REGULATORY AUTHORITIES UNDER RERA BILL,

2015 - AN ANALYSIS

BY-
Parth Bhuta

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 SVKMS

NMIMS SCHOOL OF LAW

A PROJECT SUBMITTED

ON

Regulatory Authorities Under RERA Bill 2015 - An Analysis

IN COMPLIANCE TO PARTIAL FULFILLMENT OF THE MARKING

SCHEME, FOR TRIMESTER V OF 2018-2019, IN THE SUBJECT OF LAND
LAW

SUBMITTED TO FACULTY:

Prof. Dr. Aarti Tolia

FOR EVALUATION

SUBMITTED BY:

Parth Bhuta

B.A L.L.B. (Hons)

ROLL NO 65

RECEIVED BY: ___________________________

ON DATE: __________ TIME: _________

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 TABLE OFCONTENTS

Table of Abbreviations 3

Chapter 1 Introduction 4

Chapter 2 Contemporary Position 6

Chapter 3 Comparative Study 8

Chapter 4 Conclusion 14

Bibliography 15

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 TABLE OF ABBREVIATIONS

Sn. no Key word Expanded Form

1. Pg. Page

2. v. Versus

3. www World wide web

4. i.e. That is

5. Etc. Etcetera

6. USA United states of America

7. UK United Kingdom

8. Ind. India

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 CHAPTER 1

INTRODUCTION

A Bill 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 may be, in an efficient and transparent manner and
to protect the interest of consumers in the real estate sector and establish the Appellate Tribunal to hear appeals
from the decisions, directions or orders of the Authority and for matters connected therewith or incidental
thereto.

The RERA Bill (herein after referred as The Bill seeks to set up a regulatory framework that will govern
contracts between real estate buyers and sellers. So far home buyers were forced to take what they got from
builders one-sided contract terms, delays running into years, cost escalation, arbitrary changes to the plan
and etc. But this bill proposes to put a stop to such practices by setting up of Real Estate Regulatory
Authorities (herein after referred as The Authority), which will maintain records of projects, promoters
and agents, and a database of violators. This information will be available to buyers. There will be strict
guidelines on advertisements too.

The bill also covers real estate agents and commercial developments. T address promoter concerns of
lengthy approval process causing delays, the Parliamentary panel is reported to have recommended single-
window clearances by state governments.

The government delivered by making an authority known as RERA which stands for Real Estate
Regulatory Authority. It was passed in March 2016 by the parliament. This promises to bring a justice to
the buyer through making strict policies that have to be fulfilled by the developers to sell their projects.
The major problem that real estate in India is facing is that of the delayed possession given to the home
seeker by the rich and the cunning builders. Thus, RERA will help people by bringing in a high level of
transparency and discipline that these builders must have to follow. Specifically, RERA will check all the
under-construction projects as maximum swindling is done in this phase.

Apart from these risks, the buyer has to unwillingly become a part of a major tussle between the developers
and the government relating to the approval of the projects. Many a time, the builder takes the money from
a buyer and then his project ceases at half completion due to not completing some paperwork or not getting
prior approvals with the government. Thus, in some way or the other, the government also becomes a part

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of this deceiving process as they start the approval process after the builder markets his project leading to
many problems.1

The laws under RERA are still in the early days of development but one thing is for sure that there will be
a huge relief for the buyers regarding developer-specific risk. The mechanism of RERA will be made such
that it provides a common ground for both the buyers as well as the developers. Transparency is the key
point regarding the rules under RERA as the government wants that every aspect of information that the
general public should know should be made available on an informational portal. The regulatory risk will
also be laid upon the developer as he will have to pay compensation if any mishaps happen while giving
the possession of a unit. All the builders will have to register themselves under RERA which will see a low
risk in the property business.

However, even though RERA will bring a new light for the people affected due to the immoral practices
of builders, it is still not certain whether the price will go up in the coming year since as per sources, full
implementation of RERA all over India will be completed till May 2017.

The Real Estate Regulatory Authority and Appellate Tribunal (herein after referred as Regulatory
Authority and Appellate Tribunal, respectively) will to establish state wise Authorities under the bill to
regulate transactions related to both residential and commercial projects and ensure their timely completion
and handover.2 Appellate Tribunal will now be required to adjudicate cases in 60 days as against the
previous provision of 90 days and Regulatory Authority to dispose of complaints in 60 days while no time
frame was indicated in the earlier Bill.

The Bill also seeks to establish fast track disputes resolution mechanism with the help of the Regulatory
Authority and the Tribunal, with the same these adjudicating authority bars or restricts the Civil Courts
from taking up any real estate matters whereas the Consumer Courts are allowed to hear such matters.
There are the penalties also provided under the act such as: -

If the Promoter does not register his property then the Penalty is up to 10 % of the project.
If the promoter dodges order issued by the RERA then the Penalty is imprisonment for up to 3
years, and/or an additional fine of 10% of the estimated project cost.
If promoter provides false information the Penalty is up to 5% of the estimated project cost.
If promoter violates any other provision of the act the Penalty up to 5% of the estimated project
cost.
Fine for the agents is INR 10,000 per day during the period of violation of provisions.

1
http://www.merarera.com/why-rera/ visited on July 24, 2017
2
"Big cheer for homebuyers! Rajya Sabha passes Real Estate Bill" (http://economictimes.indiatimes.com/wealth/reale
state/bigcheerforhomebuyersrajyasabhapassesrealestatebill/ articleshow/51344724.cms), The Economic Times,
10 March 2016, Visited on July 24, 2017
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 CHAPTER 2

CONTEMPORARY POSITION

Objects and the Reasons of the RERA ACT: -

The RERA Act is intended to achieve the following objectives:

a) Ensure accountability towards the allottees and protect their interest;

b) Infuse transparency in the process;
c) Ensure fair-play and reduce frauds and delays;
d) Introduction of professionalism and plan India standardization;
e) Establishment of symmetry of information between the promoter and allottee;
f) Imposing certain responsibilities on both the promoter and allottee;
g) Establish regulatory oversight mechanism to enforce contracts;
h) Establish fast-track dispute resolution mechanism;
i) Promote good governance in the sector which in turn would create investor confidence.

Development of the Bill till now: -

Some sections of the Act have not been notified yet, as the institutional structures, namely the establishment
of the Regulatory Authority and the Appellate Tribunal are necessary prior to their enforcement. For e.g.
projects can only be sold after they are registered with the Authority, thus, in the absence of the same there
would be a vacuum. Which now has been notifies on 1st May, 2017

Condition of Maharashtra after the implementation of RERA: -

After a long wait Housing Department of the Maharashtra government finally published the draft
Maharashtra Real Estate (Regulation and Development) (Registration of Real Estate Projects, Registration
of Real Estate Agents, Rates of Interest and Disclosures) Rules,2016 (Maharashtra Rules) on December
8th 2016.
These Maharashtra Rules have received some mixed signals. On when hand,Maharashtra Rules list out
several compliances which a Promoter has to follow. On the other it dilutes several provisions of the Act
and its major objective- consumer protection.

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The highlights of some of the important provisions of the Maharashtra Rules:
Exorbitantly high fees for complaints:
One of the major highlight of the Act to inter alia safeguard the interest of the consumers in the
real estate sectors.

Disclosure by the Promoter about his intention of consuming the FSI:

The sanctioned FSI is different than what is proposed to be consumed by the Promoter, then the
proposed FSI which the Promoter intends to consume shall be disclosed at the time of registration
and as and when the FSI is sanctioned, the same is required to be uploaded on the website of the
regulator by the Promoter from time to time.

Disclosure by Promoter of ongoing Projects:

The Promoter of an ongoing project, in which all buildings as per sanctioned plan have not received
occupation certificate or completion certificate, as the case may be, is required to submit the
application for registration of such Project within a period of three months from the date of
commencement of the Act.

Prior written consent of Allottees for change in sanctioned plans:

The promoter is required to seek prior written consent at least two third of the allottees, f there is
any deviation in the implementation of the proposed plans/ specifications as disclosed in agreement
executed with the Allottees, prior to registration or if there is any alterations or additions or
modifications in the sanctioned plans, layout plans and specifications of the buildings or the
common area in the project. But as per the Maharashtra Rules, if there is any deviation, alteration
or additions or modifications in the plans which are required to be made by the promoter in
compliance with any of the direction or order, etc. issued by the competent authority or statutory
authority under ay law of the state or central govt. for the time being in force, then the previous
written consent of least two third of the Allottees is not required.

Deposit of the Amount in the relation of ongoing Projects:

In relation to ongoing Projects in which all buildings/wings as per sanctioned plan have not received
occupation certificate or the completion certificate, as the case may be, has not been issued; the
Promoter is required to deposit in the separate account, seventy percent of the amount to be realized
from the Allottees. Further, in the event where the estimated receivables of the ongoing Project is
less than the estimated cost of completion of the Project, then the Promoter is required to deposit
100% of the amount to be realized from the Allottees in the said separate account. (Estimated cost
of the Project, is disclosed by the Promoter at the time of applying for registration).

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 CHAPTER 3
COMPARATIVE STUDY

The researcher has compared the legislation of India with other Countries which has similar which are as
follows:

1) The United States of America:

Real estate in the US is regulated at numerous levels. Therefore, there is no single regulatory body, but
rather a series of bodies that regulate different ownership and usage aspects. To safeguard the interest of
the end-users, the Department of Housing and Urban Development (HUD) has rules under the Real Estate
Settlement Procedures Act to protect consumer interests pertaining to the residential properties. Issues
related to the end users are not a matter of federal regulation. These are dealt with in a legal contract. If a
purchaser enters a contract with the developer, and the developer does not deliver on the terms agreed upon
in the contract, the developer can be taken to court for breach of contract. In the US, there are state real
estate licensing laws and a code of ethics in place.

2) The United Kingdom:

There is an absence of a regulator to monitor the sector. The Financial Services Authority (FSA), which is
now part of the Bank of England, regulates almost all the investments in real estates. The Property Mis-
descriptions Act of 1991 prohibits the making of false or misleading statements on property matters in the
course of estate agency business and the property development business.

3) China:

The Central Government introduced a regulation for real estate in 2010, which is more stringent and
specific than it has historically been to control the market. The State Department of Real Estate New State
10, is a regulation which enforces an accountability system for the local government to stabilise local real
estate prices. This is aimed at promoting the construction of affordable housing to promote social
development and enforce stability and accountability. On this basis, local governments have introduced
their own control rules in Beijing, Shanghai, Guangzhou and Shenzhen. The sales agreement contract
specifies the area of the property being sold. In case of the sale of residential property, a minor differential
(generally in the range of 2-3%) in the area is permissible. In case this is not followed, the buyer can legally
get a refund from the developer.

The mortgage contract is a legal document and provides legal protection to the bank (lender) and the buyer
(borrower). The sales agreement specifies the terms and conditions for sale and determines the legal rights
of both the buyer and the seller. Apart from conditions in the sales agreement, there are no other provisions
to safeguard end-users.

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The researcher has also made a questioner and also made the observations on what the opnion is of the
society. The following are the questions for the questioner:

Q1. Post implementation of RERA what are the Major changes that you expect to see while making real
estate dealings?

Q2. As an investor in real estate, do you think RERA will boost the governance hold on the sector and
eventually lead to increase in foreign (FDI) and domestic investment into the sector in near future?

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Q3. Post RERA implementation, what changes do you expect in lending options from
bankers/institutions?

Q4. The Act provides for lot of transparency to be maintained by the developers. Do you think
these practices will reduce litigation going forward?

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Q5. What is your opinion on the rule of depositing 70% of sales proceeds in a separate account?
(can choose any two)
a) It will help in getting timely delivery of the project
b) This will lock the cash and force the builders to rely on further borrowings, which will eventually
lead to higher project cost
c) It will help in eliminating the fly-by-night operators in the real estate
d) No major change

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Q6. Where do you see the maximum impact of RERA in the operations of your Company? (Rank 1 -5)

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 CONCLUSION

The real estate bill is anticipated to bring on a stimulating modification in how various stakeholders revamp
their structural capabilities and boost investors confidence in the realty sector. However, it'll take time
before the real estate regulator becomes a reality, as states have to be compelled to follow up.

This new legislation is definitely a step in the right direction and is expected to remove the chronic Issue
of late delivery of projects, eliminating not so senior players from the business. This will also attract
investments in the sector and restore the confidence of the buyers and others stakeholders in the sector.

However, one is yet to see the how the provision of the new act impacts the developers and sector at large.
it is important to understand that this should not become another tool for increasing red-tapism in the
process of obtaining approvals. One of the continuing issue being faced by the developers is the number
of approvals requires and the time taken to obtain these approvals.

The compliance of this act should not become one more layer of approvals to be obtained, but to ease out
the entire approval process. The act should also consider the impact of transition issues and make it more
pragmatic for the developers to comply at the end given the importance and contribution of real estate once
feel that the current way of reforms should continue.

Although the bill seems all inclusive, essentially after the amendments, some feel that it lacks in places.
The bill does nothing to address the two main problems in property market - supply shortage and black
money. Once the bill becomes a law, supply shortages may occur in the residential sector, as developers
cannot launch or advertise a project before obtaining all project related permissions. They wont be able to
make any pre-launch offers; this means they will have to find money from other sources to arrange funds
for obtaining approvals and registration of the project. This may therefore lead to increased prices of
property, along with frustration among investors.

The Bill also says that a central appellate tribunal should be set up as a central body and each individual
state should also have state regulators. This means that there would be some central guidelines for real
estate sector and builder and each state will focus on regulating their states real estate builders. There might
be few rules different from states to states. On this front, there might be some confusion.

Real estate developers are of the view, and rightly so, that along with such regulators, long pending issues
such as creation of a single window system for clearance and clearances from urban local government
bodies should also be brought under the ambit of the proposed regulator. The builders have been long
complaining of the inordinate delays besides the difficulty in obtaining approvals for construction from the
multi- headed government agencies. Getting construction permits in time is one of the worst benchmarks
in World Banks Doing Business in India metric.

Some suggestions given by the Researcher are as follows: -

Commercial and industrial real estate: The current Bill seeks to regulate only residential real
estate. The Bill should regulate commercial and industrial real estate as well.
Exclusion of certain projects: The exclusion of projects smaller than 1,000 square meters or 12
apartments from the purview of the RERA could lead to the exclusion of a large number of small
housing projects. This limit should be lowered to 100 square meters and three apartments.
Registration of all real estate agents: All real estate agents should be required to register with a
RERA and not just those facilitating the sale of a project covered by the Bill.
Single window system for project approvals: A new provision should be inserted to allow RERAs
to give directions to state governments to establish a single window system for providing clearances

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 for projects. A time limit should be specified for state and local authorities to issue completion
certificates.

As a collateral law, there is a need to enact the Unfair Terms in Contract Act, which will enable the ability
of the courts to check one sided clauses which are often the cause of disputes, not only in real estate but
many other consumer contracts. Such a law exists in many countries. The Law Commission of India has
recommended this many years ago but our lawmakers have not yet responded.

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 BIBLIOGRAPHY

Websites Referred:

http://economictimes.indiatimes.com/wealth/real-estate/rera-and-you/articlelist/58277172.cms
http://economictimes.indiatimes.com/wealth/real-estate/rera-sets-the-ground-rules-to-clean-up-
the-real-estate/articleshow/58453059.cms
http://www.livelaw.in/expect-expecting-maharashtra-real-estate-rules/#_ftn1
http://naredco.in/notification/pdfs/Maharashtra%20%20Real%20Estate%20%20(Regulation%20
%20and%20%20Development)%20%20(Recovery%20%20of%20%20Interest,%20%20Penalty,
%20%20Compensation,%20%20Fine%20%20payable,%20Forms%20%20of%20%20Complaints
%20%20and%20%20Appeal,%20%20etc.)%20%20Rules,%20%202017.pdf
"Realty projects, brokers have to be registered with regulatory authorities by July 31"
(http://realty.economictimes.indiatimes.com/news/regulatory/realtyprojectsbrokershavetoberegist
eredwithregulatoryauthoritiesbyjuly31venkaiahnaidu/58281050). Economic Times.
"Lok Sabha takes up real estate bill, Congress assures support"
(http://economictimes.com/news/politicsandnation/loksabhatakesuprealestatebillcongressassuress
upport/articleshow/51408464.cms), The Economic Times, 15March 2016
http://www.livelaw.in/expect-expecting-maharashtra-real-estate-rules/
https://www.projectguru.in/publications/real-estate-regulator-bill-rera/
http://www.thehindubusinessline.com/opinion/allyouwantedtoknowaboutrealestateregulationbill/a
rticle7496085.ece
http://www.livelaw.in/realestateregulationdevelopmentact2016comesfullforce/
http://www.prsindia.org/billtrack/therealestateregulationanddevelopmentbilli20132861/

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