Real Estate Act 2016

The Real Estate (Regulation and Development) Act, 2016 (“the Act”) is an umbrella legislation designed to provide a framework for both Central and State Government. The Act is a Government of India initiative to bring about the much needed transparency and order in real estate related transactions by creating a systematic and a uniform regulatory environment, thereby protecting consumer interest and making real estate developers accountable for timely completion of projects. The Act paves the way for setting up of Real Estate Regulatory Authority (“Authority”) at every State for regulation and promotion of real estate sector while promoting transparency and equity in real estate transactions.

The real estate sector has grown in the recent years but has largely been unregulated from the perspective of consumer protection. Though, consumer protection laws are available, the recourse available therein is only curative, but not preventive. This has affected the overall potential growth of the sector due to the absence of professionalism and standardization.

The functions of the Authority include promotion of real estate sector, advocacy by creating awareness, imparting training about laws relating to the real estate sector and policies, regulating and registering real estate developers and agents, maintaining website, ensuring compliance of obligations cast upon real estate developers and other such functions provided under the Act and State Rules.

The Act brings stakeholders like consumers, real estate developers and the real estate agents- under the purview of the Authority in order to ensure compliance of the Act by the stakeholders. The Act empowers the States to introduce its own rules to accommodate the need of its own unique geographies without diluting the provisions of the Act. The Act also provides for appropriate Government of two or more States or Union Territories (UTs) to establish single Authority.

Yes, The Act is applicable to both residential and commercial real estate.

There is no distinction between an ongoing/incomplete project and both types of projects are covered under the ambit of the Act. Further, any new projects to be launched by the real estate developers are also covered under the ambit of the Act.

As per the relevant provisions of the Act, the following projects do not require registration under the Act:

1. Where area of the land proposed to be developed does not exceed five hundred square meters, or the number of apartments proposed to be developed does not exceed eight inclusive of all phases:
2. Provided that, the appropriate Government considers it necessary, it may, reduce the threshold below five hundred square meters or eight apartments, as the case may be, inclusive of all phases, for exemption from registration under the Act.
3. Where the real estate developer has received completion certificate for a real estate project prior to commencement of the Act.
4. For the purpose of renovation or repair or re-development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building, as the case may be, under the real estate project.

The Authority set up by every State, is required to either grant registration or reject the application within 30 days of its submission. If the application is not in conformation with the guidelines and Authority finds it worth rejecting, it is mandatory that the applicant/real estate developer be heard in the matter before rejection.

The registration will be valid for a period specified by the real estate developer in the application form submitted to the Authority. Hence, the real estate developer is accountable to the adhere to the timelines otherwise he risks suffering losses/ penalties.

Each State has its own platform which provides access to the details of registered real estate projects, the real estate developers and the real estate agents. For example, a consumer can view the projects registered in Maharashtra on www.maharera.mahaonline.gov.in.

The agreement entered between the developer and the consumer/buyer for the sale of the apartment/flat/unit in the developer’s project is called the Agreement for Sale. Some of the States have specified through its rules the ‘Agreement for Sale’ to be entered between the real estate developer and the buyer/consumer. The Agreement for Sale is binding on the parties, however, internal flexibility may be provided in the Agreement for Sale, for determination / insertion of other provisions as may be required.

Agreement for Sale between the real estate developer and the buyer/consumer is to be registered under the Act before the buyer/consumer makes payment of a sum more than 10% of the consideration.

Yes, there are norms provided under the Act. Every real estate developer is responsible for the veracity of all information contained in the advertisement and the prospectus. In case any loss is sustained by the buyer/consumer due to false information contained therein, the promoter is liable to make good the loss sustained due to the same. Further, all advertisements / prospectus issued or published by the real estate developer shall prominently mention the website address of the Authority, wherein all the details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto.

The following are few of the obligations, functions and responsibilities of a real estate developer:

1. Register its project with the concerned Authority and obtain a valid registration number for each of its projects.
2. Real estate developers are not permitted to market, advertise, offer, invite, book or sell any plot, apartment or building in any real estate project in any planning area without registering the real estate project with the concerned Authority.
3. The real estate developer is required to submit all documents related to the project, which is considered necessary by the Authority.
4. Agreement between the developer and the buyer/consumer to be registered under the Registration Act, 1908 before exceeding 10% of the sale consideration.
5. The real estate developer must deposit 70% of the amount or such other percent as provided under the Act or the rules, received from the consumers in a separate account from time to time and the real estate developer will be able to withdraw the amounts in accordance to the procedure provided under the Act.
6. Adhere to the project plan at all times.
7. To repair structural defects if any, as defined and provided under the Act.
8. Enable the formation of an association or society or co-operative society, as the case may be, of the buyers/consumers or a federation of the same under the applicable laws.

To ensure that the consumer knows what he is paying for, it has been made mandatory for the real estate developer to specify the carpet area. Carpet area refers to the net usable floor area of an apartment, excluding the area covered by the external walls, areas under service shafts, exclusive balcony or veranda area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment. The Act thereby enacts a straightforward definition to be adopted across the country.

The Act provides that modifications/amendments in the plans or specifications can be made in case of minor additions or alterations–

However, in case of major modifications / alterations, the real estate developer can modify the sanctioned plans or project specifications only in terms of the provisions of the Act. Also, irrespective of the number of apartments held by a buyer/consumer, he/she shall only be entitled to one vote.

The real estate developer is free to decide the manner in which he wishes to develop the project land and the same may be done in various phases. The real estate developer is required to provide/submit all the requisite details of the phase it proposes to register with the Authority, post which the real estate developer will either grant registration or reject the application.

If the real estate developer violates the registration procedures prescribed by the Act, the real estate developer will be liable to pay a penalty as prescribed under the Act. However, in case the real estate developer consistently defaults or does not comply with the directions / orders of the Authority with regards to registration of the project with the Authority, the real estate developer shall be liable to additional fine or imprisonment or both, as may be prescribed under the Act.

The real estate developer is allowed to transfer the project to a third party provided that the real estate developer has obtained the consent of the buyers/consumers as well as the Authority in accordance to the provisions as prescribed in the Act.

The Authority may revoke the registration of the real estate agent in case of breach of any of the conditions laid down by the Act is committed by a real estate agent or the Authority is satisfied that the registration has been secured by the real estate agent through misrepresentation or fraud, breach of any terms and conditions of the Act, and any sort of unfair practice can cause the registration of the real estate agent to be revoked; but not before the real estate agent is given a chance to be heard. The Act makes it tougher for the real estate agents to conduct business in an unprofessional manner and in a way prompts them to adopt ethical means of dealing with consumers.

The consumer is entitled to receive information about the sanctioned plan, layout plan as approved by the competent authority, stage-wise time schedule of the project completion and the services promised by the real estate developer. After receiving the physical possession of the unit, the consumer has the right to obtain the necessary documents.

The consumers can claim possession of the unit and the association of consumers can collectively claim possession of the common areas as declared by the real estate developer as per the provisions prescribed under the Act.

If the real estate developer fails to meet the timeline or does not deliver what was promised, the consumer has the right to claim refund of amount paid along with prescribed interest for the same. Also, consumers/buyers will have to be updated about project progress, sales and construction status by the real estate developer.

The consumer is entitled to receive information about the sanctioned plan, layout plan as approved by the competent authority, stage-wise time schedule of the project completion and the services promised by the real estate developer. After receiving the physical possession of the unit, the consumer has the right to obtain the necessary documents.

The consumers can claim possession of the unit and the association of consumers can collectively claim possession of the common areas as declared by the real estate developer as per the provisions prescribed under the Act.

If the real estate developer fails to meet the timeline or does not deliver what was promised, the consumer has the right to claim refund of amount paid along with prescribed interest for the same. Also, consumers/buyers will have to be updated about project progress, sales and construction status by the real estate developer.

The consumer is entitled to receive information about the sanctioned plan, layout plan as approved by the competent authority, stage-wise time schedule of the project completion and the services promised by the real estate developer. After receiving the physical possession of the unit, the consumer has the right to obtain the necessary documents.

The consumers can claim possession of the unit and the association of consumers can collectively claim possession of the common areas as declared by the real estate developer as per the provisions prescribed under the Act.

If the real estate developer fails to meet the timeline or does not deliver what was promised, the consumer has the right to claim refund of amount paid along with prescribed interest for the same. Also, consumers/buyers will have to be updated about project progress, sales and construction status by the real estate developer.