GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY
Labour Law 2 Internal Assessment
RERA Act: A Critical Analysis
SUBMITTED BY:
Rohan Yadav
8th semester
02616503519
Introduction
The Real estate (Regulation and Development) Act,2016 is an act of the parliament of India. An
act to establish the real estate regulatory authority for regulation and promotion of the real estate
sector and to ensure sale of plot, apartment or building, as the case may be, or sale of real estate
project, in an efficient and transparent manner and to protect the interest of consumer in the real
estate sector and to establish an adjudicating mechanism for speedy dispute release.
The real estate bill was passed by Rajya Sabha on 10th March, 2016 and the Lok sabha on 15th
March,2016. The bill was passed by the Honourable President on 25th March, 2016. The act was
published by the honorable President and was published in the Official gazette on 26th March
2016 for public information. According to RERA, each state and union territory will have its
own regulator and set of rules to govern the functioning of the regulator. The Centre has drafted
the rules for Union territories including the national capital. While many states are still behind on
schedule for notification of RERA rules, many have notified rules and a regulator will start
functioning. Some of states which are notified till 31st July 2017 are Maharashtra, Andhra
Pradesh, Bihar, Chattisgarh, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Odisha,
Punjab, Rajasthan, Tamilnadu, Uttar Pradesh, Uttarakhand.
Delays in projects are the biggest issue faced by buyers. The reasons are many and the impact is
huge. Since the last 10 years, many projects have seen delays of up to 7 years. Projects launched
after the turn of this decade have faced delays as well. The reasons include diversion of funds to
other projects, changes in regulation by authorities, the environment ministry, national green
tribunal etc and bodies like those involved in infrastructure and governing transport. In many
places, land acquisition becomes an issue. Errant builders often sell projects to investors without
the approval of plans, bad quality of construction ,projects stuck in litigation etc. RERA seeks to
address issues like delays, price, quality of construction, and other changes.
The promoter of a real estate development firm has to maintain a separate escrow account to
each of their projects. A minimum 70% of the money from investors and buyers will have to be
deposited. This money can only be used for construction of projects and cost of borne towards
land. RERA requires the builders to submit the original approved plans for their ongoing projects
and alteration that they made later. They also have to furnish details of revenue collected from
allotters, how the funds are utilized, the timeline for construction, completion and delivery that
will need to be certified by an engineer/Architect/Practicing Chartered Accountant.
It will be the responsibility of each state regulator to register the real estate project and real estate
agent operating in their state under RERA. The Details of all the registered projects will be put
on the Website of public access. Developers can't invite, advertise, sell, offer, market or book
any plot, apartment, house, building, investment in a project, without first registering it with the
regulator authority. Furthermore, after registration, all the advertisements inviting investment
will bear the RERA registration number.
Background of RERA
A need for a comprehensive regulatory body was felt for tackling the struggling real estate
sector. The National Housing/Urban Development and Municipal Administration Ministers
Conference of 2009, concentrated on affordable housing for all. The outcome of this conference
included a greater emphasis on urban land-use policies, roadmaps for slum-free cities,
managerial and financial strengthening of local public bodies, and analysis of the existing
regulatory and legal frameworks. The recommendations also included the creation of a model
Real Estate Regulation Bill by the Ministry of Housing and Urban Poverty Alleviation which
addresses the issues of land valuation system and urban development regulation. After that, the
Central Government had consultations with India's Competition Commission, Tariff
Commission and Consumer Ministry to enact a model law for the real estate sector. In July 2011,
the Ministry of Law and Justice suggested that the legislation comes under the Concurrent List
of the Constitution. Subsequently, on 14 August 2013, the Real Estate (Regulation and
Development) Bill was introduced in the Rajya Sabha. In order to protect consumers and ensure
standardization of real estate transactions, the Bill established a number of state-level Real Estate
regulatory authorities. It offered transparent and efficient supervision and promotion of real
estate.
Prior to the introduction of the Real Estate (Regulation and Development) Act, 2016, Indian real
estate customers had little legal recourse and they were offered consumer protection under
various acts such as the Indian Contract Act, 1872; the Consumer Protection Act, 1986, Indian
consumers had to approach various authorities, such as the Consumer Courts and the Civil
Courts, to deal with their grievances. Also, prior to the introduction of the above Act, there was
no single regulatory authority for the regulation of the real estate sector, and buyers had to face
various problems such as timely delivery of projects, delay in handing over the possession by the
developer, high-interest rates charged on late payments, multiple bookings for the same property,
project failures, etc. On the other hand, developers had to overcome the issues such as delays in
building permits, late payments by homeowners, and non-transparent operations.
"Real Estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense,
paid in full, and managed with reasonable care, it is the safest investment in the world." -
Franklin D. Roosevelt
The truth of this statement is inevitable even today, as the scurry of owning a home is high at all
times. In this regard, with the advent of the Real Estate (Regulation and Development) Act, 2016
(RERA), we now have a central piece of legislation governing the rights and obligations of all
key players in the real estate sector, which was previously largely governed by the local laws of
each State.
Which Projects Come Under RERA?
The projects which shall come under the RERA are likely to be:
● Commercial and residential projects including plotted development.
● Projects measuring more than 500 sq. meters or 8 units.
● Projects without Completion Certificate, before the commencement of the Act.
The project is only for renovation/repair / re-development which does not involve re-allotment
and marketing, advertising, selling, or new allotment of any apartments, plot, or building in the
real estate project, will not come under RERA.
Impact in Indian economy
The three policies implemented together were demonetization, GST and RERA which at the time
had several effects on the Indian economy. Demonetization has also affected the middle class
and
the lower class. RERA was put into effect after six months of demonetization which again
detrimentally affected the real estate market. The introduction of RERA with the intention of
regulating the real estate market has since its inception turned out to be an impediment to its
development.
RERA directly impacted small-scale developers and contractors in the metropolitan areas due to
the lack of job prospects for the workers as many of the planned real estate projects were either
abandoned or delayed until they were registered with the RERA. The change in liability and
increased responsibility of the builders in terms of the delivery of the property was balanced by
the developers by a collective increase in the price of the properties up to 40 percent more than
their previous prices within a fortnight in Mumbai, 30-40 percent in Bangalore and around 25-30
percent in Delhi; although the expected price rise was not more than 10 percent. Moreover,
demonetization reached the buying power so there were even smaller buyers on the market. The
situation arose in which the sellers could not possibly sell the property at lower prices due to
limited incentives and buyers were unwilling to buy property due to their income hit by
demonetization or the reduced liquidity of the property and were simply waiting for the sellers to
lower the price. But the real estate market has been sluggish.
Lacunas in the RERA ACT
● RERA describes categorically what is a carpet area but, in order to better grasp the net
functional area, it should also include the area sold to the allottees for their individual
use, such as the living room, the bedroom, the kitchen area, and the lavatory. This area is
not to include the area enclosed by walls of partition.
● Section 31 of the RERA makes it mandatory for every potential project to be registered
under the Act. RERA also bars pre-launches in the absence of authorization by the
agency concerned. The challenge occurs as several phases include the construction of a
real estate project and then approval is to be obtained for each project. The project's
progress will face hindrance due to the lack of a single-window clearance and be delayed.
For example, if a project is made in Delhi then it needs the developer to obtain 41 permits
or clearance within 60 days.
1
Real Estate (Regulation and Development) Act, 2016, section 3.
● Insufficient recovery powers with RERA tend to be a big lacuna that fails to comply with
all the orders issued in favor of homebuyers by the RERA authorities of their respective
states.
● The challenge occurs as several phases include the construction of the real estate project
then the approval is to be obtained for each project. The project's progress will face
hindrance due to the lack of a single-window clearance and be delayed. For example, if a
project is made in Delhi then it needs the developer to obtain 41 permits or clearance
within 60 days. Whereas Section 322 of the Act states that it is the duty of the RERA to
make a recommendation on the development of a single-window system to the
appropriate government of the competent authority to see if the project is completed in
due time.
● The rules and regulations passed in the new bill do not apply to the ongoing projects or
projects that are held up due to some clearance issues.
● Government agency delay in approval and clearance may hinder the timely delivery of
products.
● Small developers with projects less than 1000 sq. m. do not come under the purview of
this act and registration with the regulator is not mandatory for these.
● Without clearance, projects cannot be launched and so the launching of new projects may
get delayed.
Judicial Insight Of RERA
Section 3(1)3 of the RERA prohibits a promoter from, inter alia, advertising, selling or offering
to sell any property, apartment or building in a real estate project, without the Authority having
registered such real estate project. On the other hand, Section 3(2) 4 of RERA offers exemptions
for such real estate projects from the registration under RERA.
The Haryana Real Estate Regulatory Authority, Panchkula (HARERA Panchkula), in its
landmark judgment in Sanju Jain vs. TDI Infrastructure Ltd.5 addressed the question of whether
2
Real Estate (Regulation and Development) Act, 2016, section 32.
3
Real Estate (Regulation and Development) Act, 2016, section 3(1).
4
Real Estate (Regulation and Development) Act, 2016, section 3(2).
5
Sanju Jain vs. TDI Infrastructure Ltd, 2018.
the Authority had jurisdiction over unregistered projects in the affirmative. In addition, as
regards the applicability of the RERA provisions to promoters of unregistered projects, the
Authority held that:
Section 116 of the Act defines and elaborates on the functions and duties of a promoter. Nowhere
in this section is used the expression Promoter of a registered project' and since the expression
used everywhere in the Section is 'Promoter', it cannot be legitimately argued that the duties cast
upon the promoter will be applicable only to the promoter of a registered project and not to the
promoter of an unregistered project.
Section 34(f)7 of the Act enjoins a duty upon the Authority to ensure compliance of all the
obligations by the stake-holders in the real estate project as envisaged under the Act, Rules and
Regulations made thereunder. There is no provision in the Act which expressly or impliedly
provides that duties, responsibilities and obligations of a promoter towards his allottees will
cease to exist upon grant of completion or occupation certificate, So, no promoter can be allowed
to argue that he stands absolved of discharging his statutory obligations after receipt of
completion certificate or that the Authority after the grant of completion certificate will have no
jurisdiction to adjudicate the complaints of the allottees.
That apart, the issuance of a part or full completion certificate will not be conclusive proof of the
fact that the project has been developed as envisaged under the agreement of sale executed
between the promoter and the allottee. Unless the development of the project is carried out in the
manner as promised to the allottee under the agreement of sale, the allottee may have some
genuine grievance against the promoter and will have the right to invoke the jurisdiction of this
Authority for redressal of his grievance, irrespective of the fact that the promoter had obtained a
completion/part completion or a occupation certificate for his project. The actual status of the
project in such eventuality shall always remain a subject for verification by the Authority in
order to determine whether or not the promoter has discharged his obligations in respect of
development works. Thus viewed, no promoter can save himself from discharging his
6
Real Estate (Regulation and Development) Act, 2016, section 11.
7
Real Estate (Regulation and Development) Act, 2016, section 34(f).
obligations on the ground that he has obtained a completion/occupancy certificate in respect of
his project and this Authority has jurisdiction to adjudicate upon the complaint filed against a
promoter regarding non-performance of his obligations.
The other relevant decision in this respect was taken by the Haryana Real Estate Regulatory
Authority, Gurugram ("HARERA Gurugram") in the case of Simmi Sikka vs. Emaar MGF Land
Limited8, where the HARERA Gurugram summarized its views on the applicability of RERA
and the Authorities' jurisdiction as follows:
Applicability of the act
(a) The Real Estate (Regulation and Development) Act, 2016 mentions nowhere that it is
applicable only for registered projects.
(b) The Real Estate (Regulation and Development) Act, 2016 provides certain categories of
projects that are not required to be registered but these are within the ambit of the Act. These
projects mentioned in section 3(2) have been taken out of registration requirements but not out of
the purview of other provisions of the Act.
(c) The provisions regarding registration and obligation during registration are applicable only
for the registered projects.
(d) A complaint pertaining to violation of provisions of the Real Estate (Regulation and
Development) Act, 2016, the Haryana Real Estate (Regulation and Development) Rules, 2017
and regulation thereunder may be filed by any aggrieved person in respect of real estate
belonging to any real estate project which qualifies to be a real estate project as per the definition
given in section 2(z)(n) of the Real Estate (Regulation and Development) Act, 2016.
With respect to the applicability of RERA, both the Haryana Authorities in Sanju Jain VS. TDI
Infrastructure Ltd. (supra) and Simmi Sikka vs. Emaar MGF Land Limited (supra) placed more
emphasis on the absence of certain terms and conditions than on the specific provisions of RERA
8
Simmi Sikka vs. Emaar MGF Land Limited, 2018.
as they exist today. While the HARERA Gurugram stated that the ventures listed under Section
3(2) were not removed from the RERA requirements, the Authority did not include any
justification for such a view. It is respectfully claimed that the absence of a consistent
understanding of RERA's requirements will contribute only to greater uncertainty as to the
applicability of this law.
Right to refund
On the issue of whether an allottee can demand refund while withdrawing from a project which
was near completion, the HARERA Ponchkula's view can be effectively summed up by its
decision in the case of Baldev Singh vs. Ultratech Township Developers Private Limited 9. The
Authority in such case has ruled that -
"In case the relief of refund is granted to the complainant, interests of the rest of the non-
complainant allottees could also get seriously jeopardized. Moreover, the respondent has stated
in his reply that the flat of the respondent is complete and ready for possession and the
complainant can take possession of the flat after clearing his pending dues. Thus, in the opinion
of this Authority, it not only is entrusted with the responsibility to protect the interest of the
home-buyers including the complainant but also has to promote orderly growth of real estate
industry through efficient project execution in the larger public interest."
A similar view has been held by HARERA Gurugram in a string of decisions37, wherein the
Authority has observed that -
"The authority is of the view that in case the refund is allowed in the instant complaint, it shall
adversely affect the right of allottees who wish to continue with the project. Further, it will also
hamper the completion of the project. Therefore, in the interest of justice, the relief sought by the
complainant regarding refund of the deposited amount cannot be allowed."
As is evident from the decisions mentioned in the preceding section, both the authorities have
consistently held that the demand for a refund of an allottee shall not be permitted in cases where
9
Baldev Singh vs. Ultratech Township Developers Private Limited, 2020.
the real estate projects were near completion or completion. However, it may be noteworthy to
note that in cases where the construction of a project was either negligible or bleak, in fact,
HARERA Gurugram has upheld the right of allottees to obtain refunds from the promoters of
such projects for their investments.
Updates in 2021 under the RERA Act
The Maharashtra RERA authorities have updated the MahaRERA rules.
The conversion of agricultural land to non-agricultural property is authorized, according to the
most recent MahaRERA update of August 16, 2021. Only if the agricultural land is located
outside of the metropolitan area and no infrastructure has been provided would it be suitable for
non-agricultural usage. The land must, however, be registered with RERA. If the developer
provides an authentic record signed by the Tehsildar, the developer will be granted permission to
build the project. It contains information on whether or not all of the prerequisites have been
completed, and it will aid in obtaining the "Completion Certification" at a later time.
The RERA Authority considered the demands of real estate developers.
The Housing Secretary of India recently spoke about the demands made by real estate developers
on May 31, 2021. The demands are centered on project completion deadline extensions. The
pandemic outbreak put a halt to ongoing projects, halting their progress. As a result, the
developers have requested a 6- to 9-month extension to complete ongoing work.
By March 2021, the government will have approved the Model Tenancy Act.
The Model Tenancy Act has passed the final stages of approval, according to the RERA report
from January 19, 2021. The template has been discussed with government officials, and
preliminary negotiations concerning final approval have taken place. The Act will be passed by
March 2021, according to Secretary of Housing and Urban Affairs Durga Shanker Mishra. All of
the reviews received by the concerned experts were taken into account by the officials, and the
Act has already been translated into all Indian languages. Telugu, Tamil, Assamese, Malayalam,
Gujarati, Punjabi, and various other languages are among them.
Key provisions of RERA
The Real Estate Regulation and Development Act 2016 has several key provisions that are aimed at
regulating the real estate sector in India. Some of the important provisions of the act are:
1. Establishment of Real Estate Regulatory Authority (RERA): RERA mandates the establishment
of a Real Estate Regulatory Authority in each state and union territory of India. The authority is
responsible for regulating the real estate sector in the state and ensuring that the provisions of the
act are implemented.
2. Registration of real estate projects: RERA makes it mandatory for all real estate developers to
register their projects with the state RERA. This ensures that the developers are accountable and
provide all necessary information related to the project, such as the timeline, project plan, and other
details.
3. Escrow account: RERA requires developers to maintain a separate escrow account for every
project. This account is meant to ensure that the funds collected from buyers are used only for that
particular project and not diverted to other projects.
4. Carpet Area: RERA defines the carpet area of a property and makes it mandatory for developers
to sell properties based on the carpet area and not the super built-up area.
5. Penalty for non-compliance: RERA imposes heavy penalties on developers for non-compliance
with the provisions of the act. The penalties can be up to 10% of the project cost or imprisonment
for up to three years.
Impact of RERA
The Real Estate Regulation and Development Act 2016 has had a significant impact on the Indian
real estate industry. The act has brought in much-needed transparency and accountability in the
sector, which was previously unregulated. The following are some of the impacts of RERA:
1. Protection for homebuyers: RERA ensures that homebuyers are protected from fraudulent
developers and are provided with all necessary information related to the project. This has
increased the confidence of homebuyers in the real estate sector.
2. Improved project delivery: RERA mandates developers to complete projects on time and
maintain transparency in all transactions. This has resulted in improved project delivery and
increased trust among homebuyers.
3. Increase in foreign investment: The implementation of RERA has made the Indian real estate
sector more transparent and attractive to foreign investors. This has led to an increase in foreign
investment in the sector, which is expected to boost the growth of the industry.
Conclusion
The Indian real estate sector , before 2016 was functioning in a very hayward and unorganized
way. It was RERA which has the capability to clean up this sector and make a much more
organized sector which can become the driver of the Indian economy. With the government's
goal of HOUSE TO EVERY INDIAN by 2022, it is necessary that some type of discipline is
injected into the real estate sector so that they can help the government in fulfilling the dream of
giving house to every Indian. Even from the developer point of view this act was necessary so
that they complete projects timely and do not face any judicial difficulties and also become more
agile before launching the projects. There is a benefit to the buyer as this new act has become the
trust bridge between buyer and developer. But there are some issues which need to be addressed
and also the scope of this act should be modified as it can become more business friendly to the
sector. There are some challenges which are faced by various stakeholders due to
implementation of this act. Buyers should be made aware about their rights; this can bring more
transparency to the transaction. RERA adds a greater accountability to the developer as they
have to deliver projects on time and with the said quality and size of the unit. Some changes to
this act can make this act a transformation tool of the real estate sector.
