Real Estate Regulation Act, 2016 which is in force since 1st Mat 2016 will finally get all its teeth on 1st May, 2017 with the setting up of the statewise Real Estate Regulatory Authorities

1. “New
opportunities
-
RERA – Sword
or Reward”

4. www.smaca.in
RERA -
TIMELINES
Central Law in force -
1/5/2016
State Rules (based on Central
Model Rules) within 6 months
of commencement of act
Section 84 - 1/11/2016
Establishment of RERA within
one year from enactment i.e.
1/5/2017
Online Submission within one
year from estd of RERA i.e.
1/5/2018

5. www.smaca.in
FinancialDiscipline
Transperancy
Acountability
Customer
Centricity
Compliance
Improve the perception of the sector among various stakeholders
Uniform regulatory environment
COMMERCIAL and
RESIDENTIAL projects including
PLOTTED DEVELOPMENT (Lease
arrangements not covered)
Land under development
MORE THAN 500 SQ MTS /
NO. of UNITS exceeds 8
Projects which do not have
COMPLITION CERTIFICATE
before commencement of
ACT
RENOVATION or REPAIR or REDEVELOPMENT projects not involving Marketing, Advertising,
Selling & New Allotment NEED NOT BE REGISTERERD
Real Estate Act
Source – Ajmera and Ajmera

6. www.smaca.in
Fiscal discipline will play a critical role in project development and requires
utmost importance
FinancialDiscipline What it entails
70% of the
funds collected
from allottees
needs to be
parked in the
project account
Withdrawals to
cover
construction
and land cost
In proportion
to the %
completion
method
Withdrawals
to be
certified by
Engineer,
Artichect ,
and CA
Provision for
RERA to freeze
project bank
account upon
non-
compliance
Projects
Account to be
Audited / FY .
Copy to be
submitted to
RERA
Provision for
stronger
financial
penalties for
RERA non-
compliance
Interest on
delay will be
same for
customer
and
promoter
Promoter to
compensate
buyer for
incorrect
statement
with full
rerun of
property
cost with
interest
Source – Ajmera and Ajmera

7. www.smaca.in
Structured communication is required to furnish all project related information to the customers
Transparency What it entails
Number, type
& carpet area
of apartments
Consent from
affected
allottees for
any major
addition or
alteration
Consent of
2/3rd
allottees for
any other
addition or
alteration
No false
statements or
commitments
in
advertisement
No arbitrary
cancellation of
units by
promoter
Project
completion
time frame
Informing
allottees for
any minor
addition or
alteration
No Launch or
advertisement
before regd.
with RERA
Consent of
2/3rd
allottees for
transferring
majority
rights to 3rd
party
Source – Ajmera and Ajmera

8. www.smaca.in
A Proj. Mgmt Office would be required to track and monitor developments as per defined
project plans
Accountability What it entails
Quarterly update
of project
progress
(Sold
+ Unsold
+ Pending
approvals on
RERA website
Every office of the
company , who as
in charge or
responsible will
be liable for the
conduct of the
company and
deemed guilty
Offence by an
officer committed
with the consent
or connivance of
any director ,
manager ,
secretary or other
officer of the
company , will
also be guilty
Source – Ajmera and Ajmera

9. www.smaca.in
Registration of all projects & brokers/agents and a strong dispute management will
be
Accountability
What it entails
Authenticated
copy of all
approvals,
commencement
certificate,
sanctioned plan,
layout plan of
development
work, proposed
facilities, proforma
allotment letter,
agreement for
sale & conveyance
deed to be given
when applying for
project
registration with
RERA
Registrations of
brokers/agents
with RERA
Timely updating
of RERA website
Maximum 1 year
extension in case
of delay due to no
fault of developer
Annual audit of
projects account
by a CA
Dispute resolution
within 6 months
at RERA and FERA
appellate
rebalance
Developers to
share details of
projects launched
in last 5 years
with status and
reason for delay
with RERA
Conveyance deed
for common area
in favor of RWA
Mandatory
registration of new
and existing
projects with RERA
before launch
Separate
registration of
different phases
of a single
projects
Construction
and land title
insurance
Project
completion time
period
Source – Ajmera and Ajmera

10. www.smaca.in

11. www.smaca.in
Rewards of RERA
Industry Developer Buyer
 Governance and
Transparency
Project efficiency and
robust project delivery
 Standardization
and quality
 Enhance confidence
of investor
Attract higher investments
and PE funding
 Regulated
environment
 Common and
best practices
 Increase efficiency
 Consolidation of
sector
 Corporate branding
 Higher investment
 Increase in
organization funding
 Significant
buyers
protection
 Quality products
and timely delivery
Balanced agreements
and treatment
Transparency - Sale
based on carpet area
Affordability will
become distant
Delayed launches and
thereby lesser projects
Safety of money and
transparency on
utilization
Source – Ajmera and Ajmera

12. www.smaca.in
Initial Backlog
Increased Project
Cost
Tight Liquidity
Rise in Cost of
Capital
Consolidation
Increase in
Project Launch
Time
Possible impact on sector
Initially, a lot of work is to be done to get the existing and new
projects registered. Details such as status of each project executed in
last 5 years, promoter details, detailed execution plans etc. needs to be
prepared.
Registrations with RERA and insurance cost for construction and land
title and provision for Interest and
Penalties.
Land and approval costs to be meted out of internal accruals as pre
launch concept may end . It may lead to a shift in equity financing from
debt financing prevailing currently
The cost of capital may go up as developers may now have to fund the
land the approval cost through equity. With frequent delay in obtaining
approvals, debt funding may not be an ideal route for prominence
With entry in the sector made difficult, the sector may witness
consolidation. Strong financial and execution capability is required to
launch a project. The development model/agreement may gain
prominence
a lot of time will involve in
finalizing finer details before launching a project. Details such as complete
drawings, utilities layout, etc. Needs to be finalized before project starts.
Source – Ajmera and Ajmera

13. www.smaca.in

14. www.smaca.in
Rewards for Consultants
 Source of Initial Funding
 Expected Customer Collections
 Cost of Land + Initial Promotion
1) Project Fund planning before registration

15. www.smaca.in
2) Review of Advertising Brochure
 False / non-realistic statement or data will attract
rejection of application,
 Interest + Penalty
 Bad Track Record for the future

16. www.smaca.in
3) Project registration with authority
 Online in some time
 Authority either have to be approved or reject
application within 30days from the date of application

17. www.smaca.in
Trace the Project Funds
How much is the cost incurred ?
How to take effect of cancellation and refund ?
How much fund will be required to complete the project ?
Single or Project wise Multiple Accounts ?
So books of accounts have to be designed in such way that gives
answer to all these issues
4) Project Fund Monitoring

18. www.smaca.in
Deposit of 70% Funds
• 70% of Amounts received from allotees to be
deposited in separate scheduled bank a/c
• Withdrawal – Land Cost and Construction Cost
• In Proportion to % completion of project

19. www.smaca.in
Deposit of 70% Funds
• Working Capital Limits – Impact on Interest cost
• No distinction between builder vs Developer
• Payment Terms of Joint Development Agreement ?
• More than 70% can also be deposited
• Common Infra and Land for multiple projects / phases
• Construction Cost – Rule 5 (2) – Restricted to on-site exp
for physical development of project – very subjective
– 30% for Profits + Office overheads
• What happens to ongoing contracts calculations ?
• Creation of Back to Back sub-contracting group co.

20. www.smaca.in
• Engg, Arch and a CA in practise – Multi Disciplinary Setup
• in proportion to % completion before the withdrawal is made
• Advisable to indicate in certificate
– % Completion of Project Till date (Method adopted to
determine the same)
– Maximum Amount that can be withdrawn (a)
– Cumulative withdrawal till date (b)
– Amount that can be withdrawn (a-b)
• Professionals will have to indicate the extent to which they
have relied on each other
Microsoft Excel
Worksheet
5) Certificate for withdrawal of Funds

21. www.smaca.in
3rd Proviso of Section 4(2)(l): -
• Within 6 months from close of Financial year
• By a CA
• CA have to comment on following points as per Act
 Amount collected for this project have been utilized for
the same project,
 Withdrawal has been in compliance with the proportion
to the percentage of completion of the project
No Audit report format has been prescribed
6) Audit

22. www.smaca.in
 Updating the authority time to time as per the Act,
 Response any routine notice or clarification regarding
project,
 Supervision of books of accounts , etc..
7) Routine compliance work

23. www.smaca.in
Swords under RERA
False information/Contravenes
the provision of sec 4
Extend up to 5% of estimated
cost.
Any other fault over above Extend up to 5% of estimated
cost.
Real estate agent fails to comply
under Sec 9/10
10k Rs per day. If default conti.,
5% of project cost
Failure to comply the orders of
authority by promoter
Everyday penalty , up to 5% of
project cost
Failure to comply the orders of
Appellate Tribunal by promoter
Imprisonment for 3yrs or per
day penalty, may extend up to
10% or both

24. www.smaca.in
Same legal structure in this law like others
o Adjudicating Officer or Authority,
o Appellate Tribunal
As per Section 56, following persons can appear to represent
the client:-
 Chartered Accountant,
 Company Secretary,
 Cost Accountant,
 Legal Practitioner (An Advocate, Vakil, Attorney of any High Court
and includes a pleader in practice)
8) Appear before Authority / Tribunal