Property Plus

Towards realty transparency

G. Shyam Sundar writes on the impact of the Real Estate Regulation and Development Act, 2016

The Real Estate Regulation and Development Act, 2016, that came in to force on May 1, 2016 (Central Act 16 of 2016) has been enacted to primarily regulate the real estate industry. It is also aimed at addressing the concerns of home buyers by establishing an adjudicating mechanism for speedy dispute redresals. As per the Act, projects more than 500 sq.m. (5,380 sq.ft.), with more than 8 apartments (inclusive of all phases), or where the promoter/developer has not obtained the completion certificate for existing projects, have to be compulsorily registered with the Real Estate Regulatory Authority. Details of the project, the promoter’s past 5-year record, approval details, etc., have to be mentioned. Seventy per cent of amount realised from the project should be kept in an escrow account and must be utilised only for that project. In case of any false or misleading representation (including advertisements), the Authority has powers to revoke the registration of the promoter. Likewise, real estate agents should compulsorily register with the authorities and without this they can’t facilitate the sale or purchase of any plot, apartment, or building. Punishment up to 3 years or fine or 10 per cent of the estimated cost of the project can be imposed by the regulatory authorities for non registration of a real estate project.

The rights and duties of promoters and allottees have been clearly laid down in the Act. A promoter can’t accept more than 10 per cent of the project without entering into a written sale agreement. This agreement can be entered only after all the approvals are in place. He has to strictly abide by the sanctioned building plan for construction and ensure a clear transfer of title to the buyers. If the promoter is unable to deliver the project on time, the Act states that the money should be refunded to the buyers who wish to withdraw from the project. In case of any contraventions of the provisions of the Act, a fine can be levied, which is upto 5 per cent of estimated cost of the project.

The Act once implemented will curtail unapproved land layouts to a maximum extent possible. The entire undivided share of land including share in common areas should be conveyed to the allottees/buyers. Moreover, a promoter should sell only the carpet area of an apartment and not the super built up area. There is no standard method of determining super built up area which includes carpet area plus common area plus wall thickness. This clause may force escalation of apartment costs by around 20 per cent,however, with the likely introduction of GST, prices of building raw materials will come down by 3 per cent and hence the net increase will be around 17 per cent. Every state government shall within a period of one year from the date of notification of this Act (1st May, 2016) shall establish a Real Estate Appellate Tribunal. It shall consist of at least one judicial member and one administrative and technical member.

Government agencies such as sanctioning authorities, electricity board and water Supply authorities, have been left out from the purview of the Act and there is no mention of project delays due to delays in obtaining completion certificates/essential connections from these agencies. The implementation of the Act will pose a big challenge in the initial few years, but will make the sector a more organised one. Also, builders can hope to get bank finances at a slightly lower rate. The strict provisions of the Act will drastically reduce the number of players in the real estate market in a phased manner as well.

The writer is a Chennai-based advocate and author of ‘Property Registration, Land Records and Building Approval Procedures Followed in Various States in India’

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Printable version | Jun 26, 2020 4:53:15 AM |

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