Real Estate (Regulation and Development) Bill 2011(2013)

The Union Cabinet approved of the draft Real Estate (Regulation and Development) Bill 2013 and it shall now be codified into an Act. The purpose of this Bill is to regulate the otherwise unregulated Real Estate Sector which is one of the largest sectors in India and has been requiring regulation from the Government for a long time. The Builders and Developers lobby have on the whole not really welcomed the bill and understandably so , as it curbs the monopolistic business practices and gives more rights and freedom to the purchaser.

SALIENT FEATURES OF THE BILL

Under the Bill the local authority or any authority/body established by the Government which shall have the powers to approve, sanction regulate and oversee the functioning of the Promoters and Builders within its local jurisdiction shall be referred to as the Competent Authority.

The Builder/Developer referred to as Promoter in the Bill shall now be required to register the project (each phase of a project shall be considered as a single entity) which it intends to develop on an immovable property in a prescribed format and only upon receiving the approval and certificate of registration can the Promoter advertise and invite public to make bookings in the Project. The said certificate of registration granted by the Regulatory Authority shall be valid for the period of completion of project as declared by the Promoter and shall be given an extension of upto one year and not exceeding two years. In case if the project remains to be completed after such extensions expire, then in that case the remaining development work shall be carried out by the Competent Authority, body of Allottees or in any manner so decided.

However, such registration shall not be required in cases where the area of development is less than 4000 sqmtrs or is in an area notified by the Central or the State Government. It shall also not be applicable to Promoter who had sought all necessary approvals and permissions a year prior to the commencement of the Act. Any repair/ renovation which does not require remarketing of the project has also been kept out of the ambit of such registrations.

The Bill has laid down some stringent rules in cases of default by the Promoters. The registration so granted shall be revoked on various grounds including wilful default by Promoter, unfair practices of misrepresentations and violation of terms of agreement with the Competent Authority. The Promoter shall also be debarred by the Competent Authority and the list of such debarred Promoters shall be available on the website of the Competent Authority.

OBLIGATIONS OF THE PROMOTER/BUILDER

That the Promoter shall be obliged to make all information including the approved plans public on its webpage so provided by the Authorities. The Promoter shall not indulge in any kind of misleading advertising of the project. In case the Promoter is found to have misled the customer/purchaser, the purchaser shall have the right to withdraw from the Project and all amounts deposited by him towards booking of the property shall be completely refunded to him. The major obligations of the promoter under the current Bill is to adhere to the proposed and approved plans by Competent Authority, provide all documents such as plans, payment schedules, information about the project being linked to the municipal amenities, obtain completion certificate, execution of conveyance deed for transfer of title, maintain the building till the time that the Allottees do not take over the maintenance etc.

The Promoter shall not collect any amounts from the Allottees towards booking of the properties till the Agreement for Sale is entered into. The Promoter would be required to sign an undertaking stating therein that he has title in the land, it is free from all encumbrances, timelines for the project shall be adhered to, setting out the time line and that the Promoter shall be obliged to deposit 70% of the amount realised from the Allottees from time to time in a separate account to be maintained in a scheduled Bank within 15 days of its realization and utilize the same for that project only. The Promoters shall therefore not be able to circulate their monies for completion of their other projects thus ensuring timely completion of the projects. The Promoter shall be required to decare its list of Real Estate Agents as well.

If for any reason the Promoter/builder is unable to complete the project, it shall be liable to refund the amounts to the Allottees alongwith interest in terms of clause 15 (2) of the Bill and penalty if any as imposed by the Competent Authority. This shall however be without prejudice to its right to other remedies. That upon completion of the project and after obtaining completion certificate or occupation certificate as the case may be the Promoter shall handover the maintenance of the building/plot to the Allottees. The original title certificates and the building plans shall also be handed over to the association of the Allottees. If within a year of handing over of the property there are any structural defects or deficiencies noticed , the Promoter shall be obliged to rectify the same without further charge and within a reasonable time. In case of failure to do the same the Allottees shall be entitled to compensation/damages as may be determined by the Competent Authority.   

OBLIGATIONS OF THE ALLOTTEES

The Allottee shall be obliged to pay the amounts due towards the consideration of purchase of the pot/building/apartment as agreed upon and in case of any delay in payment the same shall be payable alongwith interest thereon as agreed between the parties. The proportionate share of Municipal taxes, water electricity charges , ground rent, registration charges etc. shall also be payable by the Allottee.

REGULATORY AUTHORITY

Under the Bill it has been provided that the Government shall establish an authority which shall be known as the Real Estate Regulatory Authority whose prime function would be to regulate the real estate development and to promote the real estate sector. The Authority shall have the Power to set up a Dispute Resolution Mechanism for amicable settlement of dispute through Mediation, conciliation etc and shall appoint such officers as it may deem appropriate for the said purpose.

The Authority may upon a complaint made or on a suo moto complaint summon the Promoter, Allottee or any person connected with such complaint and seek explanation in regard to the complaint so made. While doing so the Authority shall have the same powers as a Civil Court under the Code of Civil Procedure 1908. The authority shall also have the power to execute the orders passed by it in case the party fails to comply.

There is no specific format prescribed under the Bill for making complaints before the Authority however it has been provided that the Authority shall on a later date prescribe the format , fee etc for complaints, applications etc.    

Having been bestowed with the powers of a Civil Court the Legislative has exclude the Civil Courts from interfering in such matters unless there is a specific reference from the Authorities itself.

APPELLATE TRIBUNAL

Any appeal from an order of the Regulatory Authority could be preferred before the Appellate Tribunal within a period of 30 days in the format so prescribed from the date of receiving the order by the concerned party or the Competent Authority or State Government. Any delay in preferring the appeal could be condoned upon showing good cause for such delay. The said appeal is required to be disposed off by the Appellate Authority within 90 days failing which they shall have to record reasons for not doing so. The said Appellate Authority would not be bound by the provisions of the CPC or the Evidence Act and could formulate its own rules. However the Powers of the Appellate Authority would be akin to that of a Civil Court under the CPC both in terms of deciding the appeal and execution of the order/decree. The Appellate Authority would however be at liberty to refer the order/decree for execution to a Civil Court of appropriate jurisdiction as if the said order/decree had been passed by the said Civil Court.

PROSECUTION AND PENALTIES

The Bill provides for prosecution and penalties in case there is a default by the Promoter on the following counts:
  1. If the promoter wilfully neglects to obtain the Registration Certificate he shall be punishable with imprisonment which may extend to 3 years or penalty which may extend to 10% of the total estimated cost of the project or both
  2. If the promoter contravenes any other provision of the Act he may have to pay penalty which could extend to 5% of the  total estimated cost of the project
  3. If the promoter wilfully disobeys the orders/directions passed by the Authority he shall be liable to pay a penalty of Rs. 1 lakh per day which may extend to 5% of the total estimated cost of the project
  4. If the promoter wilfully disobeys the orders/directions passed by the Tribunal he shall be punishable with imprisonment upto one year or a penalty of which may extend to 10% of the total estimated cost of the project or both

In case of a Company all persons responsible for the day to day activities of the Company and in-charge of the affairs of the Company shall be prosecuted unless he is able to prove that the default was not within his knowledge. The Court before which the case is being prosecuted shall have the power to compound the offence.  

The aforementioned rules, regulations procedures and proceedings as set out in the draft Bill available in the public domain shall be codified by the Legislature and enacted in all the States and it shall then be the responsibility of the State to  regulate the Real Estate Sector and prevent malpractices of the Builders/Promoters. The ACT which shall come into being soon shall bring more clarity with regard to the various forms, formats, applications, fees for applying for various approvals by the Promoters, formats for filing complaints before the Regulatory Authority and appeal before the Appellate Authority, and rules relating to the exercise of power by the Regulatory Authorities in States and the Appellate Tribunal. The enactment of the Bill is most awaited by the promoters and investors as only thereafter would it be clear whether the attempt to regulate the Real Estate Sector has a positive or a negative impact on the real estate market.     

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