitled to receive appropriate compensation
in the manner as provided in the Act.
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 11

ADVERTISEMENT
The advertisement or prospectus issued or published by the promoter should prominently mention the
website address of the Regulatory Authority, where all details of the registered project have been entered
and include the registration number obtained from the Regulatory Authority and other similar details.

Where a buyer makes an advance or a deposit on the basis of the information contained in the notice,
advertisement or prospectus and sustains any loss or damage because of any incorrect, false statement
included in these, he shall be compensated by the promoter in the manner as provided under the Act.
Also, if the buyer affected by such incorrect, false statement contained in the notice, advertisement or
Currently, around prospectus, intends to withdraw from the proposed project, his entire investment (along with interest at such
rate as may be prescribed and compensation in the manner provided under the Act), will be returned to him.
80-85% of PE
funds invest with
tier I developers MANDATORY DEPOSIT OF 70% OF REALISATION
in bigger cities. The Act mandates that a promoter shall deposit 70% of the amount realised from the allottees, from
Increased time to time, in a separate account to be maintained in a scheduled bank. This is intended to ensure that
transparency and adequate funds remain available for completion of the project on time.
good corporate The promoter shall be entitled to withdraw the amounts from the separate account, to cover the cost of
governance the project, in proportion to the percentage of completion of the project. However, such withdrawal can
RQO\EHPDGHDIWHULWLVFHUWLHGE\DQHQJLQHHUDQDUFKLWHFWDQGFKDUWHUHGDFFRXQWDQWLQSUDFWLFHWKDWWKH
structure will
withdrawal is in proportion to the percentage of completion of the project.
now benefit tier-
7KHSURPRWHULVDOVRUHTXLUHGWRJHWKLVDFFRXQWVDXGLWHGZLWKLQVL[PRQWKVDIWHUWKHHQGRIHYHU\QDQFLDO
II and tier-III year by a practicing chartered accountant. Further, he is required to produce a statement of accounts
developers in GXO\FHUWLHGDQGVLJQHGE\VXFKFKDUWHUHGDFFRXQWDQWDQGLWVKDOOEHYHULHGGXULQJWKHDXGLWWKDWLWKH
these cities as amounts collected for a particular project have been utilised for the project; and (ii) the withdrawal has been
in compliance with the proportion to the percentage of completion of the project.
they stand to gain
this share.
RESTRICTION ON TRANSFER AND ASSIGNMENT
The promoter shall not transfer or assign his majority rights and liabilities in respect of a project to a third
party without obtaining prior written consent from two-thirds of the allottees, and without the prior written
approval of the Regulatory Authority.

The allottee, irrespective of (i) the number of apartments or plots booked by him or booked in the name
RIKLVIDPLO\RULLLQWKHFDVHRIRWKHUSHUVRQVVXFKDVFRPSDQLHVUPVDQ\DVVRFLDWLRQRILQGLYLGXDOV
by whatever name called, booked in its name or booked in the name of its associated entities/related
enterprises, shall be considered as one allottee only.
12 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

REFUND OF AMOUNT IN CASE OF DELAY IN HANDING

A promoter
shall not accept
OVER POSSESSION
a sum more In case the promoter is unable to hand over possession of the apartment, plot or building to the allottee (i)
in accordance with the terms of the agreement of sale; or (ii) due to discontinuance of his business as a
than 10% of promoter on account of suspension; or (iii) revocation of his registration or for any other reason, then the
the cost of the promoter shall be liable, on demand being made by the allottee, to return the amount received by him from
apartment as the allottee with interest and compensation at the rate and manner as provided under the Act. This relief will
be available without prejudice to any other remedy available to the allottee.
an advance
payment or an However, where an allottee does not intend to withdraw from the project, he shall be paid interest by the
promoter for every month of delay, till the handing over of the possession, at a prescribed rate.
application fee

LIMIT ON RECEIPT OF ADVANCE PAYMENT

A promoter shall not accept a sum more than 10% of the cost of the apartment, plot, or building, as the
FDVHPD\EHDVDQDGYDQFHSD\PHQWRUDQDSSOLFDWLRQIHHIURPDSHUVRQZLWKRXWUVWHQWHULQJLQWRD
written agreement of sale with such person and register the said agreement of sale, under any law for the
time being in force.

OTHER PROVISIONS
a. The promoter shall execute a registered conveyance deed in favour of the (i) allottee in respect of the
apartment, plot or building; and (ii) association of allottees of competent authority in respect of the
undivided proportionate title in the common areas, and hand over possession of the same within the
SHULRGDVVSHFLHGXQGHUWKHORFDOODZV,QWKHDEVHQFHRIDQ\ORFDOODZVXFKFRQYH\DQFHGHHGVKDOOEH
FDUULHGRXWE\WKHSURPRWHUZLWKLQWKUHHPRQWKVIURPGDWHRILVVXHRIWKHRFFXSDQF\FHUWLFDWH

b. After the promoter executes an agreement for sale for any apartment, plot or building, no mortgage or
charge can be created by the promoter on such apartment, plot or building. If any such mortgage or
charge is created, then notwithstanding anything contained in any other law for the time being in force, it
shall not affect the right and interest of the allottee who has taken or agreed to buy such apartment, plot
or building.

c. The promoter may cancel the allotment only in terms of the agreement for sale. However, the allottee
may approach the Regulatory Authority for relief, if he is aggrieved by such cancellation and such
cancellation is not in accordance with the terms of the agreement for sale, is unilateral and without any
VXIFLHQWFDXVH
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 13

d. Every allottee shall take physical possession of the apartment, plot or building as the case may
RERA should EHZLWKLQDSHULRGRIWZRPRQWKVRIWKHRFFXSDQF\FHUWLFDWHLVVXHGIRUWKHVDLGDSDUWPHQWSORW
or buildings.
place more
accountability e. In the absence of any local laws, an association or society or cooperative society, as the case
may be, of the allottees, shall be formed within a period of three months of the majority of
on govt agencies allottees who have booked their plot or apartment or building, as the case may be, in the project.
for a time-
f. The Regulatory Authority shall make recommendations to the appropriate Government on (i)
bound approval creation of a single window system for ensuring time-bound project approvals and clearances for
processes & timely completion of the project; and (ii) creation of a transparent and robust grievance redressal
penalties for PHFKDQLVPDJDLQVWDFWVRIRPLVVLRQDQGFRPPLVVLRQRIFRPSHWHQWDXWKRULWLHVDQGWKHLURIFLDOV

failing to adhere
to time-bound
approvals
LIQUIDITY FOR DEVELOPERS
As developers will have to keep 70% of their money in a separate account, it may result in cash
RZLVVXHVLQWKHVKRUWWHUP. However, as demand returns in the long term and PE funds take
renewed interest in the sector, they will stand to EHQHWoverall.

Amongst other reasons, diverting funds by developers to other projects was one of the major
reasons for delays. Either way, a developer will now be forced to use the project accruals for
development of the same project and will have little room for fund manipulation. This may not have
DELJLPSDFWRQLQGLYLGXDOSURMHFWVFDVKRZVDOWKRXJKDWDQHQWLW\OHYHOWKHGHYHORSHUZLOOKDYH
70% money in a to manage funds more judiciously as he will have to stick to project timelines in order to avoid the
separate account penalties involved.
may lead to cash There were concerns about being fair with developers who have to bear high land cost upfront,
flow issues in in cities like Mumbai. In our view, Mumbais case will be no different because even if land prices
are high in the city, the commensurate realisations from sale of apartments are also high. It thus
the short term,
underlines the importance of aligning the product with the market demand, pricing it in accordance
but renewed end with affordability and being resilient in pricing to maintain required sales velocity. In instances
user demand and ZKHUHDSURMHFWLVQGLQJGLIFXOW\LQVHOOLQJWKHGHYHORSHUPD\WKLQNRIVHOOLQJVWDNHVLQWKDWSURMHFW
PE interest will to some other entity who may manage the project in a better way. We do expect the frequency
of project level stake sales and/or joint ventures to rise going forward. The developers who are
greatly benefit in presently sitting on land banks may also consider not pre-selling developing projects and would
the long term concentrate on raising funds for construction and selling their products. This will reduce the risk for
the developers and will also provide enhanced returns to the developer.
14 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

IMPACT ON PRICE
The cost of capital for developers will go up because they will have to
QRZORRNIRUHTXLW\UDWKHUWKDQVWUXFWXUHGGHEWWRQDQFHODQGEX\V7KLV
is because developers cannot sell homes before they get all the project
DSSURYDOV7KLVPHDQVWKH\FRXOGQGLWWRXJKWRSD\LQWHUHVWLIWKH\
take debt to buy land. Developers will also have to manage seamless
construction to ensure completion of their projects on time due to the
penalties involved.

%DQNVZLOOSOD\DUROHLQLQXHQFLQJSULFHV%DQNVDUHOLNHO\WR
start funding for land purchases as well, although with riders (e.g.
construction start date), which can keep land acquisition costs in check.
'HJUHHRISDUWLFLSDWLRQRIEDQNVZLWKGHEWRIIHULQJVWKXVFDQLQXHQFH
GHYHORSHUVGHSHQGHQFHRQSULYDWHHTXLW\(YHQLIWKHHTXLW\QDQFH
costs go up, the developers wont risk passing it on to the buyers in the
current scenario of weak market conditions, helping prices to remain
stable.

As developers will have to sell on the basis of carpet area alone, there
could be a revision in capital values across cities as well as the cost of
compliance. The former, however, may not affect the end-users as the
total cost would continue to be the same as when they were charged on
super built-up area.

There is a need to look into determining and publishing stamp duty rates
and premium FSI rates on carpet area basis for consistency and to
avoid increase in compliance cost.

Given that builders will be left with restricted surplus liquidity until project
completions, rise in land prices is also expected to remain under check
DVGHYHORSHUVZRXOGQGGLIFXOWWRDFTXLUHSORWVXVLQJSURMHFWUHYHQXHV

IMPACT ON GOVERNMENT
AGENCIES
Calculation by carpet area could
A major drawback of RERA is that it misses out on placing higher
lead to revision of capital values
accountability for government agencies. There are no punitive measures
across board, end-users will still recommended on sanctioning authorities for delays in approvals.
shell out the same cost as they The price rise seen in previous years across India, was also due to the
were bearing before, unless there fact that developers faced delays in getting approvals, which increased
is a revision in circle/ ready project and land holding costs. With the central government moving most
approvals online and urging state governments to do the same as also
reckoner rates.
planning to come up with a credit rating mechanism for civic bodies, the
entire approvals process is expected to shorten over the next few years.
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 15

FINANCIAL INSTITUTIONS
The unorganized
%DQNVZLOOQGWKHPVHOYHVLQPRUHVHFXUHVLWXDWLRQZLWKSURMHFWFDVKRZVRSHUDWHGIURPDSURMHFWVSHFLF
brokerage separate account thus adding comfort to debt servicing by the developer, but at the same time, they will
business which revisit debt product offering and revise terms owing to the fact that they will prefer to link debt servicing
is linked possibility for one not-so-successful project from project accruals of another successful project by the same
GHYHORSHUHYHQLILWPHDQVQRWKDYLQJDUVWFKDUJHRQWKHSURMHFWFDVKRZ
with lack of
professionalism, The typical product offering of a bank will change from the typical term loan to overdraft (as corporate loans
ZLOODOVRJHWPRUHGLIFXOWWRREWDLQ$QRWKHULPSOLFDWLRQLVWKDW/HDVH5HQWDO'LVFRXQWLQJ/5'FRXOGJRXS
accountability due to this.
deficit and
opacity in
activities will RETAIL INVESTORS/ APARTMENT FUNDS
become history On the other hand, individual or group investors (also known as apartment funds) who mostly invested in the
in the next few residential asset class with an intention to exit even before the project is completed, will have to participate
as lenders and not as investors. They will have to be prepared for a longer period (at times, up to completion
months of projects) for making returns on their funds lent.

BROKERS
In addition to the promoter and allottees, RERA also brings real estate brokers, who facilitate the sale
and purchase of units in a project, within its ambit. India has had real estate broking as one of the easiest
EXVLQHVVHVWRGR,WFDOOHGIRUQRVSHFLFTXDOLFDWLRQH[SHULHQFHRUFRGHRISUDFWLFHDQGWKHJRYHUQPHQW
DJHQFLHVRQO\SUHVFULEHGJXLGHOLQHVUDWKHUH[SHFWDWLRQVIURPWKHEURNLQJFRPPXQLW\ZLWKRXWGHQLQJUROHV
and responsibility.

No wonder India has thousands of brokers in her big cities, hundreds of them in smaller cities and quite
a few even in her villages. Very few of them work with professional companies whether international or
domestic, and for many of them, property brokerage is just a side business. Hence, brokerage business
LQJHQHUDOLVOLQNHGZLWKODFNRISURIHVVLRQDOLVPDFFRXQWDELOLW\GHFLWRSDFLW\LQDFWLYLWLHVDQGDOHQJWK\
costly dispute resolution mechanism, all of which will become history after a few months.

5(5$GHPDQGVDOOSURSHUW\EURNHUVEHUHJLVWHUHGZLWKWKHUHJXODWRUWREHTXDOLHGIRUGRLQJSURSHUW\
brokerage business. While we do not expect the regulator to introduce qualifying criteria immediately, this
registration will be conditional to brokers acceptance of accountability and code of business practice. This
will bring in transparency and responsibility, the two virtues this sector needs badly.

6WHDGLO\RYHUDSHULRGWKHUHJXODWRUZLOODOVREULQJLQTXDOLFDWLRQFULWHULDLQWHUPVRIWUDLQLQJWREH
acquired and professional experience to be had as trainee brokers, thus raising the standards of services for
the consumers hiring them. This, in turn, will lead to introduction and development of real estate brokerage-
related vocational training and inclusion of real estate-related courses in degree and diploma colleges,
and other autonomous institutions. Indias Technical Education Board will hopefully develop a real estate
education programme as a guideline for the colleges to follow.
16 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

RERA also requires developers to appoint only brokers registered with the regulator for selling and thus,
Consolidation is primary market will be out of bounds for brokers not registered. It will be just a matter a time before the
regulator will push this condition for the secondary market as well. It clearly means that going forward, this
bound to happen
HOGZLOODOORZRQO\WKRVHWRIXQFWLRQZKRWUHDWSURSHUW\EURNHUDJHDVSULPDU\OLYHOLKRRGDFWLYLW\DWWDLQDQG
and hundreds of demonstrate professional and responsible business practice, have training and experience in property
part time brokers business and who aspire to make a prosperous career in it.
will have to leave &RQVROLGDWLRQLVERXQGWRKDSSHQDQGKXQGUHGVRISDUWWLPHEURNHUVZLOOKDYHWROHDYHWKHHOG(YHQIRUWKH
the field. full-time brokers, it will be a serious business to be engaged in. To remain relevant, they will have to have a
certain minimum scale, skill and sophistication to demonstrate.

REDRESSAL SYSTEM
Acceptance or refusal of registration
a. Upon receipt of an application by the promoter, the Regulator Authority shall within a period of 30 days,
grant or reject the registration.

b. Upon granting a registration, the promoter will be provided with a registration number, including a login Id
DQGSDVVZRUGIRUDFFHVVLQJWKHZHEVLWHRIWKH5HJXODWRU\$XWKRULW\DQGWRFUHDWHKLVZHESDJHDQGWROO
in the details of the proposed project.

c. 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. The industrys concern here is how to
implement this and how to ensure that the details of project deemed approved are disclosed in the same
way for formally approved projects and how to ensure such projects also follow the Act.

d. 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 Regulatory Authority due to
IRUFHPDMHXUHDQGRQSD\PHQWRIVXFKIHHDVPD\EHVSHFLHGE\UHJXODWLRQVPDGHE\WKH5HJXODWRU\
Authority or in reasonable circumstances not due to default of the promoter for a period not exceeding
one year in aggregate.

Lapse or Revocation of registration

a. The registration of the project / phase of the promoter shall lapse if the promoter fails to complete the
SURMHFWZLWKLQWKHWLPHSHULRGVSHFLHGDWWKHWLPHRIUHJLVWUDWLRQRUWKHH[WHQGHGSHULRG

b. In the event the registration is lapsed then the Regulatory Authority may consult the appropriate
*RYHUQPHQWWRWDNHVXFKDFWLRQDVLWPD\GHHPWLQFOXGLQJFDUU\LQJRXWRIWKHUHPDLQLQJGHYHORSPHQW
work by the competent authority or the association of allottees or in any other manner as may be
determined by Regulatory Authority.

c. 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
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 17

any terms of the approvals granted for the project; and (iii) the promoter is involved in any kind of unfair
practice of irregularities.

G ,QWKHHYHQWWKHUHJLVWUDWLRQLVUHYRNHGE\WKH5HJXODWRU\$XWKRULW\WKH5HJXODWRU\$XWKRULW\VKDOO

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

ii. 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
DVVRFLDWLRQRIDOORWWHHVVKDOOKDYHDUVWULJKWRIUHIXVDOIRUFDUU\LQJRXWWKHUHPDLQLQJGHYHORSPHQW
works; or

LLL GLUHFWWKHVFKHGXOHGEDQNKROGLQJWKHSURMHFWEDQNDFFRXQWWRIUHH]HWKHDFFRXQWDQGWKHUHDIWHUWDNH
VXFKIXUWKHUQHFHVVDU\DFWLRQVLQFOXGLQJFRQVHTXHQWGHIUHH]LQJRIWKHDFFRXQWIRUIDFLOLWDWLQJWKH
remaining development works in the manner mentioned above.

Website of the Regulatory Authority

a. The promoter shall, upon receiving his login Id and password, create his web page on the website of the
5HJXODWRU\$XWKRULW\DQGHQWHUDOOGHWDLOVRIWKHSURSRVHGSURMHFWLQFOXGLQJ

i. details of the registration granted by the Regulatory Authority;

ii. quarterly up-to-date list of the number and types of apartments or plots or garages, as the case may
be, booked;

iii. quarterly up-to-date status of the project along with the list of approvals obtained and approvals
SHQGLQJVXEVHTXHQWWRFRPPHQFHPHQWFHUWLFDWHDQG

LY VXFKRWKHULQIRUPDWLRQDQGGRFXPHQWVDVPD\EHVSHFLHGE\WKHUHJXODWLRQVPDGHE\WKH
Regulatory Authority.
18 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

Real Estate Appellate Tribunal

RERA, a central
a. In addition to the establishment of the Regulatory Authority, the Bill also proposes to establish a Real
act rides over Estate Appellate Tribunal (Appellate Tribunal) within one year from the date of commencement of the Act.
state acts of same
b. Any person aggrieved by any direction or decision made by the Regulatory Authority or by an
nature DGMXGLFDWLQJRIFHUPD\PDNHDQDSSHDOEHIRUHWKH$SSHOODWH7ULEXQDOZLWKLQDSHULRGRIGD\VIURP
the date of receipt of a copy of the order or direction.

c. The Appellate Tribunal shall deal with the appeal as expeditiously as possible and endeavour shall be
made to dispose of the appeal within a period of sixty days from the date of receipt of appeal.

d. The Appellate Tribunal shall have same powers as a civil court and shall be deemed to be a civil court.
$QDSSHDODJDLQVWWKHRUGHURIWKH$SSHOODWH7ULEXQDOPD\EHOHGEHIRUHWKHMXULVGLFWLRQDO+LJK&RXUW
within a period of sixty days from the date of communication of the decision or order of the Appellate
Tribunal.

Adjudicating Officer
For adjudging the compensation to be paid by the promoter in accordance with the provisions of the Act, the
Regulatory Authority shall appoint (in consultation with the appropriate Government) one or more judicial
RIFHUVDVGHHPHGQHFHVVDU\ZKRLVRUKDVEHHQD'LVWULFW-XGJHWREHDQDGMXGLFDWLQJRIFHUIRUKROGLQJ
an inquiry in this regard. However, such an appointment will be made after giving any person concerned a
reasonable opportunity of being heard.

Offences and Penalty

a. Stringent penal provisions have been prescribed under the Act against the promoter in case of any
contravention or non-compliance of the provisions of the Act or the orders, decisions or directions of the
5HJXODWRU\$XWKRULW\RUWKH$SSHOODWH7ULEXQDOZKLFKDUHWKHIROORZLQJ

i. If promoter does not register its project with the Regulatory Authority the penalty may be up to 10%
of the estimated cost of the project as determined by the Regulatory Authority;

ii. If promoter does not comply with the aforesaid order of the Regulatory Authority - imprisonment of up
to three years and a further penalty of up to 10% of the estimated cost, or both; and

iii. In case the promoter provides any false information while making an application to the Regulatory
Authority or contravenes any other provision of the Act the penalty may be up to 5% of the
estimated cost of the project or construction.

These penal provisions have also been prescribed for any contravention or violation committed by the real
estate agent or the allottee.
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 19

b. If any allottee fails to comply with, or contravenes any of the orders, decisions or directions of the
Regularity Authority, there may be a penalty for the period during which such default continues, which
may cumulatively extend up to 5% of the cost of the plot, apartment or building, as the case may be, as
determined by the Regulatory Authority. Further, if any allottee fails to comply with, or contravenes any of
the orders or directions of the Appellate Tribunal, this may entail imprisonment up to one year or with
QHIRUHYHU\GD\GXULQJZKLFKVXFKGHIDXOWFRQWLQXHVZKLFKPD\FXPXODWLYHO\H[WHQGXSWR
RIWKHFRVWRIWKHSORWDSDUWPHQWRUEXLOGLQJDVWKHFDVHPD\EHRUZLWKERWK

Overriding effect
The provisions of this Act shall have an overriding effect in case there is any inconsistency between the
provisions contained in this Act and in any other law (including a state law) for the time being in force.

The Maharashtra Housing (Regulation and Development) Act 2012 has been repealed by the Central
Government.
20 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A

Conclusions
and unanswered
questions
 D E C I P H E R I N G T H E L E G A L A N D C OM M E R C IA L A SP E C T S O F R E R A 21

In essence, the Bill intends to increase transparency and accountability in the real estate sector, by providing mechanisms to facilitate and
regulate the sale and purchase of commercial and residential units/projects and timely completion of projects by the promoters.

Now, the challenge before the Government would be to establish the Regulatory Authority (or any other authority, in the interim) within the
timeline prescribed under the Act in order to start implementing the provisions of the Act effectively.

$OVRDVLQJOHZLQGRZFOHDUDQFHLVQHHGHGQRZZLWKRXWZKLFKWKHUHPD\EHFDVHVZKHUHERQDGHGHOD\VE\GHYHORSHUVPD\VWLOOUHVXOWLQDQ
XQIDLUSHQDOW\7KHWLPHWDNHQWRJHWPDQ\HQYLURQPHQWDOVWDWHOHYHODQGPXQLFLSDOOHYHOFOHDUDQFHVKDYHDILFWHGGHYHORSHUVIRUORQJ7KH
central government, on its part, has been working to streamline approvals and has set up a 30-day approval period recently. The Model Building
Byelaws have also been released.

7KHUHDUHKRZHYHUTXHVWLRQVWKDWQHHGDQVZHUV

 While the accountability of buyers, developers and brokers has $OOLQDOOWKHLQFXPEHQWJRYHUQPHQWKDVVXFFHHGHGDJDLQVW

been set, where is the accountability for government agencies? YDULRXVRGGVDQGJLYHQ,QGLDQUHDOHVWDWHLWVPRVWYDOXDEOHFDUG
 0RUHFODULW\QHHGHGRQLIDQGZKDWFKDQJHVZLOOKDYHWREH 7KHELOOLVDYHUGLFWWRHQGWKHDJHRILQIRUPDWLRQDV\PPHWU\ODFN
implemented by under-construction projects. There maybe many RIDFFRXQWDELOLW\DQGXQZDUUDQWHGSURMHFWGHOD\VDQGPDUNVWKH
projects having all the clearances and approvals currently but EHJLQQLQJRIULVLQJWUDQVSDUHQF\OLTXLGDWLRQRIDVVHWVDQG
no separate project account maintained or less than 70% of the LPSRUWDQWO\SRVLWLYHVHQWLPHQW
project accruals used for the same project, what will be the likely
treatment for those projects.

 0RUHFODULW\QHHGHGRQSORWWHGGHYHORSPHQWDVLWDIIHFWVDPDMRULW\
of home buyers, especially outside the metros.

 :KDWLVWKHPLQLPXPDPRXQWLQDVHSDUDWHDFFRXQWWKDWWKHVWDWHV
can implement? The Centre has prescribed 70% with an allowance
WR6WDWH*RYWWRUHGXFHLWLVWKHUHLVORZHUFHLOLQJGHQHG"

 +RZVRRQGRZHDQWLFLSDWHWKHLPSOHPHQWDWLRQRIWKLV%LOO"$VLW
requires cooperation from all states, the implementation could be
delayed.