RERA - Refresher Session - Sandeep Jhunjhunwala FCA

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Real Estate (Regulation and Development) Act 2016 & Karnataka
Real Estate (Regulation and Development) Rules 2017 – An update
Session
Bangalore Branch of SIRC of ICAI – April 4, 2018
Presented By: Sandeep Jhunjhunwala, FCA

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Presentation Overview
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RERA – Nationwide Acceptance Status
RERA – Administrative Preparedness
RERA – After Effects
Karnataka RERA – Status Report
Role of Chartered Accountants
Registration of new projects
Pre-withdrawal certification
Annual Audits and Quarterly updates
Legal Aspects
Areas for Advisory involving RERA
Knowledge Banks
Overall Analysis
Bangalore Branch of SIRC
of ICAI
April 4, 2018
Sandeep Jhunjhunwala FCA
For basic understanding of RERA, please visit http://bangaloreicai.org/index.php/v/mediaitem/961-analysis-impact-of-real-estate-regulation-development-bill and
http://bangaloreicai.org/index.php/resources/background-material/8-reference-material/background-material/360-analysis-impact-of-real-estate-regulation-development-bill

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RERA – Nationwide Acceptance
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RERA – Nationwide Acceptance Status
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April 4, 2018
~21 States and 7 Union Territories (UTs) have implemented RERA [framed rules as required under Section
84 of the Real Estate (Regulation and Development) Act]
Out of these, 16 states have a fully functional online RERA portal
Out of these only 5 States - Gujarat, Maharashtra, Madhya Pradesh, Rajasthan and Punjab have established
permanent Real Estate Regulatory Authority, while 19 States/ UTs have set up interim authorities
A sum of 9 States/ UTs have named the Appellate Tribunals under the Real Estate Act, while 7 States have
begun the online enlistment under the Act
Maharashtra has seen the maximum response in project registrations (~16,000 project registrations) with its
real estate regulatory authority
~2,500 in Uttar Pradesh (second in the list), ~1,700 in Gujarat and Madhya Pradesh (both stand third)
While deviation from the model Act is the main cause for concern, slow progress of states in operationalising
RERA and making available details of registered projects widely is even more perturbing
Regulators in Maharashtra have imposed fine on ~1,800 developers for delayed registration
Maharashtra has a conciliation forum (which has representation from Builders' and Consumers'
Associations) to speed up dispute resolution between buyers and property developers
In Karnataka - Principal Secretary, Department of Housing is acting as an Interim Authority and Karnataka
Appellate Tribunal as an Interim Appellate Tribunal. Rules were notified last year, no regulations in place yet
*Source: Based on publicly available information

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RERA – Administrative
Preparedness
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RERA – Administrative Preparedness
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State Rules Notified Website Permanent Authority
Karnataka Yes Operational Not Formed
Tamil Nadu Yes Operational (no online registrations) Not Formed
Telangana Yes Created, Non Operational Not Formed
Delhi Yes Created, Non Operational Not Formed
Haryana Yes Created, Non Operational Not Formed
Uttar Pradesh Yes Operational Not Formed
Maharashtra Yes Operational Formed
West Bengal No No Not Formed
Punjab Yes Operational Formed
Haryana Yes Created, Non Operational Not Formed
Gujarat Yes Operational Formed
Madhya Pradesh Yes Operational Formed
*Source: Based on publicly available information

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RERA – After effects
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RERA – After effects
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Builders getting
more cautious
about new
launches
Builders
charging on
carpet area
basis
Advertisement
getting more
factual -
Lesser
misleading &
ambiguous
than before
Detailed
written
agreements
Online
mechanism of
lodging
complaints
Transparency
of details with
respect to
registered
projects
Banks
shutting out
Builders
without RERA
Registration

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Karnataka RERA – Report Card
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*Source: https://rera.karnataka.gov.in [As on April 4, 2018]
Projects
• Projects
approved:1466
• Applications under
process: 357
query: 187
• Applications rejected:
52
Agents
• Total Approved Agents:
841
process: 193
Otherupdates
• Projects under
investigation: 519
• Online helpdesk to
post enquiries with
Department
• Online mechanism to
report unregistered
projects
• Helpdesk for lodging
grievances
(operational matters)
• Viewing of registered
project details now
possible
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Karnataka RERA – Dispute resolution (1/2)
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0%
10%
20%
30%
40%
50%
60%
70%
Delay in handover Refund of booking
amount
Rectification of
mistake while
registration
Delay in execution
of sale deed
*Source: https://rera.karnataka.gov.in/ [As on April 4, 2018]

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Karnataka RERA – Dispute resolution (2/2)
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Recently, orders passed by the Karnataka RERA Authorities in 40 complaints have been made public
Almost all the orders passed by the Karnataka RERA Authorities are in favour of buyers
Perusal of these orders depicts that of 40 complaints, ~26 (65%) have been settled through compromise
petition between buyer and the builder, ~6 have been withdrawn after the builder refunded the advance
amount paid by the buyer, and ~8 have been annulled/ withdrawn on ground of lack of a dispute which
needs adjudication
Most of the orders based on compromise petitions have failed to record details of such compromise, leaving
a blind spot on bargaining equations between the parties
*Source: https://rera.karnataka.gov.in/ [As on April 4, 2018]

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Role of Professionals
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Role of
Professionals
Section 3:
Registration of
RE projects
with RERA (CA/
CS/
CWA/ Legal
Practitioners
Section 4:
Pre-withdrawal
certification
based on PoC
(CA)
Section 4:
Audits
(Statutory and
Internal) and
IFCs (CA) and
Quarterly
Filings
(updates)
Section 56:
Representation
services (CA/
CS/
CWA/ Legal
Practitioners)
New area of
practice for all -
General
Advocacy,
Trainings,
Impact
Assessment etc
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Compliance and reporting
Restriction on fungibility of cash
from projects
Increased obligations
Process changes
Training
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Registration of projects
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Marketing/ Selling/ Booking of projects possible only after obtaining registration (Section 3 of the Act)
Approvals need to be in place for registration of projects (commencement certificate as per the Act, though
not insisted upon by the Authorities in Karnataka)
Approvals – Building approval, Layout Approvals etc by the local bodies
Marketing/ Selling/ Booking of projects possible only after project registration (final) – Not with provisional
acknowledgement number generated pursuant to the online lodging of application (Karnataka RERA Circular
dated March 31, 2018) – Applicable from April 1, 2018 – Imposes virtual stay on businesses
Application runs through various stages: Application under query > Application under process
Indicative/ Tentative timeline for getting project registration: 2-3 months (post furnishing requisite documents/
information/ clarification and not necessarily from the application filing date)
Backlog of applications with the regulators since December 2017
Follow-up could be done using the online Helpdesk option
Almost all information/ documents furnished (including promoter and project details) while seeking
registration are available for public view (barring a few including financial statements of the promoter) –
Authorities may notify an alternate document in the form of a certificate (akin to a net worth certificate) in lieu
of financial statements
Penalty for false information is 5 percent of total estimated project cost (Section 60 of the Act)

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Almost all documents provided while seeking registration are available for public view (barring a few including financial statements of the promoter)

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Deemed Registration – 30 days time window – Practical challenges
Obligation of registration in few situations (case and fact specific):
Situation 1: Area sharing Joint Development Agreement (JDA) – Landowners' and Builders' share of
units - Separate registrations are required though building approval may be single (as law stands
today)
- Maharashtra RERA – Circular Nos 12 and 13 of 2017 dated December 4, 2017 - Concept of
co-promoter – Landowner is also a co-promoter and required to maintain 70 percent account and
furnish affidavit cum declaration in Form B while seeking registration of a real estate project. However,
project registration is single (saves administrative hassles of having 2 registrations in such cases)
- Separate registrations for a single project may require modifications in marketing collaterals as well as
legal documents such as agreement for sale (defect liability etc) and separate bank accounts
- Ample disclosures should be made in such cases and due care should be taken in terms of disclosing
the land area to be developed, so that registration fee is not paid doubly [such notes could form part of
Form-B (affidavit cum declaration to be given by the applicant)]
Situation 2: Single building approval for development on a land parcel co-owned in equal share by 2
companies (or individuals) – JDA and GPA in the names of different companies (or individuals)
- Separate project registrations would be required

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Situation 3: Large scale projects such as integrated townships –
- Separate registrations for various blocks (residential or commercial) and other developments (shopping
malls etc) – efficient from cash flow perspective (70:30 rule) + delay in one part of the development
does not impact the time commitment on the other part [Separate building plan approvals required for
each block/ phase]
- Additional burden arising out of single registration:
1. Defect liability period gets extended for all the phases;
2. Compensation/ damages to be computed on the estimated cost of the project, which varies from
5% to 20%. If the project is a large one, the quantum of damages calculated would be more;
3. Allottees of every phase would have a say in the entire larger project;
4. Every Allottee will have right in the common areas of the entire larger project;
5. If title of a portion of the project is affected, the entire larger project may get impacted

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70 percent condition – An illustration
Content Cost Assumptions
Land cost 20
Construction cost 20
Overheads, Interest, Others 30
Project Cost 70
Sale Assumptions
Land 50
Construction 50
Sale value 100
Payment and Construction Schedule
Booking
Instalment % Completion
10% 0
1st Milestone 25% 20%
2nd Milestone 25% 40%
3rd Milestone 25% 70%
4th Milestone 10% 85%
Possession 5% 100%
Particulars
Cumulative
cash flow
Amount
that needs
to be
deposited
(70%)
% completion
X Project cost
(cumulative)
Retentions
(Restricted
Cash)
Booking 10.00 7.00 0 7.0
Instalment 1 35.00 24.50 14.0 10.5
Instalment 2 60.00 42.00 28.0 14.0
Instalment 3 85.00 59.50 49.0 10.5
Instalment 4 95.00 66.50 59.5 7.0
Possession 100.00 70.00 70.0 0
How does this work in JD arrangements
(Revenue as well as Area sharing)?
Float - Collateral for other projects? 70 percent
account is a “no-lien” account
*Few states including Maharashtra have clarified that marketing related
costs could not be considered for withdrawal from the 70 percent account.
The rules in Karnataka defines construction cost to mean cost incurred
towards onsite and off-site expenditure for the development of the real
estate project. Marketing costs, could, therefore, be considered eligible for
the purpose of withdrawal from the 70 percent account in the state of
Karnataka (though technically evaluating, marketing costs are incurred
towards “selling” and not “development” of real estate project
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Components of cost (Rule 5 – Karnataka RERA Rules)
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LANDCOST
Costs incurred by the Promoter for
acquisition of ownership and title
of the land parcels for the real
estate project as an outright
purchase lease etc or the Guidance
value in accordance with Section
45-B of the Karnataka Stamp Act
1957 relevant on the date of
registration of the real estate
project, whichever is higher
Amount paid for acquisition/
purchase of TDR etc
Amount paid to the competent
authority for project approval, no
objection certificates, stamp duty,
transfer charges, registration
charges, conversion charges,
change, taxes, statutory payment
to State and Central Government
CONSTRUCTIONCOST
All such costs, incurred by the
Promoter towards on-site and off-
site expenditure for the
development of the real estate
project including payment of taxes,
fees, charges, premium, interest
etc to any competent authority, or
statutory authority of the Central
Government or State Government,
including interest, paid or payable
to any financial institutions,
including scheduled banks or non-
banking financial companies etc
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Content Format of certification not prescribed by the regulators in Karnataka
States such as Maharashtra, Madhya Pradesh, Gujarat, Andhra Pradesh etc have notified formats
Few states such as Andhra Pradesh also have an additional requirement for uploading the certificates issued
by professionals (CA, Engineer and Architect) certifying Percentage of Completion (PoC) of real estate
project on to the RERA portal, whereas other states such as Maharashtra have clarified that such certificates
be maintained by the Promoter and not submitted to Banks or Authorities
In the absence of any prescribed formats, professionals have flexibility to design formats until the time such
formats are prescribed by the regulators (however may lead to ambiguity)
Maharashtra RERA – Circular No 5/2017 dated June 28, 2017 and Circular No 7/2017 dated July 4, 2017 –
provide guidance on CA certificates
Does the Developer need to submit the certificates to Banker or retain with him for records/ audit?
– Maharashtra Circular No 3/2017 dated June 7, 2017
– Promoter required to submit self-declaration to the Bank on a quarterly basis confirming the abidance
to 70:30 rule
– Certificates to be retained by the Promoter and not to be filed with the Banks/ Regulators
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Pre-withdrawal certification: Few positions
Content Few important aspects on computation of PoC:
– Format of certification?
– PoC on Accounting Principles (CA)/ Physical progress (Architect & Engineer)?
– Percentage of Completion (PoC) to be considered including land cost or excluding that (AS-7/ Ind-AS-
11/ ICDS-III/ Draft ICDS on real estate transactions on construction contracts)?
– PoC – Project wise/ Tower wise (if multiple towers in same phase)?
– PoC to be calculated with reference to a particular project (or share of project) in cases where a project
is vivisected into multiples on account of issues such as landowners vis-à-vis owners share etc.
Reference to estimated total cost of the registered project has to be made even if a registered project
is a sub-set of the entire project
– Fund for meeting customer refunds for cancelled units? Maharashtra Rules permit 70 percent
withdrawal under this scenario (Circular No 7/ 2017 dated July 4, 2017). Karnataka RERA Rules are
silent on this aspect
– PoC varies amongst 3 professionals – CA, Architect and Engineer – Based on the Principle of
Prudence, CA should consider the lower PoC (fact specific though) – CA should collect/ consider/ rely
upon certificates issued by the Engineer and Architect, while issuing pre-withdrawal certificate (best
practices)
– For verification of construction costs while issuing certificates, GST returns and other related
documents such as purchase invoices etc could be examined
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Pre-withdrawal certification: Few positions
Content
Whether the quantum of withdrawal would be determined by applying PoC so determined with the balance in
70 percent (project designated) account OR by applying PoC with total estimated cost of the project.
A plain reading of the section implies that the quantum of withdrawal should be determined by applying the
percentage of completion so determined with the balance available in 70 percent account.
Based on the intent of Section 4(2)(l)(D) of the Act, it appears that the reason for creating the rule that 70%
of the receipts from customers will be pooled into a separate bank account is to ensure that the same is used
only for project cost purposes. The certification mechanism (Architect/ Engineer/ CA) also aims at
safeguarding this aspect that the withdrawals will be allowed only for meeting the project costs. Therefore, if
based on the certifications provided, if the project costs incurred till date based on certified project
completion justifies a higher withdrawal from pooling A/c, then that should be allowed since it is in line with
the intent of the 70% A/c mechanism. However, given the divergent views available, the contrary view (as
given in under Madhya Pradesh rules) cannot be ruled out.
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State Position on withdrawal from the project receipts account
Karnataka No clarity/ guidance
Maharashtra Costs incurred till date (based on the certified project completion
percentage)
Madhya Pradesh Lower of:
A. Costs incurred till date (based on the certified PoC)
B. % of completion (as per certificate) * Amounts lying in the project
receipts account (project receipts and receivables)
Gujarat Costs incurred till date (based on the certified project completion
percentage)

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Annual Audits and
Quarterly updates
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Annual Audit
Content Audit under RERA – Is this another compliance or does this get subsumed under Statutory Audit (under
Companies Act 2013) or Tax Audit (under Income Tax Act 1961)?
– Likely that it is another audit as it is mandated by RERA
– First RERA audit to be completed by September 30, 2018 (6 months from the end of FY 2017-18 ie
the first year of RERA implementation)
– It shall be verified during audit that - (i) Amounts collected for a particular project have been utilized
for that project, and (ii) Withdrawal has been in compliance with proportion to PoC of the project
– Format of Audit report not available
– Would RERA audit be subject to certain turnover threshold (such as in tax audit) or would it be
applicable to all developers/ promoters?
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Quarterly updates
Content Rule 15(D) of Karnataka RERA Rules – Promoter required to update the webpage of the project within
15 days from the expiry of each quarter
Status of project (construction and approvals), Booking details etc needs to be updated by the Promoter
As of now, Karnataka RERA portal does not provide for online update facility
Physical letter could be filed with the authorities (or an email) providing all such details, to avoid penal
implications at a later stage (and to avoid haste in case of short notice)
Guidance available under Circular No 8/ 2017 dated July 17, 2017 and Circular No 14/ 2017 dated
November 1, 2017 by the regulators in Maharashtra (could have a persuasive value only in Karnataka)
Penalty for contravention could runs upto 5 percent of the estimated total cost of the real estate project
(Section 61 of the Act)
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RERA – Legal aspects
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How Rules have diluted overall essence of RERA!
Content Various states have digressed to an extent that their tinkered
watered-down rules violate the parent Act. State Rules littered with gaps
which will make it smoother for builders to circumvent the law.
The Ministry of Housing and Urban Poverty Alleviation (MHUPA) had
notified its rules under the Act in October 2016. Such central rules are
applicable to all Union territories without their own legislature and were
meant to serve as template for rules in other states
Rules (draft/ final) effectively issued by some states favour RE developers/
construction industry over home-buyers
Press articles suggest that:
– PMO has sought a report from the Housing Ministry with respect to
violation of central provisions
– Amid reports that key provisions of the Act have been diluted by some
states, the Central Government had forwarded the rules notified by
the states to a parliamentary committee (Committee on subordinate
legislation) for examination
– Parliamentary committee has suggested MHUPA to instruct
States to amend diluted rules or re-notify them (August 11, 2017)
Statistics reveal that home-buyers in 65 percent of ongoing projects across
8 cities - including Ahmedabad, Mumbai and NCR-Delhi are staring at a
delay ranging between a few months and over 5 years
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How Rules have diluted overall essence of RERA!
Content Few noted deviations:
– Cancellation by promoter on a week’s notice
– Registration fee at Re 1 per square metre (Central rules prescribed Rs
10/ Rs 50 per square meter depending on area of development)
– Increase in appeal filing fee (Rs 1,000 to Rs 10,000)
– Exclusion of disclosures (including pending court cases!)
– Payment of 30 percent of the total cost while signing the agreement
and 45 percent on reaching plinth level
– Deletion of anti-discriminatory clauses (given under UT model Rules)
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From the Courts
Content Builders took Centre to court, said RERA illegal on grounds such as retrospective application on ongoing
projects/ Infringement of right to privacy/ land being state subject
– Builders and Developers Welfare Association - PIL before Jabalpur Bench of Madhya Pradesh
High Court (Writ Petition No 7456/ 7348 of 2017)
– Swapnil Promoters and Developers - Nagpur bench of Bombay High Court (Writ Petition No 4419
of 2017)
– MIG (Bandra) Realtors and Builders Pvt Ltd
The Housing and Urban Development Ministry moved the Supreme Court for clubbing of all cases
relating RERA which have been filed in different high courts, so that these can be decided by one court.
The Supreme Court had directed Bombay High Court to decide on the matter
Plot owner in Maharashtra move HC on RERA making them co-promoters
– Petition says the Authority by notifying the definition of "co-promoter" foists a liability on the owner
which was never contemplated either under the Maharashtra Ownership Flats Act or RERA and
only "promoter" is defined under both acts.
– Even Parliament chose not to add the definition of co-promoter in RERA, it adds
Buyers across India, in parallel, had challenged safe harbor to ongoing home projects, legal validity &
composition of interim regulatory authority and several other diluted provisions under RERA
The Bombay High Court in its 330 page judgement (December 2017) has upheld the constitutional
validity of various provisions, which were challenged by the developers
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Judicial Mechanism
Content
RERA
Adjudicating Officer
[District Judge]
RE Appellate
Tribunal
High Court
Adjudicating Officer to be appointed by
RERA in consultation with the State
Section 12 - Veracity of information in
advertisement, notice, prospectus or model
apartment
Section 14 - Adherence to sanctioned
plans, layout plans and project
specifications by the Promoter
Section 18 - Return of amount of
compensation
Section 19 - Rights and duties of allottees
Other matters
Any dispute resolution relating to
matters on any violation or
contravention of provisions is through
RERA or the Adjudicating Officer
No recourse to civil courts on
matters covered under the RE Act –
Declaration that case is not pending
needs to be given.
Consumer forums (National, State
or District) not been barred from
the ambit of the Act
In respect of matters pending before
Consumer Courts, the Appellants
have the option to withdraw such
complaint and file an application
before the Adjudicating Officer
Pre-deposit at REAT level: 30
percent of penalty for Promoters or
100 percent of interest/
compensation for allottees
REAT to be headed by a sitting or
retired Judge of the High Court, with
one judicial and one administrative/
technical member
Consumer court case versus
RERA - Which one to choose?
Foradjudgingthe
compensationtobepaid
byPromoters
Required to adjudicate cases
within 60 working days from
the date of receipt of appeal/
application
* Section 31 – As per the definition of “aggrieved person”, even an outsider (who is not the customer or the association of allottees) could file a complaint
with the Adjudicating Authority or the officer
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Projects under investigation
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Projects under investigation
Content Karnataka RERA Authorities have been identifying and publishing details of projects which are not registered
- Public is cautioned to invest in such projects
- List is updated (addition & deletion) on every Friday at 1PM based on replies received from the
promoters in response to notices issued by RERA authorities
- Source seems to be advertisements (through digital means, newspapers and hoardings), official records
of urban local authorities (BBMP/ BDA/ Sub-registrar’s office etc), customer complaints, promoters'
websites etc
- Authorities are in the process of roping in a private agency to support them in identifying unregistered
projects (both ongoing and new) – Tender Notification issued on March 5, 2018
- Revised approach* is to embark on a physical survey (total station survey, in technical terms, which is a
survey on a land parcel on the basis of its latitude and longitude using advanced GIS technology)
- Authorities estimate that there are close to 1500 unregistered projects in Karnataka, out of which ~800
are in and around Bengaluru
Representation may be required in case of notice received from the Authorities
- Approach should be to test if such project falls in the exclusion of ongoing projects as defined in
Explanation to Rule 4 of the Karnataka RERA Rules
- Exclusion covers projects where developmental work is completed and certified/ 60 percent sale deeds
registered/ application made for issue of occupation certificate etc (all conditions to be met as on July 11,
2017)
- If yes, detailed submissions along with requisite supportings could be provided
- Basis such submissions and representation, the details of the said project could be removed from the list
on a provisional basis. However, it could be included again in case documents are found to be deficient/
inappropriateBangalore Branch of SIRC
of ICAI
April 4, 2018
Sandeep Jhunjhunwala FCA *Source: Based on publicly available information

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Agreement for sale
Content Karnataka RERA Authorities had issued a draft agreement for sale for public consultation in August 2017
Final format yet to be notified
Section 13 of the Act requires the Promoter to enter into a written agreement for sale and register the same
before accepting a sum of more than 10 percent of the cost of apartment, plot or the building, as the case may
be
Pending final notification from the Authorities, promoters have adopted the draft and tweaked some of the
clauses – to enable them to accept sum exceeding 10 percent of the cost of apartment/ plot/ building
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Complaints by homebuyers
Annexures
Construction
not started
Delay in
Possession
Enhanced
demand by
Builder at the
time of
handing over
of possession
like charging
for increase in
super area etc
Major change in
the layout plan
or building plan
by the Builder
Quality of
construction
or land title
issues
Subvention
Scheme -
Builder
defaulting in
paying of EMIs
to Bank
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Other Areas (General
Advocacy, Impact
Assessment, Transaction
Advisory etc)
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Revisiting Business and
operational models – Developer's
perspective
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Departments – Increased roles & responsibilities
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Finance
•Cash flow / liquidity
management (70
percent clause)
•Managing project
wise bank accounts
and withdrawal
certification
•Impact on Pricing
•Alternate ways of
funding/ sourcing
equity partners
•Insurance
•Monitor cost and
schedule overruns
•Auditing of project
accounts
•Institutionalize
periodic RERA
checks
Legal
•Revised agreement
of sale/ affidavits/
declarations as per
Rules
•Deep land due
diligences
•Registrations/
Extensions/
Updation of details
on RERA website
•Formation of
association of
allotees within 3
months from the
date of majority of
units being booked
•No mortgage or
charges etc
•Vendor
management/
Dispute Resolution/
Cyber Security
•Ring-fencing senior
management/
promoters liabilities
Design
•Prioritize design
development and
delivery capabilities
•Fix structural
defects or any other
defect in
workmanship,
quality or provision
of services or any
other obligations of
the promoter – 5
year warranty
period
•Minor vs major
additions/
alterations
(changes) to the
structure as per
sanctioned plan –
careful
consideration
•Institutionalize
periodic RERA
checks
Operations
•Strengthen delivery
and management
capabilities around
execution,
monitoring,
handover and
operations
•Managing
alterations and
additions
•Empanelment of
channel partners
(including
architects,
engineers, real
estate agents etc)
•Institutionalize
periodic RERA
checks & process
compliance audits
•Redefine
indemnities and
liabilities for
channel partners
and associates
Marketing/Sales/CRM
•No project
promotions/
advertisements/
marketing before
registration
•Provide information
to allotees -
sanctioned plan,
layout plan, stage
wise schedule of
completion
•Sanitize marketing
collaterals/
brochures etc
(identify and
address conflicting
customer
commitments) and
align to RERA
regime
•Email and
communication
exchange with
customers
•Managing
cancellations (to be
compliant with the
terms agreed)
of ICAI
April 4, 2018

Contents
Summary
Content
Page 43
Advertising – Caution list
Content
Disclaimer prior to exhibiting
mock/ sample flats
Careful use of adjectives for
describing the project
Mentioning carpet area as
defined in RERA
Review and monitoring emails/
written communications sent by
the marketing/ agent team
Appropriate disclaimers in
Booking Forms/ Pamphlets
*Usage of marketing phrases such as 10 minutes drive from International Airport Road, fully loaded gymnasium, 5 star clubhouse, investment
hotbed, 50 percent appreciation in 2 years, assured rentals, last few apartments left, all approvals received etc - should be closely watched out
for and rephrased appropriately. The overall essence for the marketing materials should be - "To be as Precise and Accurate" as possible.
of ICAI
April 4, 2018

Contents
Summary
Content
Page 44
Implications on M&A in RE space
Content
of ICAI
April 4, 2018
Transfer of shares of the Promoter entity (Share Purchase/ Buyouts)
- Developmental rights for the project continues to remain with the same promoter entity,
- No change in the developmental plans and timeline for completion of the project (project end date) as
provided while seeking registration for this project.
- Prior written consent of two-third allottees should not be required
- Regardless of a "no-approval" situation, an intimation should be filed with the RERA Authorities
Merger/ Demerger/ Amalgamations/ Takeovers/ Business Transfer
- Various positions possible such as retaining RERA registered projects in one entity (consolidation or
business reorganisations)
- Segregation of business such as RERA registered projects vis-à-vis non RERA projects etc
- In case of change of developmental rights, prior approval from two-third allottees and the Authority is
needed
- No additional time provided to the incoming developer to complete the real estate project
- Incoming developer to be responsible for pending obligations of the erstwhile promoter and also for
damages arising out of breach or delay
Circular No 11/ 2017 dated November 8, 2018 issued by Maharashtra RERA Authorities – Clarification to the
provisions of Section 15 of RERA Act dealing with obligations of a promoter in case of transfer of a real estate
project to a third party
Reasonably sized repository of case laws/ judgements available on few regulators’ portal such as Maharashtra
RERA (~1100 reported judgements), Madhya Pradesh RERA (~650 reported judgements) – Views of
regulators support in taking positions on debatable issues, for instance, applicability of RERA provisions on
projects involving lease etc (Maharashtra RERA has a reported ruling on this piece, stating not applicable)

Contents
Summary
Content
Page 45
Overall Summary
Content
of ICAI
April 4, 2018

Contents
Summary
Content
Page 46
Role of Chartered Accountants
Content
Certification (pre and post registration) - No format prescribed yet, may lead to ambiguities + could be a public
document at a later point in time
Need to adequately document the scope of work, technical positions taken
Scope limitations/ Professional indemnity (Penalty for false information itself is 5 percent of estimated project
cost as per Section 60 of RE Act)
Disclaimers (Interim/ Final) - For websites, marketing materials, emails (though disclaimers may not provide
legal protection in case of violation/ breach of law)
Sanitisation of marketing materials/ collaterals/ documentation
Pricing re-calculation based on RERA norms/ Cash flow Analysis
Agreement for sale
Commercial terms agreed with vendors/ land owner/ lenders/ banks
Standard Operating Procedures for core teams (marketing and sales, accounting and compliance, construction
and product strategy, customer relationship, finance, operations and design)
RERA Audits – As RERA is applicable from May 1 of 2017, RERA audit should apply for FY 2017-18 and some
guidance on audit procedures should be available before September 31, 2018 (ie the audit completion date)
Representation services – Builder vis-à-vis consumer side – Need to understand facts/ scope completely
Ongoing compliances/ Advisory support on transactions
of ICAI
April 4, 2018

Contents
Summary
Content
Page 47
Knowledge Bank
Content For technical guidance, please refer:
Website of the interim regulatory authorities in Karnataka (https://rera.karnataka.gov.in)
Notifications/ Circulars/ FAQs issued by the Ministry of Housing and Urban Affairs, Government of India
(http://mohua.gov.in)
FAQs issued by Maharashtra RERA Authorities - may have persuasive value for other states
Notifications/ Clarifications/ Press releases issued by Maharashtra RERA Authorities – Seems to be fairly
evolved and hence can provide reasonable guidance, even covers standard operating procedures post
registration etc
RERA websites of other states (such as Tamil Nadu, Karnataka, Madhya Pradesh, Rajasthan, Andhra
Pradesh, Telangana) etc – May have persuasive value only
Press Articles and releases
Case documents on the websites of the respective judiciaries (writs filed by builders or consumer community
etc and their respective outcome)
Technical papers/ Representation/ White papers issued by Associations of Builders/ Consumers
Schemes of arrangement available on NCLT portal (related to companies dealing in Real Estate)Bangalore Branch of SIRC
of ICAI
April 4, 2018

Contents
Summary
Content
Page 48
Overall Analysis
Content Law in its tone and tenor – hard on developers – would leave only serious developers in the market
RE industry already facing liquidity crunch and mounting inventories. It’s likely that the regulatory burden,
cost of capital and compliance would increase
May help Tier-II and Tier-III developers to attract PE funding with the increase in transparency. Currently
~80 - 85 percent PE funds invest in Tier-I developers owing to good corporate governance structure
Tier-II and Tier-III cities may now appear on PE investment radar
Restricted use of 70 percent – Well intentioned but may have little economic merit
Dispute settlement mechanism - Given the experience of consumer courts, it’s only a matter of time before
the new mechanism gets as clogged as the existing
Could revitalize consumer confidence in the over-supplied/ over-priced RE market
Makes an agreement for sale compulsorily registrable. The Indian Registration Act, 1908 does not provide
for compulsory registration of an agreement for sale
Seems to penalize the developer but at the same time does not provide any real relief to the end user
Silo style of operation should stub out with the requirement to make disclosures of project details
Pre-launch/ Soft launch sale of projects will now be a history!
of ICAI
April 4, 2018

Contents
Summary
Content
Page 49
OPEN HOUSE & DISCUSSIONS
THANK YOU
Sandeep Jhunjhunwala, FCA, LLB, ACS, B.Com (H)
E: Mailboxofsandeepj@gmail.com
M: +91 97401 55469
D: +91 80 6565 5469
The views in this presentation are personal views of the Presenter. The information contained is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although, the overall endeavor is to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or
that it will continue to be accurate in the future. This presentation is meant for general guidance only and no responsibility for loss arising to any person/ entity acting or refraining from
acting as a result of any material contained in this presentation will be accepted. It is recommended that professional advice be sought based on the specific facts and circumstances. This
presentation does not substitute the need to refer to the original pronouncements.

Contents
Summary
Content
Page 50
Annexures
Annexures
of ICAI
April 4, 2018

Contents
Summary
Content
Page 51
National Consumer Commission vs RERA – Which
one to choose?
Annexures For making a complaint to a consumer court, the home buyer will have to
determine the pecuniary jurisdiction and file the case depending upon the
subject matter and compensation claimed. Under RERA, a home buyer can file
the complaint with the Authority of the State where the property is situated
After the verdict from the highest consumer court, appeal lies before the
Supreme Court of India. Under RERA, complaint could be filed before the
Adjudicating Authority/ RERA, followed by appeal before the Appellate Tribunal
and the High Court of the state concerned
A consumer can approach consumer court in cases where the unit/ flat/ apartment
has been delivered by the Builder. A consumer can retort to judicial appellate path
under RERA only if it is a RERA registered project (projects with completion or
occupancy certificates - partial or complete, cannot be challenged under RERA
In case a person has Consumer Court for relief, there is no bar to approaching
appropriate authority or initiating criminal proceedings against the Builder.
The RERA Rules for most states, specifically take an undertaking from the
complainant at the time of making a complaint to the Authority that the home
buyer has not made any other complaint
of ICAI
April 4, 2018

Contents
Summary
Content
Page 52
Decoding Carpet Area
Annexures
of ICAI
April 4, 2018
Carpet Area: Net usable floor area in a Building/
Apartment. Simply put, this is the area on which carpet
could be laid out. Includes all rooms like living room,
bathrooms, bedroom, kitchen, utility etc within an
apartment.
Built up area (or Plinth Area): Capet Area + Areas covered
by inside and outside walls (thickness), balconies and
verandahs attached to the unit for exclusive use
Super Built up Area (or saleable area in pre RERA regime):
Built up Area + Proportionate share of common areas such
as reception, corridors, lobbies, staircases, lift/ elevator
shaft, generator/ electrical rooms, pump rooms, gas banks,
garbage rooms, play area, pool and clubhouse, garden,
gymnasium etc (Parking is not included and charged
separately)
Post RERA, one can see the
carpet area, external
walls+Balconies and share of
common area in the pricing
document. Pricing has to be
made only on the basis of
carpet area, the definition of
which is slightly tweaked under
RERA. However, property tax
continues to be paid
considering the super built-up
area of the apartment. Even
stamp duty and registration
charges are calculated on
super built-up area. These
aspects needs to be looked at
by the local civic authorities.

RERA - Refresher Session - Sandeep Jhunjhunwala FCA

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RERA - Refresher Session - Sandeep Jhunjhunwala FCA