Real Estate (Regulation and Development) Act 2016 (RERA)

Subject – Governance

Context – SC verdict on real estate Act benefits homebuyers

Concept –

The Act seeks to protect home-buyers as well as help boost investments in the real estate sector by bringing efficiency and transparency in the sale/purchase of real estate.
The Act establishes 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.

Key Provisions of Real Estate Regulation Act

Establishment of state level regulatory authorities– Real Estate Regulatory Authority (RERA): The Act provides for State governments to establish more than one regulatory authority for promotion and regulation of the sector.
Establishment of Real Estate Appellate Tribunal- Decisions of RERAs can be appealed in these tribunals.
Mandatory Registration: All projects with plot size of minimum 500 sq.mt or eight apartments need to be registered with Regulatory Authorities.
Deposits: Depositing 70% of the funds collected from buyers in a separate escrow bank account for construction of that project only.
Liability: Developer’s liability to repair structural defects for five years.
Penal interest in case of default: Both promoter and buyer are liable to pay an equal rate of interest in case of any default from either side.
Cap on Advance Payments: A promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale.
Defines Carpet Area as net usable floor area of flat. Buyers will be charged for the carpet area and not super built-up area.
Punishment: Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.

Supreme Court Rulings –

Last week, the Supreme Court affirmed that the provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA) are applicable to projects that were ongoing and for whom completion certificates were not obtained at the time of the enactment of the law, in effect interpreting that the law is retroactive.
The court also held that the amount invested by the allottees, along with interest as quantified by the regulatory authority or the adjudicating officer, can be recovered as arrears of land revenue from the builders.
Aimed at protecting homebuyers, the ruling brings a major relief for the buyers, speeds up the resolution process, and makes it difficult for state governments to dilute the intent of the law.
Under Chapter II of the Act, registration of real estate projects was mandatory. It mandated that for projects that were ongoing on the date of commencement of the Act, specifically projects for which the completion certificate had not been issued, the promoters shall be under obligation to make an application to the authority for registration of the project.
- Projects that received their completion certificate prior to enactment of RERA, however, are not covered by the law.

What must builders do for filing an appeal?

The Supreme Court affirmed that it is mandatory for real estate developers to deposit at least 30% of the penalty ordered by the regulator, or the full amount as the case may be, before they challenge any RERA order under Section 43(5).
This is expected to ensure that only genuine appeals are filed and homebuyers’ interests are protected.