The Real Estate (Regulation and Development) Act, 2016 comes into force from May 1, 2016 setting in motion the process of making necessary operational rules and creation of institutional infrastructure for protecting the interests of consumers and promoting the growth of real estate sector in an environment of trust, confidence, credible transactions and efficient and time bound execution of projects.
Ministry of Housing & Urban Poverty Alleviation (HUPA) has notified 69 of the total 92 sections of the Act. A proposal for a law for Real Estate was first mooted at the National Conference of Housing Ministers of States and Union Territories in January, 2009.
As per the notification, Rules under the Act have to be formulated by the Central and State Governments within a maximum period of six months i.e by October 31,2016 under Section 84 of the Act.
Ministry of HUPA would make Rules for Union Territories without legislatures while the Ministry of Urban Development would do so for Delhi.
Section 84 of the Act stipulates that “The appropriate Government shall, within a period of six months of the commencement of this Act, by notification, make rules for carrying out the provisions of this Act.”
Early setting up of Real Estate Regulatory Authorities with whom all real estate projects have to be registered and Appellate Tribunals for adjudication of disputes is the key for providing early relief and protection to the large number of buyers of properties.
Section 20 of the Act says “The appropriate Government shall, within a period of one year from the date of coming into force of this Act, by notification establish an authority to be known as the Real Estate Regulatory Authority to exercise the powers conferred on it and to perform the functions assigned to it under this Act”. These Authorities decide on the complaints of buyers and developers in 60 days time.
Section 20 of this Act also empowers appropriate Governments to designate any officer preferably Secretary of the Department dealing with Housing, as the interim Regulatory Authority until the establishment of Regulatory Authority under the provisions of the Act.
Regulatory Authorities, upon their constitution get three months time to formulate regulations concerning their day to day functioning under Section 85 of the Act.
Likewise, under Section 43 of the Act, Real Estate Appellate Tribunals shall be formed within a maximum period of one year i.e by April 30,2017. These fast track Tribunals shall decide on the disputes over the orders of Regulatory Authorities in 60 days time.
Under the directions of the Minister of Housing & Urban Poverty Alleviation Shri M.Venkaiah Naidu, a Committee chaired by Secretary (HUPA) has already commenced work on formulation of Model Rules under the Act for the benefit of States and UTs so that they could come out with Rules in quick time besides ensuring uniformity across the country. The Ministry will also will come out with Model Regulations for Regulatory Authorities to save on time.
The time limits of six months for formulation of Rules and one year for setting up Regulatory Authorities and Appellate Tribunals are the outer limit and the States willing to act quickly could do so and the Ministry of Housing & Urban Poverty Alleviation would notify the remaining Sections of the Act to enable relief to the buyers under the Act as quickly as possible.
The remaining 22 Sections to be notified relate to functions and duties of promoters, rights and duties of allottees, prior registration of real estate projects with Real Estate Regulatory Authorities, recovery of interest on penalties, enforcement of orders, offences, penalties and adjudication, taking cognizance of offences etc.
Salient features of the Act:
a) The Act regulates both commercial and residential real estate projects. It seeks to set up Real Estate Regulatory Authority (RERA) in states and union territories to oversee real estate transactions.
b) It makes registration of real estate projects and real estate agents with the authority mandatory. It mandates that builders should disclose details of all registered projects, including those about the promoter, project, layout plan, land status, approvals, agreements along with details of real estate agents, contractors, architect, structural engineer etc. All these details should be uploaded on the website of the RERAs. Real estate agents also need to register with the RERAs.
c) Act makes it mandatory for the builders to park 70% of the amount collected from buyers for a project in a separate bank account. This must only be used for construction of that project. However, The state government can alter this amount to less than 70%.
d) It seeks to establish fast track dispute resolution mechanisms for settlement of disputes through adjudicating officers and Appellate Tribunal. The bill bars civil courts from taking up matters defined in it. However, consumer courts are allowed to hear real estate matters. There are 644 consumer courts in the country. The more avenues for grievance redressal would mean lower litigation costs for the buyers. Promoters are barred from changing plans and design without consent of consumers.
e) If the promoter does not register his property, he will have to pay up to 10 percent of the project cost as penalty. If he dodges order issued by the RERA, he faces imprisonment for up to three years, and/or an additional fine of 10% of the estimated cost of the project. In case the builder violates any other provision of the act, he will have to pay up to 5 percent of the estimate cost of the project, reckons PRS Legislative. Meanwhile, the fine for the agents is Rs 10,000 per day during the period of violation of provisions.
Once in place, the Act is expected to boost consumer confidence as it is expected to ring in transparency in the sector.