Real Estate Basics: The Real Estate (Regulation and Development) Act, 2016 (RERA)
Utkarsha Nikam, Associate, Kanga & Company
One of the primary reasons The Real Estate (Regulation and Development) Act, 2016 (RERA) has been enacted is to regulate the sale and transfer of flats between the Promoter and Allottee. The terms “Promoter” and “Allottee” are referred because RERA is specific to transactions between these two parties. The intention of this Act is also to (1) regulation and promotion of the Real Estate sector, (2) ensure the sale of flats in an efficient and transparent manner, (3) to protect the interest of the consumers, (4) to establish an adjudicating mechanism for speedy dispute redressal and (5) to establish the Appellate Tribunal to hear appeals from the decisions of the Real Estate Regulatory Authority and the adjudicating officers. The Act also establishes the Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution. Its primary purpose, apart from defining rules, was to build trust among buyers and builders in a market where opaque deals thriving in grey payment systems operating outside the legitimate financial system had become commonplace.
Does RERA repeal Maharashtra Ownership Flat Act-1963 (MOFA)?
The MOFA is an important piece of legislation as it lays down the responsibilities of real estate developers/builders with respect to flats sold by them and conversely the rights of flat purchasers within the State.
There is, however, a certain amount of confusion if MOFA is still under force, with Real Estate (Regulation & Development Act) 2016 (RERA) being enacted and implemented across the country. The Maharashtra Ownership Flat Act-1963 is still in force as there has been no notification repealing the aforesaid act.
Kinds of projects RERA applies to? Application of RERA
A "real estate project" is defined as the development of a building, converting an existing building or a part in apartments, development of land into apartments/plots for the purpose of selling and includes common areas, development works, all improvements and structures thereon and all easement, rights and appurtenances belonging to such building or land or structure.
In simple terms Section 2(zn) simply states that whether it is the development of a building, or conversion of an existing building into apartments, or development of lands, into plots/apartments, it would all come within the ambit of the definition if such development/conversion is being carried out with the purpose of selling such plots or apartments. It is not necessary that all the apartments in the building or all the plots need to be sold. As long as the intention is to sell even a few of them, it would be a real estate project.
Section 3(2) lays down three circumstances whereunder the Real Estate Project is exempt from registration:
(1) where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases.
The interpretation of the term “OR” in Sub-section 2(a) of section 3 has been analysed in the case of M/s Geetanjali Aman Construction & Ors v. Hrishikesh Ramesh Paranjpe & Ors. The primary question, in this case, was whether their project, which was less than 500 square metres but consisted of more than eight flats needed to be registered? The Appellate Authority inter alia held that “OR” is to be read disjunctively and not conjunctively as a conjunctive reading would make the legislative intent redundant. Therefore, where either of the two contingencies is satisfied, the project is held to be eligible for an exemption for registration.
(2) The second circumstance provided is that if the promoter has received a completion certificate for the real estate project prior to commencement of the Act, i.e. 1st May 2016. It is pertinent to note that the Maharashtra Rules provide that the requirement for registration of ongoing projects shall be exempt in case of projects in which either Occupancy Certificate of Completion Certificate has been obtained. In my experience, most of the times, the department issues an Occupancy Certificate. Therefore this clarification in the rules was necessary.
(3) The last circumstance provides that in case of renovation or repair or re-development which does not involve marketing, advertisement, selling of new allotment of any apartment, plot or building, registration of such real estate project is exempt.
The duration/validity of the grant of registration of the real estate project
When the Promoter registers a real estate project, there is a long list of compliances to be met with, lots of details and documents need to be provided. One of the details that the Promoter has to insert or provide while registering the real estate project is the estimated date by when the project will be complete.
Therefore, when the Authority grants its approval under section 5 of the Act, it is granted for such period of time which is declared by the promoter for completion of the project or the phase, whatever the case may be.
Is there a scope for an extension?
Once the Authority has granted the registration, it may extent such registration only in the following conditions
(1) due to Force Majeure;
(2) at the discretion of the Authority where it feels that for no fault of the Promoter, the circumstances demand that an extension must be provided, but again such discretionary extension is for an aggregate period of 1 year.
Revocation of Registration.
The Authority either based on a complaint or on the recommendation of the competent authority or suo moto, revoke the registration granted by it. Of course, before revoking the registration, the Authority has to give the promoter a notice.
When the Promoter is in default of doing anything as required under the Act or its rules or regulations, or when the Promoter violates any terms of conditions of the approvals given by the competent authority or if the Promoter is involved in any unfair trade practices, his registration can be revoked.
What if the Allottee fails to take possession of his/her apartment?
In the case of Platinum Properties v. Ashok Tukaram Khaladkar, decided on 2nd April 2019 the Appellate Tribunal inter-alia, observed that the Allottee is not justified in denying the possession of the flat due to the work of the common amenities and facilities of the entire project not yet being complete. Further, in the event, the Promoter fails to complete the project or is unable to give possession in accordance with the terms of the agreement, the Allottee can choose to withdraw from the project. Therefore, once the promoter has received the OC and is ready to give possession of the apartment, the Allottee has to complete its payment formalities and take possession of the flat.
In the case of Association of Commerce house Block Owners Ltd v/s. Vishandas Shamaldas, 1981 Bom CR 716, the Bombay High Court was of the view that the provision of MOFA contains an absolute enactment which must be observed and if such absolute enactment is not obeyed, the consequence will be that the agreement between the promoter and the purchaser will be wholly invalid and altogether void, creating no rights between the parties.
The Bombay High Court in Neelkamal Realtors Suburban Pvt.Ltd Vs Union of India upheld the constitutional validity of the provisions of the Act. In Real Estate Regulation Authority, Punjab Vs. Sushma Buildtech Ltd, the authority imposed a penalty of Rs 10,000 on Respondent for Advertisement of their projects in print media and visual media without displaying the registration Number issued by the authority for the projects. It was held to be violative of Section 11(2) of the Real Estate (Regulation and Development) Act, 2016.