1. Real Estate (Regulation & Development) Act, 2016
The stated purpose of Real Estate (Regulation &
Development) Act, 2016 is to establish the Real
Estate Regulatory Authority for regulation and
promotion of the real estate sector and to ensure
sale of plot, apartment or building, as the case
maybe, or sale of real estate project, in an efficient
and transparent manner and to protect the interest
of consumers in the real estate sector and to
establish an adjudicating mechanism for speedy
dispute redress all and also to establish the
Appellate Tribunal to hear appeals from the
decisions, directors or orders of the Real Estate
Regulatory Authority and the adjudicating officer
and for matters connected there with or incidental
thereto. The scope covers residential as well as
commercial projects.
The Act broadly specifies the requirements in
respect of the following :
1. Real Estate Regulatory Authority –
Establishment, Functions, Regulations & Powers
2. Registration of a Real Estate Project with RERA
3. Promoter’s Obligations
4. Regulation of Real Estate Agents’ Activities
5. Rights and Duties of Allottees
6. Real Estate Appellate Tribunal, Offences &
Penalties
The Promoter’s Obligations include :
1. To get the project registered with the regulatory
authority
2. Not to advertise or make offer for sale without
registering the project
3. To make available documents at the time of
booking and issue of allotment letter
4. To obtain the completion certificate or the
occupancy certificate
5. To obtain lease certificate
6. Not to accept deposit or advance over 10% of
cost without executing agreement to sell
7. To keep 70% of the amount received in separate
bank account
8. To adhere to sanctioned plans and project
specifications
9. To refund the amount received in case of failure
to give possession in time
10. To compensate the allottee for loss due to
defective title of the land
11. To enable formation of association or society of
the Allottees or a federation of the same
12. To provide essential services till handing over to
the association of Allottees
13. To execute conveyance in favour of Allottees
and their association
14. Pay all outgoings till transfer of physical
possession
15. Not to create any charge after execution of
agreement for sale
16. To get the project insured
17. To rectify structural or other defects
18. Not to assign his majority rights and liabilities to
a Third Party
The rights of Allottees include :
Information rights (covering inter alia, time
schedule for completion),
Claiming possession,
Claiming refund in case of non-completion,
Obtain documents and plans,
Register conveyance deed,
Take possession,
Participate in the formation of society /
association etc.
The enactment of Real Estate (Regulation &
Development) Act, 2016 is a welcome development
for the construction industry.
A brief summary of the impact of the RERA Act on
the construction industry is presented below :
1. Requirement of registration of the Project with
the Authority : Beneficial, as this will ensure
that the construction work in new Projects
begin with all applicable clearances in place.
The delays and disruptions in construction
phase due to clearances will reduce.
2. Promoter’s obligation to adhere to sanctioned
plan and specifications : Beneficial, as this will
avoid subsequent changes to the original
drawings and specifications, which tend to
delay the construction schedule. The delays and
disruptions in construction phase due to
clearance delays and due to subsequent
changes in scope and specifications will reduce.
2. 3. Prohibition to accept more than 10% of cost
without execution of agreement : Beneficial, as
this will restrict the Project launch to be only
when sales are tied up by Promoters or
otherwise when the Project cash flow is tied up
through financing arrangements. The delays
and disruptions in construction phase due to
staggered inflows of funds will reduce.
4. Promoter’s obligation to earmark 70% of the
sale proceed for the project work : Beneficial,
as this will ensure smooth flow of funds in the
Project for the construction work. The delays
and disruptions in construction phase due to
payment delays will reduce.
5. Promoter’s obligation to complete the Project
in time : Beneficial, as the interests of the
Promoter and the Contractor will be aligned for
expeditious completion. The delays and
disruptions in construction phase due to various
reasons will reduce.
6. Promoter’s obligation to rectify structural or
other defects : Beneficial, as the five year
guarantee requirement will boost the demand
for good quality of construction, with
willingness to pay the appropriate cost.
The prescription for deposit of 70% of the amount
received from buyers in a dedicated account that
will be utilised for funding the construction works
and the requirement for timely completion are
fundamental requirements under the Act that have
won accolades of all stakeholders.
Thus, The Real Estate (Regulation & Development)
Act, 2016, to be administered through the Real
Estate Regulatory Authority (RERA) in each State,
will immensely benefit the construction industry,
increasing the market size for established players
besides enabling timely completion and improved
cashflows.
The thrust on timely completion and durable quality
of construction entail the projects to be undertaken
for construction by contractors with the proven
experience, expertise and resources.
The Act has come into force on 1st
May 2016 and
the Real Estate Regulatory Authorities are being
established by the States this year.
There will be a delay in launch of new projects in
the short term, when the State RERAs are set up
and they get adequately equipped to handle the
processes as mandated under the Act.
The process of securing clearances will be time
consuming and the requirement of such clearances
will delay the launch of new projects.
Also, we may see a consolidation in the market,
with joint development and marketing of real estate
projects so that the obligations are discharged by
the Promoters in a due and proper manner.
All said, the wait will be worth the reward when the
projects get into construction phase.
The improved regulatory environment under RERA,
combined with the positive effects of a growing
economy, and the Government thrust on Housing
for All, will boost the demand for housing
significantly.
The increasingly positive investment climate with
the renewed interest of Private Equity funds,
combined with the expected launch of Real Estate
Investment Trusts will enable fund flow into the
sector.
