2. MEANING :-
• Real estate, in context of real estate law, refers to properties
compromising land, buildings, or natural resources that are subject to
legal ownership or control. It emcompases a broad range of physical
assests, including residential homes, commercial buildings, offices, retail
spaces, industrial facilities, vacant land, and even natural rources like
minerals, water, and crops.
• Real estate law governs the legal aspects related to the acquisition,
ownership, use, and transfer of real property. It encompasses a variety of
legal principles and regulations that dictate how real estate transactions
are conducted and how property rights are established and protected.
3. • Real estate law covers numerous areas, including property rights,
contracts, zoning and land use regulations, landlord-tenant relationships,
finacing and mortgages, property taxes, environmental regulations, and
real estate development. It sets forth the legal framework for buying,
selling, leasing, renting, and managing real estate.
• Real estate law is crucial for protecting the righs and interets of property
owners, promoting fair and transparent transactions, and ensuring the
orderly development and use of real property within legal boundaries. It
is influenced by federal, state, and local laws, which can vary
insignificantly depending on the jurisdiction.
4. • Understanding and complying with real estate law is essentail for
individuals, businesses, and organizations involved in real estate
transactions to mitigate risks, safeguard their investments, and ensure
lawful and ethical practices in the dynamic and complex world of real
estate.
• Real estate laws in India are governed by various acts, regulations, and
policies at the national, state, and local levels. Here are some key
legislations that play a significant role in the rela estate sector:-
5. • Real Estate (Regulation and Development) Act, 2016 (RERA) -
RERA is a significant legislation enacted by the central government to
regulate the real estate sector and protect the interest of the home buyers.
It aims to bring transperancy, accountability, and fair practices into the
industry. RERA mandates the registration of real estate projects with the
respective state regulatory authorities, ensuring that developers provide
accurate and timely information about their projects to buyers. It
establishes rules for the timely completion of projects, disclosure of
projects, use of funds, and resolution of greviances. RERA also requires
real estate agents to be registered and comply with ecrtain standards of
conduct. The legislation provides a mechanism for buyers to seek
redressal of greviances through the regulatory authorities or the Real
Estate Appellate Tribunals.
6. • Transfer or Property Act, 1882: The Transfer of Property Act governs
the transfer of property in India. It lays down the legal framework for
various modes of property transfer, including sale, mortgage, lease, gift,
and exchange. The act defines the rights and responsibilities of parties
involved in property transactions and sets out rules for the proper
execution and registration of documents related to property taansfers. It
also governs the rights and liabilities of landlords and tenants in lease
agreements.
7. • Indian Contract Act, 1872: The Indian Contract Act regulates contracts
in India, including those in the real estate sector. It defines the formation,
enforceability, and breach of contracts. The act provides a legal
framework for real estate contracts, such as purchase agreemets, lease
agreements, and construction contracts. It outlines the rights and
obligations of parties, establishes rules for the validity of contracts, and
provides remedies in case of contract disputes.
8. • Registration Act, 1908: The Registration Act mandates the registration
of certain real estate documents to provide them with legal validity and
public notice. Documents such as sale deeds, lease deeds, and mortgages
need to be registered at the local sub-registrar's office. Registration
ensures the authenticity of the documents, prevents frauds, and facilitates
the transfer of property rights. It also allows the public to access
information about property transactions.
9. • Land Acquisition Act, 1894: The Land Acquisition Act governs the
acquisition of land by the government for the public purpose. It provides
the legal framework for the process of land acquisition, compensation
mechanisms, and dispute resolution. The act outlines the procedures for
land acquisition, including public notification, assessment of
compensation, and rehabilitation and resettlement measures for affected
parties.
10. • Town and Country Planning Acts: Various states in Inida have
town and country planning acts that regulate land use, zoning,
development activities. These acts define the permissible land
building codes and development controls, and establish
obtaining devlopment approvals. They ensure that urban and
are planned and developed in a planned and sustainable manner.
examples are - Maharashtra Regional and Town Planning Act, 1966;
Delhi Development Act, 1957; Karnataka Town and Country
Planning Act, 1961; Tamil Nadu Town and Country Planning Act,
1971; West Bengal Town and Country (Planning and Development)
Act, 1979.
11. A. TRANSFER BY SALE
• Transfer by sale in India refers to the legal process of transferring
ownership of a property from one party to another in exchange for
monetary consideration. It is a common mode of property transfer and is
governed by various laws and regulations, including the Transfer of
Property Act, 1882.
12. WHEN A PROPERTY IS TRANSFERRED BY SALE,
IT INVOLVES THE FOLLOWING KEY
ELEMENTs:
• Parties: The transferor, also known as the seller or vendor, is the current
owner of the property who intends to sell it. The transferee, also known
as the buyer or vendee, is the individual or entity acquiring the property.
• Agreement: The sale of a property is typically initiated through a sale
agreement or sale deed. This agreement outlines the terms and conditions
of the sale, including the purchase price, payment schedule, property
description, and any other relevant clauses.
• Consideration: Consideration refers to the monetary value or price
agreed upon by the parties involved in the sale. It is the amount that the
buyer agrees to pay to the seller in exchange for transferring ownership
of the property.
13. • Transfer of Ownership: Once the sale agreement is executed and the
consideration is paid, the ownership of the property is transferred from
the seller to the buyer. This transfer of ownership is legally recognized
through the execution of a sale deed or conveyance deed. The sale deed
is a legal document that records the transfer of ownership and acts as
proof of the transaction.
• Registration: To make the sale deed legally valid and enforceable, it
must be registered with the appropriate authority, usually the local sub-
registrar's office. Registration involves presenting the sale deed, paying
the applicable registration fees, and ensuring the presence of witnesses.
The registration process provides legal validity, authenticity, and public
notice to the sale transaction.
14. SURAJ LAMP & INDUSTRIES PVT. LTD. V. STATE
OF HARYANA, 2012
• In this case, the Supreme Court of India addressed the issue of the
validity of sales of immovable property through power of attorney
transactions. The court ruled that a sale of immovable property can only
be legally valid if it is executed through a registered sale deed and not
through an agreement or power of attorney.
• The case arose from a practice prevalent in some parts of India where
property transactions were conducted through power of attorney holders
without executing a registered sale deed. The power of attorney holders
would sell the property on behalf of the owner, and such transactions
were often considered as valid transfers.
15. • The Supreme Court, in its judgment, held that a mere power of attorney
is not sufficient to transfer the ownership of immovable property. It
emphasized that for a valid sale of immovable property, the transaction
must be executed through a registered sale deed as per the provisions of
the Transfer of Property Act and the Registration Act.
• The court's decision in this case brought clarity and emphasized the
importance of executing registered sale deeds for valid property
transactions in India. It curbed the practice of property sales through
power of attorney and reaffirmed the significance of adhering to legal
formalities to ensure the authenticity and legality of property transfers.
• Since this case, property buyers and sellers in India have been reminded
of the necessity of registering sale deeds to protect their rights and avoid
legal disputes. It has become a landmark ruling in the context of property
transactions and has had a considerable impact on real estate practices in
the country.
16. B. TRANSFER BY LEASE
• Transfer by lease, also known as lease assignment or lease transfer, refers
to the process of transferring the rights and obligations of a lease
agreement from the current tenant, known as the assignor or transferor,
to a new tenant, known as the assignee or transferee. It allows the
assignee to step into the shoes of the original tenant and assume the
rights and responsibilities outlined in the lease agreement for the
remaining term of the lease.
17. WHEN A TRANSFER BY LEASE OCCURS, THE
FOLLOWING KEY ELEMENTS ARE INVOLVED:
• Assignor (Transferor): The assignor is the current tenant who wishes to
transfer their leasehold interest to another party. The assignor typically
seeks to transfer the lease due to reasons such as the need to vacate the
premises, business changes, or other personal circumstances.
• Assignee (Transferee): The assignee is the new tenant who assumes the
rights and obligations of the lease. The assignee may be an individual, a
company, or an organization interested in occupying the leased premises
and fulfilling the remaining lease term.
18. • Lease Agreement: The lease agreement is the legal document that
establishes the terms and conditions of the lease between the original
tenant and the landlord. It outlines the rights, obligations, and
responsibilities of the tenant and landlord during the lease term,
including rent payment, maintenance responsibilities, use restrictions,
and other provisions.
• Assignment Agreement: To effect the transfer by lease, an assignment
agreement is executed between the assignor and the assignee. This
agreement details the terms of the transfer, including the effective date,
transfer of rights and obligations, any conditions or restrictions, and any
associated costs or fees.
19. • Landlord Consent: In most cases, the landlord's consent is required for a
valid transfer by lease. The landlord must agree to accept the new tenant
as the assignee and release the original tenant from their obligations
under the lease. The landlord may evaluate the financial stability,
creditworthiness, and suitability of the proposed assignee before granting
consent.
• Once the assignment agreement is signed, and the landlord provides
consent, the assignee assumes the rights and responsibilities of the
original tenant under the lease. The assignee becomes responsible for
paying rent, complying with lease terms, and performing any other
obligations outlined in the lease agreement for the remaining lease term.
20. • The transfer of lease rights, also known as lease assignment or transfer
by lease, is primarily governed by contract law principles rather than
specific legislation in India. The key legal framework for lease
transactions is provided by the Indian Contract Act, 1872.
• The Indian Contract Act governs the formation, rights, and obligations of
parties involved in contracts, including lease agreements. It sets out
general principles for the transfer of rights and obligations under a
contract, which apply to lease assignments as well.
• Additionally, lease agreements may contain specific provisions regarding
the assignment or transfer of the lease. These provisions, along with the
general principles of contract law, regulate the transfer of lease rights and
the conditions under which it can be done.
21. ASSOCIATED HOTELS OF INDIA LTD. V. R.N.
KAPOOR (1959)
• The Supreme Court of India addressed the legal concept of determining
whether a lease agreement is a lease or a license. The court established
important principles that distinguish between a lease and a license, which
have significant implications on the rights and liabilities of the parties
involved.
• The case involved a hotel owner (Associated Hotels of India Ltd.) who
granted possession of some hotel rooms to a person (R. N. Kapoor)
under an agreement. The hotel owner sought to terminate the agreement
and recover possession of the rooms. Kapoor claimed that he had a lease
agreement and could not be evicted without following the proper
eviction process.
22. THE COURT LAID DOWN THE FOLLOWING
ESSENTIAL CHARACTERISTICS OF A LEASE:
• There must be a transfer of an interest in the property, creating a
relationship of landlord and tenant.
• The transferee (lessee) must have exclusive possession of the property
for a defined period.
• The lessee must have the right to enjoy the property as if he or she were
the owner, to the exclusion of all others, including the owner (lessor).
• On the other hand, a license is a permission or a personal privilege to use
the property of another, which does not create any interest or estate in the
property.
23. • The Supreme Court analyzed the nature of the agreement and made
important observations regarding the distinction between a lease and a
license. The court held that whether an agreement creates a lease or a
license depends on the substance of the agreement, and not merely on its
nomenclature.
• The judgment in the Associated Hotels case has since become a leading
authority in the determination of whether an arrangement is a lease or a
license. It clarified the legal distinction between the two concepts,
providing guidance to courts and parties involved in lease transactions.
The distinction is essential because the rights, responsibilities, and
remedies available to the parties differ significantly between a lease and
a license agreement.
24. C. TRANSFER BY EXCHANGE
• Transfer by exchange under Indian law refers to a specific mode of
property transfer where two parties mutually agree to transfer their
properties to each other. In this arrangement, each party gives up
ownership of their property and acquires ownership of the other party's
property in exchange.
25. • The concept of transfer by exchange is governed by the Transfer of
Property Act, 1882, which is the central legislation regulating property
transfers in India. The act defines exchange as follows:
• Section 118 of the Transfer of Property Act defines an "exchange" as
follows:
• "When two persons mutually transfer the ownership of one thing for the
ownership of another, neither thing or both things being money only, the
transaction is called an "exchange".
26. KEY ELEMENTS OF TRANSFER BY EXCHNAGE :
• Mutual Agreement: For a transfer by exchange to be valid, it requires
the mutual consent of both parties involved. Both parties must agree to
transfer their respective properties to each other.
• Ownership Transfer: In an exchange, there is a mutual transfer of
ownership. Each party gives up ownership of their property and acquires
ownership of the property offered by the other party.
• No Money Involved: In a true exchange, the consideration for the
transfer is the property itself. Money is not involved in the transaction, or
it is involved only as part of the equalization of value if there is a
difference in the value of the properties exchanged.
27. • Equal Value: The properties exchanged are expected to have
approximately equal value. The law does not require an exact match, but
the properties should be reasonably equivalent in worth.
• Registration: Like any other property transfer, the exchange of
properties requires registration of the deed with the appropriate authority
to make the transaction legally valid and enforceable.
• Transfer by exchange provides an alternative mode of property transfer,
allowing parties to meet their specific property needs or preferences
without necessarily involving cash transactions. It can be a useful
mechanism for parties with unique property requirements and can help
facilitate property transfers when traditional sale and purchase
transactions may not be suitable or feasible.
28. ENCUMBRANCES ON ESTATE INCLUDING
MORTGAGE
• Encumbrances on an estate refer to any legal claims, restrictions, or
liabilities that affect the property's title and ownership. These
encumbrances can impact the property's marketability and may limit the
owner's rights over the property.
29. SOME COMMON ENCUMBRANCES ON AN
ESTATE, INCLUDING MORTGAGE, ARE :
• Mortgage: A mortgage is a significant encumbrance on an estate
governed by the Transfer of Property Act, 1882, in India. A mortgage is
created when the owner of the property (mortgagor) transfers an interest
in the property to a lender (mortgagee) as security for a loan. The
mortgage agreement details the terms of the loan, the repayment
schedule, and the conditions for redemption (repayment of the loan).
Until the loan is repaid, the lender holds a lien on the property, and in
case of default, the lender has the right to foreclose the property to
recover the outstanding debt.
30. • Easements: Easements are rights granted over a property for specific
purposes. In India, easements are governed by the Indian Easements Act,
1882. Easements can be affirmative, allowing others to use the property
(e.g., a right of way), or negative, preventing the property owner from
doing something that may obstruct others' rights (e.g., blocking a view).
Easements are created through agreements or by long-standing usage,
and they can impact the property's value and utility.
• Liens: Liens are legal claims on a property to secure payment of a debt.
In India, liens can arise due to various reasons, including unpaid taxes,
unpaid contractors, or judgments in legal disputes. Liens can be statutory
(e.g., tax liens) or contractual (e.g., mechanic's liens). Until the debt is
satisfied, the property may not be transferred or sold without addressing
the lien.
31. • Charges: In India, charges are a form of encumbrance on a property
created to secure payment or performance of an obligation, excluding a
debt. The Indian Companies Act, 2013, governs charges created by
companies over their assets, including immovable property, to secure
loans or other obligations. Charges need to be registered with the
Registrar of Companies to be valid and enforceable.
• Leases: Leases are governed by various state-specific laws and the
Transfer of Property Act, 1882. A lease creates a right for a tenant to
possess and enjoy the property for a specified period in exchange for
rent. During the lease term, the owner (lessor) cannot transfer the
property without considering the rights of the tenant (lessee) under the
lease agreement.
32. • Covenants, Conditions, and Restrictions (CC&Rs): CC&Rs are
restrictions imposed by developers or homeowner associations in
planned communities or subdivisions. These restrictions may govern the
use and appearance of the property, such as prohibiting certain types of
construction or limiting the use of the property for specific purposes.
• Understanding and addressing these encumbrances is crucial when
buying, selling, or transferring property in India. A thorough title search
and consultation with legal professionals or title companies can help
identify and resolve any encumbrances to ensure a clean and marketable
title.
33. KINDS OF MORTGAGE
In India, the Transfer of Property Act, 1882, classifies mortgages into
different types based on the manner in which the security interest is
created. The following are the kinds of mortgages recognized under Indian
law:
34. A. SIMPLE MORTGAGE
In a simple mortgage, the borrower (mortgagor) creates a charge on the
property in favor of the lender (mortgagee) to secure a loan or debt. The
mortgagor does not deliver possession of the property to the mortgagee.
Instead, the mortgagee relies solely on the property as security. If the
borrower defaults on the loan, the mortgagee can sell the property to
recover the debt.
Illustration: A homeowner, Mr. Sharma, needs a loan to fund his child's
education. He approaches a bank and takes a loan of Rs. 10 lakhs. To
secure the loan, Mr. Sharma creates a simple mortgage on his residential
property. In this case, the bank becomes the mortgagee, and Mr. Sharma
remains the mortgagor. The bank has a charge on the property, but Mr.
Sharma continues to possess and use the property. If Mr. Sharma defaults
on the loan, the bank can sell the property to recover the outstanding debt.
35. B. MORTGAGE BY CONDITIONAL SALE
• In this type of mortgage, the mortgagor ostensibly sells the property to the mortgagee
on the condition that the sale will be void if the mortgagor repays the debt within a
specified time. Until the debt is repaid, the mortgagee holds the property, but if the
debt is not repaid within the stipulated time, the sale becomes absolute, and the
mortgagee becomes the owner of the property.
• Illustration: Mr. Singh wants to buy a property worth Rs. 50 lakhs but does not have
the full amount. He approaches a friend, Mr. Kapoor, who agrees to lend him the
money. Mr. Kapoor suggests a mortgage by conditional sale. Under this arrangement,
Mr. Singh sells the property to Mr. Kapoor for Rs. 50 lakhs on the condition that if he
repays the loan within two years, the sale will be void, and the property will be
transferred back to Mr. Singh. If Mr. Singh fails to repay the loan within two years,
the sale becomes absolute, and Mr. Kapoor becomes the owner of the property.
36. C. USUFRUCTUARY MORTGAGE
• In a usufructuary mortgage, the mortgagor delivers possession of the
property to the mortgagee and allows the mortgagee to receive and retain
the property's income or profits during the mortgage period. The
mortgagee uses the income to offset the debt. Once the debt is fully
repaid, the mortgagor regains possession of the property.
• Illustration: Mr. Verma runs a small business and needs funds for
expansion. He approaches a local lender, Mr. Gupta, who agrees to lend
him Rs. 5 lakhs. In return, Mr. Verma creates a usufructuary mortgage on
his commercial property. Under this arrangement, Mr. Verma hands over
the possession of the property to Mr. Gupta. Mr. Gupta collects the rent
from the property, which is used to repay the loan. Once the full loan
amount is repaid, Mr. Verma regains possession of the property.
37. D. ENGLISH MORTGAGE
• An English mortgage is a type of mortgage where the mortgagor
transfers the property to the mortgagee on the condition that the
mortgagee will transfer it back to the mortgagor upon repayment of the
debt. In this type of mortgage, the mortgagee is usually obligated to
manage the property and use the income from the property to pay off the
debt.
• Illustration: Mrs. Khan wishes to renovate her ancestral property but
needs financial assistance. She approaches a bank for a loan. The bank
agrees to lend her the required amount and suggests an English
mortgage. Under this arrangement, Mrs. Khan transfers the property to
the bank, and the bank agrees to transfer it back to her upon repayment
of the loan. The bank manages the property during the mortgage period
and uses the rental income to repay the loan.
38. E. MORTGAGE BY DEPOSIT OF TITLE DEEDS
(EQUITABLE MORTGAGE)
• This is a type of mortgage where the borrower delivers the title deeds of
the property to the lender as security for the loan. The mortgage is
created without any formal mortgage deed. The deposit of title deeds
serves as evidence of the mortgage. An equitable mortgage does not
involve the transfer of possession of the property to the lender.
• Illustration: Mr. Das needs funds to start a business and approaches a
private lender. The lender agrees to provide the loan and suggests an
equitable mortgage. Mr. Das hands over the title deeds of his property to
the lender as security. A formal mortgage deed is not executed. The
deposit of title deeds serves as evidence of the mortgage. If Mr. Das
defaults on the loan, the lender can enforce the mortgage to recover the
debt.
39. F. ANOMALOUS MORTGAGE
• Anomalous mortgage is any type of mortgage that does not fall into any
of the above categories. It may be a combination of two or more types of
mortgages or a mortgage with unique conditions agreed upon by the
parties involved.
• Illustration: Ms. Patel plans to buy a piece of land to build her dream
home. She secures a loan from a financial institution. The terms of the
mortgage are unique and differ from the standard types. The mortgage
agreement involves a combination of aspects from simple mortgage and
mortgage by deposit of title deeds. This would be an example of an
anomalous mortgage.
40. • Each type of mortgage has its specific legal implications and procedures
for enforcement. It is essential for both borrowers and lenders to be
aware of the characteristics and consequences of the chosen mortgage
type when entering into a mortgage agreement. Consulting with legal
professionals is advisable to understand the specific legal requirements
and implications of each type of mortgage under Indian law.
41. CODIFICATION OF REAL ESTATE LAW (REAL
ESTATE REGULATORY DEVELOPMENT BILL,
2013)
• The Real Estate (Regulation and Development) Bill, 2013, also known as
RERA (Real Estate Regulatory Authority), aimed to regulate the real
estate sector in India and provide protection to homebuyers. The bill was
introduced to address several issues faced by homebuyers, such as delays
in project completion, lack of transparency, and fraudulent practices by
developers.
42. MAIN OBJECTIVES OF THE REAL ESTATE
(REGULATION AND DEVELOPMENT) BILL, 2013
• Establishment of Regulatory Authority: The bill proposed the
establishment of a Real Estate Regulatory Authority in each state and
union territory to regulate the real estate sector. The authority would
oversee the registration of real estate projects and real estate agents and
ensure their compliance with the provisions of the law.
• Mandatory Registration of Projects: The bill made it mandatory for all
real estate projects, with a certain number of units or area, to register
with the regulatory authority before advertising, marketing, or selling
any property. This was to ensure that only approved and verified projects
were brought to the market.
43. • Deposit of Funds in Escrow Account: The bill required developers to
deposit a certain percentage of the project's funds in a separate escrow
account. This provision was introduced to prevent diversion of funds and
ensure that the funds were used for the specific project's development.
• Timely Completion of Projects: The bill aimed to curb project delays
by imposing strict guidelines on developers to adhere to the timeline
promised to homebuyers at the time of booking.
• Transparent Sale and Advertisements: The bill sought to bring
transparency to the real estate sector by mandating that developers
provide accurate and complete information about the project in their
advertisements and sales brochures.
44. • Promoting Fair Practices: The bill aimed to promote fair practices in
the real estate industry and protect the interests of consumers by
prohibiting unfair trade practices and false advertisements.
• The Real Estate (Regulation and Development) Bill, 2013, went through
several revisions and discussions in both houses of parliament. It was
passed by the Rajya Sabha (Upper House) on March 10, 2016, and by
the Lok Sabha (Lower House) on March 15, 2016. Subsequently, it
received the President's assent on March 25, 2016, and became the Real
Estate (Regulation and Development) Act, 2016 (RERA). RERA has
been instrumental in bringing more transparency and accountability to
the real estate sector in India and has provided significant protection to
homebuyers. It has established regulatory authorities in each state and
union territory to govern the real estate market and has led to increased
consumer confidence in the sector.
45. MAIN OBJECTIVES OF THE REAL ESTATE
(REGULATION AND DEVELOPMENT) ACT, 2016
• Consumer Protection: One of the primary aims of RERA is to protect
the interests of homebuyers, who often face various challenges in the real
estate market. RERA ensures that developers provide accurate and
transparent information to homebuyers, preventing deceptive practices
and false advertisements. It also establishes a mechanism for addressing
grievances and disputes, safeguarding buyers from unfair treatment.
46. • Transparency and Accountability: RERA seeks to bring transparency
and accountability to the real estate sector. By mandating developers to
register their projects with the regulatory authority, providing detailed
project information, and adhering to project timelines, RERA promotes
openness and fairness in real estate dealings. The Act holds developers
accountable for fulfilling their commitments to homebuyers.
• Establishment of Regulatory Authority: RERA sets up Real Estate
Regulatory Authorities in each state and union territory to oversee the
real estate sector's functioning. These authorities act as watchdogs,
ensuring compliance with the Act's provisions and promoting a regulated
environment. They have the power to impose penalties on developers for
any non-compliance and protect the interests of consumers
47. • Timely Completion of Projects: One significant concern in the real
estate industry is project delays. RERA addresses this issue by requiring
developers to provide a timeline for project completion at the time of
booking. The Act ensures that developers adhere to these timelines and
face penalties for any delays. This measure protects homebuyers from
indefinite waits and uncertainty.
• Utilization of Funds: RERA introduces the concept of an escrow
account to ensure the efficient use of funds collected from homebuyers.
Developers must deposit a certain percentage of project funds in this
account, which can only be used for the development of that specific
project. This prevents developers from diverting funds meant for one
project to other ventures and safeguards buyers' investments
48. • Promotion of Fair Practices: RERA aims to promote fair practices in
the real estate industry. It prohibits developers from engaging in
misleading or unfair trade practices and ensures that they fulfill their
commitments as per the agreement with homebuyers. This fosters an
environment of trust between buyers and developers.
• Boosting Investor Confidence: With consumer protection, transparency,
and accountability, RERA aims to boost investor confidence in the real
estate market. The Act assures investors that their investments are
protected, and they are less likely to face fraudulent schemes or project
delays
49. • Uniformity and Standardization: RERA brings about uniformity in
real estate practices across states and union territories by establishing a
centralized regulatory framework. This standardization ensures that
similar rules and protections apply to buyers across the country, reducing
confusion and uncertainty.
• By achieving these objectives, the Real Estate (Regulation and
Development) Act, 2016, seeks to bring about a more efficient and
consumer-friendly real estate sector in India, benefiting both buyers and
developers and promoting sustainable growth in the industry.
50. IMPORTANT PROVISIONS FROM THE ACT
{AIMED AT REGULATING THE REAL ESTATE SECTOR AND
PROTECTING THE INTERESTS OF HOMEBUYERS)
• Mandatory Registration of Projects: The Act makes it mandatory
for all real estate projects with a certain number of units or area to
be registered with the state's Real Estate Regulatory Authority
(RERA). Projects cannot be advertised, marketed, or sold without
obtaining RERA registration. This provision ensures that only
approved and verified projects are offered to homebuyers.
51. • Deposit of Funds in Escrow Account: The Act requires developers to deposit a
certain percentage (typically 70%) of the project funds, including land and
construction costs, in a separate escrow account. This measure aims to prevent
developers from diverting funds meant for one project to other purposes and ensures
that the funds are used for the specific project's development.
• Timely Completion of Projects: RERA mandates developers to adhere to the
timelines provided to homebuyers at the time of booking. Failure to complete the
project within the stipulated time may lead to penalties for the developer
• Carpet Area Disclosure: Developers are required to disclose the carpet area of
apartments, rather than ambiguous super-built-up areas, in all advertisements and
agreements. This ensures that buyers are aware of the actual usable area they will get.
• Sale Only on Basis of Carpet Area: The Act prohibits developers from selling any
part of the project based on super-built-up areas, as it might include common spaces
like corridors and lobbies. Developers can sell units only on the basis of the carpet
area.
52. • Structural Defect Liability: Developers are liable for any structural
defects in the building for a period of five years after the possession is
handed over to the buyers. If any such defects are found during this
period, the developer must rectify them at no additional cost to the
buyers.
• Promotion of Fair Practices: RERA prohibits unfair trade practices and
misleading advertisements by developers. Any false representation or
failure to deliver on commitments may result in penalties.
• Real Estate Agents Registration: Real estate agents are required to
register with RERA before facilitating any real estate transactions. This
helps bring transparency and accountability to the real estate brokerage
industry.
53. • Penalties for Non-Compliance: The Act imposes penalties on
developers and real estate agents for any non-compliance with its
provisions. These penalties can be severe and may include monetary
fines, imprisonment, or both.
• Formation of Buyers' Association: The Act provides for the formation
of an association of allottees (homebuyers) for a project. The association
represents the collective interests of homebuyers and ensures their
participation in decision-making and grievance redressal.
• These provisions, among others, are aimed at promoting transparency,
accountability, and consumer protection in the real estate sector. The Act
significantly benefits homebuyers by providing them with more
comprehensive information, timely project completion, and safeguards
against fraudulent practices. At the same time, it aims to improve the
credibility and efficiency of the real estate market in India.
