FAQs - RERA
Q1) Which Is The ‘Appropriate Government’ As Per The Act?
The appropriate government is the State Government.
- As per section 84 the State Government is required to notify Rules for the implementation of the Act, within six months of its commencement i.e. by 31st October 2016. (MP complied on 22nd October 2016).
- As per section 20 the State Government is required to establish the Regulatory Authority within 1 year from its commencement i.e. latest by 30th April, 2017. (MP complied on 15th December 2016).
- As per section 43 the State Government is required to either establish a separate Appellate Tribunal or designate an existing Appellate Tribunal (under any other law in force) to be the Appellate Tribunal, within 1 year, i.e. latest by 30th April 2017.
- As per section 28 and section 51 the State Government is required to appoint officers and other employees of the Regulatory Authority and the Appellate Tribunal. In addition, it is required to identify office space etc. and other infrastructure for its functioning.
- As per section 75 the State Government is required to constitute a ‘Real Estate Regulatory Fund’.
- As per section 41 the Central Government (i.e. the Ministry of HUPA) is required to establish the Central Advisory Council.
The Act covers all bodies (private and public) which develop real estate projects for sale to the general public. Section 2(zk) defines the term ‘promoter’ which includes both private and public real estate promoters. Thus, both Development Authorities and the Housing Boards, when involved in sale are covered under the Act.
The Explanation to section 2(zk) stipulates that “where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made thereunder”.
The Explanation to section 2(za) stipulates that the rate of interest payable by either the promoter or the allottee shall be the same. The rate of interest is required to be specified by the appropriate Government in the Rules.
Q6) Does Advertisement Include Solicitation By Emails And Sms? Is Issuance Of Prospectus Considered To Be A Case Of ‘Advertisement’?
According to section 2(b) which defines ‘advertisement, any medium adopted in soliciting for sale would be covered under the said definition, including sms or emails or prospectus.
According to section 2(d) an allottee includes a person who acquires the apartment/ plot through transfer or sale, but does not include a person to whom such plot/ apartment is given on rent.
Section 2(n) defines ‘common areas’ to include ‘open parking areas’, thus open parking areas cannot be sold to the allottees.
Section 2(n) defines ‘common areas’ to include ‘community and commercial facilities’, thus they are an integral part of the project, to be handed over to the Association of Allottees.
Section 2(zf) and section 2(q) respectively, define ‘occupancy certificate’ and ‘completion certificate’. Occupancy certificate relates to the occupation of the apartment/building, which has provision for civic infrastructure such as water, sanitation and electricity and is habitable. Completion certificate relates to the completion of the entire project certifying that the project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority.
Section 2(zf) and section 2(q) respectively, define ‘occupancy certificate’ and ‘completion certificate’. The two definitions are very broad and use the term ‘by whatever name called’. Thus, if in a Municipal area only one certificate is issued which provides for both the aspects covered under the two definitions, it would suffice the requirements under the Act.
Section 2(v) defines ‘estimated cost of the real estate project’, which means “the total cost involved in developing the real estate project and includes the land cost, taxes, cess, development and other charges”. The determination of the estimated cost of the real estate project is necessary due to Chapter VIII of the Act, which provides that penalties would be imposed on the promoter for violations prescribed under the Act, based on the estimated cost of the real estate project.
Section 2(y) defines the term ‘garage’, which can be sold to the allottee independent of the ‘apartment’.
The term ‘real estate project’ has been defined under section 2(zn) and the term ‘project’ has been defined under section 2(zj), which have been interchangeably used under the Act.
Section 2(zm) defines the term ‘real estate agents’, which is a very broad and inclusive definition and covers all forms of agencies involved in sale and purchase of projects, registered under the Act. Consequently, web-portals etc. engaged in selling plots or apartments are also covered under the Act and are required to comply with the duties and responsibilities as provided therein including under the Rules and regulations made thereunder.
Section 2(zr) is an omnibus definition which provides that terms which have not been defined under the Act or the Rules and Regulations made thereunder, would have the same meaning as assigned to them under the relevant Municipal laws or under any law for the time being in force
II. REGISTRATION OF PROJECT AND AGENTS
The Act covers both residential and commercial real estate. Section 2(e) defines ‘apartment’ and section 2(j) defines ‘building’ which include both residential and commercial real estate. Commercial real estate is a broad definition, and includes all non-residential purposes except industrial uses.
As regards the ambit of the Act, there is no distinction between an ongoing project and a future project, i.e. both ongoing / incomplete projects and future projects are covered under the Act.
Section 3(1) first proviso provides that promoters of ‘all ongoing projects which have not received completion certificate will need to register their project with the Regulatory Authority within 3 months of the date of notification of Section 3
.Q19) Does The Act Cover All Projects In Urban Areas And In Rural Areas?
Section 3(1) provides that all projects within a ‘planning area’ will require to be registered with the Authority. ‘Planning Area’ has been defined under section 2(zh). In Madhya Pradesh there are currently 157 planning areas notified under Section 13(1) of the M.P. Town & Country Planning Act, 1973.
However, section 3(1) second proviso gives powers to the Authority to order a promoter to register projects beyond the planning area.
As per section 3(2) the following projects do not require to be registered under the Act:
- 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;
- where the promoter has received completion certificate for a real estate project prior to commencement of this Act (notification of Section 3).
- for the purpose of renovation or repair or re-development which does not involve marketing, advertising, selling or new allotment of any apartment, plot or building.
The promoter can advertise his project for sale after the project has been registered with the Regulatory Authority as provided in section 3(1).
Section 4 of the Act gives the details, information and undertaking to be provided by the promoter to the Authority for registration of a project. The mechanism for registration i.e. the requisite forms to be filled, the fees to be paid etc. are to be determined by the Rules made by the State Government. (See Form A and Form B)
The promoter is required to make an application as per Form A and fees prescribed by the Rules along with the documents/ information and undertaking specified in section 4 to the Authority for registration of the project. In addition, the promoter is also required to append Form B/ other additional documents/ information as specified in the Rules.
The Regulatory Authority is required to register the project, if in compliance with the Act and the Rules and Regulations, within 30 days of the application having been received by the Authority.
If the application for the registration of the project is not complete as required under the Act or the Rules and Regulations made thereunder, the Authority may grant an opportunity to the promoter to complete the application in all respects. However, in case of non-compliance the Authority has the power to reject the application, after giving an opportunity to the promoter of being heard.
Section 5 of the Act provides that the Authority has to decide on the application within 30 days of its receipt. It further provides that in case the Authority fails to take a decision within 30 days the project shall be deemed to be registered.
According to section 4, the validity of the registration granted to a project shall be the period declared by the promoter under section 4(2)(l)(C), at the time of making the application for registration, within which he would complete the project.
Section 4(2)(l)(D) provides that the promoter shall maintain a ‘separate account’ for each project undertaken by him, wherein seventy percent of the money received from the allottees shall be deposited for the purposes of construction and land cost. The account has to be self maintained and is not an escrow account requiring the approval of the Authority for withdrawal.
Section 4(2)(l)(D) clearly provides that the funds can only be used for construction and land cost.
According to section 4(2)(l)(D) first and second proviso, the promoter is allowed to withdraw the amounts from the separate account to cover the cost of the project, in proportion to the percentage of completion of the project, after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.
As per section 4(2)(l)(D) third proviso, the promoter is required to get his accounts audited and certified within six months after the end of every financial year by a chartered accountant in practice, and it shall be verified during the audit that the amounts collected for a particular project have been utilized for that project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project.
Section 4 envisages that for a period of one year the application process can be both manual and online based, however, after one year it is mandatory to make the entire process online. However, in M.P. it is proposed to go online right from the start.
Section 6 envisages two situations in which the registration granted to a project can be extended: (a) in case of force majeure, or (b) under reasonable circumstances, without the fault of the promoter, which shall not be more than a maximum of 1 year.
Explanation to section 6 has defined force majeure to mean ‘a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project’.
The terms and conditions, the application form and the fees payable for extension of registration shall be in the manner as prescribed by the Rules. (See Form E)
As per section 7 the Authority has the powers to revoke registration of a project, for violations. However, revocation of registration of a project is envisaged as a last resort and can only be done after providing a reasonable opportunity of being heard.
In case a project is revoked, section 8 provides for various mechanisms in which the project can be completed. However, in such a scenario, the association of allottees shall have the first right of refusal for carrying out the remaining development works.
Section 9 of the Act provides that real estate agents which engage in selling projects registered under the Act, can only do so after registering themselves with the Authority. The mechanisms for registration, the fees payable, the period of registration, subsequent renewal etc. are matters to be detailed vide the Rules.
Section 10 of the Act provides for detailed functions and duties of real estate agents.
III. FUNCTIONS AND DUTIES OF PROMOTER
Q37) What Are The Important Functions And Responsibilities Of The Promoter After Registration Of The Project With The Authority?
As per section 11 of the Act, the promoter is required to update all project information as furnished at the time of application on the allotted page on the website of the Authority. In addition, section 11 also provides for certain information, which needs to be updated every quarter by the promoter.
In addition, the promoter is required to carry out all the responsibilities as envisaged under section 11 at various stages of development of the project and upon its completion.
Section 4 and section 11 provide for a detailed list of disclosures on the website of the Authority by the promoter for public viewing.
As per section 12 the promoter is responsible for the veracity of all information contained in the advertisement and the prospectus. In case of any loss sustained by any person due to false information contained therein, the promoter is liable to make good the loss sustained due to the same.
Section 13 provides that the promoter cannot accept a sum more than 10 percent of the price of the apartment/ plot as an advance payment/ application fees. For any further collection towards the apartment/ plot cost, the promoter is required to enter into an ‘Agreement for Sale’ with the allottee.
As per section 13(2) the appropriate Government is required to specify through Rules the ‘Agreement for Sale’ to be entered into between the promoter and the allottee. This Agreement is binding on the parties, however, internal flexibility could be provided in the said Agreement for Sale, for determination / insertion of other provisions as decided between the parties, provided these are not contrary to any provision of the Act or Rules, and of the principles of fairness and equity.
As per section 14 of the Act the promoter can only modify/ amend the sanctioned plans or project specifications, after they have been approved by the competent authority and disclosure to the allottees, to the extent of minor additions or alterations.
However, in case of major modification/ alteration, the promoter can modify the sanctioned plans or project specification only after taking approval from two-thirds of the allottees. For arriving at the number of two-third allottees, the number of apartments held by the promoter will be excluded. Also, irrespective of the number of apartments held by an allottee or family members (as defined in Sec 2(x)) he/she shall only be entitled to one vote.
As per section 14(2) the promoter shall be liable for 5 years form the date of handing over of possession to the allottee towards structural defect or any other defect as specified therein.
As per section 15 the promoter is not entitled to transfer or assign his majority rights and liabilities in the project to a third party, without obtaining the prior written consent of two-thirdsof allottees and the Regulatory Authority.
For arriving at the number of two-third allottees, the number of apartments held by the promoter will be excluded. Also, irrespective of the number of apartments held by an allottee or family members (as defined in Sec. 2(x) he/she shall only be entitled to one vote.
As per section 16 the promoter is required to take an insurance of the real estate project towards title of the land and towards construction of the project, in the manner as may be notified by the appropriate Government.
Section 17 of the Act provides for detailed provisions regarding transfer of title of the apartment and the project to the allottee and to the association of the allottees respectively.
Section 18 of the Act provides for various situations in which the allottee would be compensated by the promoter due to delay in completion of the project etc.
IV. RIGHTS AND DUTIES OF ALLOTTEES
Q48) What Are The Rights And Duties Of The Allottees Under The Act?
Section 19 provides for the various rights of the allottees. This section specifies various rights which the allottees have, including those which the promoters are liable to fulfill based on the agreement entered into with the allottees, namely– stage-wise schedule of completion of the project and the services, claim timely possession of the apartment/ plot, entitlement to necessary documents and plans etc.
Section 20 provides for the various duties of the allottees, which provide for matters relating to payment regarding the apartment/ plot, liability towards interest for delay in payment, responsibility to take possession, participate in formation of association etc.
As per section 22 the Chairman and the Members of the Authority are required to be appointed by the State Government on the recommendations of a Selection Committee comprising of the Chief Justice of the High Court, the Housing Secretary and the Law Secretary.
Apart from the day to day implementation of the Act and the Rules and Regulations made thereunder the immediate responsibility of the Regulatory Authority are:
- Registration of the real estate project and the real estate agent;
- Extension of registration of the real estate project and its revocation;
- Renewal of registration of the real estate agent and its revocation;
- As per section 34 the Authority is responsible to to maintain a website of records for public viewing of –
- all projects registered with the Authority including details of projects as specified in the Act and the rules and regulations - to be disclosed on the website;
- details of promoters with photographs of promoters;
- details of projects in case of revocation of registration or where any project penalized under the Act;
- details of agents registered under the Act including his photograph and also of those agents whose registration has been revoked.
- As per section 71 the Authority is required to appoint one or more ‘adjudicating officer’ in consultation with appropriate Government.
- As per section 85 the Regulatory Authority is required to notify Regulations within 3 months of establishment.
- As per section 32 the Regulatory Authority is also required to make recommendations on various matters for the growth and promotion of a healthy, transparent, efficient and competitive real estate sector.
Section 31 of the Act provides for filing of complaint by an aggrieved with the Regulatory Authority. The form and manner and the fees payable for filing the complaint are specified in the Rules. (See Form M).
Section 29 provides that the Authority should endeavour to dispose of the questions / complaints as expeditiously as possible but not later than sixty days from the date of filing the same. However, where it could not be disposed of during the said period the Authority is required to record its reasons for the same.
VI. CENTRAL ADVISORY COUNCIL
Q53) What Is The Composition Of The Central Advisory Council?
The Central Advisory Council, to be headed by the Union Minister for Housing, is a multi-member body comprising of representatives of specified Central Ministries, five representatives of State Governments to be selected by rotation, five representatives of Regulatory Authorities to be selected by rotation and any other central government department as notified.
The Central Advisory Council is also required to have representatives of consumers, real estate industry, real estate agents, construction labourers, NGOs, and academic / research institutions.
The Central Advisory Council is required to advise the Central Government on matters relating to implementation of the Act, questions of policy, protection of consumer interest, foster growth and development of the real estate sector, and other matters as may be assigned to it by the Central Government.
VII. THE REAL ESTATE APPELLATE TRIBUNAL
Q55) What Is The Timelines For Establishment Of The Appellate Tribunal Under The Act?
As per section 43 of the Act, the Appellate Tribunal is required to be established latest by 30th April, 2017. The State Government may designate an existing Appellate Tribunal (under any other law in force) to function as an Appellate Tribunal under the Act.
The Appellate Tribunal is a quasi-judicial body, which is empowered to hear appeals from the orders / decisions / directions of the Regulatory Authority or the Adjudicating Officer, as the case may be. The form and manner and the fees payable towards filing the appeal and the manner for hearing and disposing the appeal are to be provided by Rules to be made by the State Government. (See Form L).
Any person aggrieved by the decision or order of the Appellate Tribunal can file an appeal with the High Court.
Section 44 provides that the Appellate Tribunal should endeavour to dispose of the appeal as expeditiously as possible but not later than sixty days from filing the appeal. However, where the same could not be disposed of during the said period the Appellate Tribunal is required to record its reasons for the same.
As per section 46 the Chairman of the Appellate Tribunal shall be a sitting or retired Judge of the High Court. Section 46 also provides that the Appellate Tribunal shall comprise of at-least two Members one of whom shall be a Judicial Member and the other shall be a Technical or Administrative Member.
As per section 46 the Members of the Appellate Tribunal are required to be appointed by the appropriate Government on the recommendations of a Selection Committee comprising of the Chief Justice of the High Court (or his nominee), the Housing Secretary and the Law Secretary. The section also provides for the qualification etc. that are required for the appointment of the Judicial / Administrative Members.
VIII. OFFENCES, PENALTIES AND ADJUDICATION
Q60) What Is The Punishment Prescribed For Non-Registration Of A Project Under The Act?
As per section 59, it is obligatory for the promoter to register a project with the Authority, and if he fails to do so, he shall be liable to a penalty of up to ten percent of the estimated cost of the real estate project.
In case the promoter consistently defaults or does not comply with the directions/ orders of the Authority as regards registration of the project with the Authority, he shall be liable to additional fine of ten percent of the estimated cost of the real estate project or imprisonment upto 3 years or both.
As per section 60 if the promoter defaults as regards matters covered under section 4, he shall be liable to a penalty of up to five percent of the estimated cost of the real estate project.
As per section 61 if the promoter defaults any other provision of the Act or the Rules and Regulations made there under, he shall be liable to a penalty of up to five percent of the estimated cost of the real estate project.
As per section 63 if the promoter fails to comply with the orders of the Authority, he shall be liable to a penalty for every day of default, which may cumulatively extend up to five percent of the estimated cost of the real estate project
As per section 64 if the promoter fails to comply with the orders of the Appellate Tribunal, he shall be liable to a penalty for every day of default, which may cumulatively extend up to ten percent of the estimated cost of the real estate project or with imprisonment for a term which may extend upto three years or with both.
As per section 62, where under the Act, it is obligatory for the real estate agent to register himself with the Authority, and the real estate agent fails to do the same, he shall be liable to a penalty of up to rupees ten thousand per day of default, which may cumulatively extend up to five percent of the cost of the plot / apartment, for which the sale has been facilitated by him.
As per section 65 if the real estate agent fails to comply with the orders of the Authority, he shall be liable to a penalty for every day of default, which may cumulatively extend up to five percent of the cost of the plot/ apartment, for which the sale has been facilitated by him.
As per section 66 if the real estate agent fails to comply with the orders of the Appellate Tribunal, he shall be liable to a penalty for every day of default, which may cumulatively extend up to ten percent of the cost of the plot/ apartment, for which the sale has been facilitated by him or with imprisonment for a term which may extend upto one year or with both.
As per section 67 if the allottee fails to comply with the orders of the Authority, he shall be liable to a penalty for every day of default, which may cumulatively extend up to five percent of the cost of the plot/ apartment.
As per section 68 if the allottee fails to comply with the orders of the Appellate Tribunal, he shall be liable to a penalty for every day of default, which may cumulatively extend up to ten percent of the cost of the plot / apartment or with imprisonment for a term which may extend upto one year or with both
As per section 70 if any person is punishable with imprisonment under the Act, the same may be compounded on such terms and conditions which may be prescribed by Rules made by the appropriate Government. In addition, the fine payable in lieu of imprisonment needs to be specified by the said Rules, which cannot be more than the maximum fine payable for that offence.
The Adjudicating Officer is a quasi-judicial person who is mandated to adjudicate on disputes arising under section 12, 14, 18 and section 19. The Adjudicating Officer shall be a person who is or has been a District Judge.
The Adjudicating Officer shall, while deciding the disputes under section 12, 14, 18 and 19 of the Act, have regard to – the amount of disproportionate gain or unfair advantage, the amount of loss, repetitive nature of the default and such other factors that the Adjudicating Officer may consider necessary in furtherance of justice.
IX. FINANCE, ACCOUNTS, AUDITS AND REPORTS
Q73) What Is The Mechanism To Finance The Functioning Of The Authority?
A Real Estate Regulatory Fund shall be established. The State Government shall make grants and loans to the Authority. The fees payable to the Authority shall also be deposited in the Fund.
The Fund is to be used towards payment of salary and allowances to the Chairperson and the Members of the Authority and the Appellate Tribunal and such other expenses of the Authority in connection with the functions and purposes specified under the Act.
As per section 76 penalties recovered under the Act are to be deposited in the State Account .
As per section 77 the Authority is required to prepare a budget and maintain proper accounts and other relevant records and also prepare an annual statement of accounts in the manner as may be prescribed by Rules made by the State Government.
In addition, section 77 provides that the accounts of the Authority are required to be audited by the Comptroller and Auditor General of India.
The accounts of the Authority as certified by the Comptroller and Auditor General of India (audit report) is required to be forwarded to the State Government for it to be laid before the State Legislature.
As per section 78 the Authority is required to prepare an Annual Report, to be forwarded to the State Government for it to be laid before the State Legislature.
Q77) Are The Civil Courts And Consumer Forums Barred From Entertaining Disputes Under The Act?
As per section 79 of the Act civil courts are barred from entertaining disputes (suits or proceedings) in respect of matters which the Authority or the adjudicating officer or the Appellate Tribunal is empowered under the Act to determine. However, the consumer forums (National, State or District) have not been barred from the ambit of the Act.
Section 71 proviso permits the complainant to withdraw his complaint as regards matters under section 12, 14, 18 and section 19, from the consumer forum and file it with the adjudicating officer appointed under the Act.
The laws of the country do not permit forum shopping, thus, an aggrieved can only approach one of the two for disputes over the same matter.
As per section 81, the Authority is empowered to delegate such of its powers and functions under the Act to any Member, officer or any other person subject to conditions specified in the order issued for the same. However, the Authority cannot delegate the responsibility of making Regulations under section 85 under the Act.
As per section 86 every Rule, Regulation, notification issued by the State Government or the Authority, is required to be laid before the State Legislature.
The Central Government, under section 91, has been empowered to notify Orders towards removal of difficulties while implementing the Act. However, such removal of difficulties Order cannot be issued after the expiry of a period of two years since its commencement.