The Real Estate (Regulation and Development) Act, 2016: Empowering Real Estate in India
The Real Estate (Regulation and Development) Act, 2016, is a landmark piece of legislation enacted by the Parliament of India with a dual mission: to safeguard the interests of homebuyers and stimulate investments in the real estate sector.
This Act introduces the Real Estate Regulatory Authority (RERA) in each state, serving as both a regulatory body for the real estate industry and an efficient mechanism for resolving disputes.
The Act received unanimous approval, passing the Rajya Sabha on 10 March 2016 and the Lok Sabha on 15 March 2016. It officially took effect on 1 May 2016, with 61 of its 92 sections being implemented initially.
The remaining stipulation took effect as on 1 May 2017. Both the Central and state governments are mandated to establish the Rules under the Act within six months from its enactment.
The core purpose of this legislation is to establish the Real Estate Regulatory Authority, which will oversee and promote the real estate sector, ensuring that property sales, whether plots, apartments, or buildings, occur in a transparent and efficient manner.
It further aims to safeguard the interests of consumers within the real estate domain and set up an adjudicating mechanism for expeditious dispute resolution.
An Appellate Tribunal is also established to handle appeals stemming from the decisions, directives, or orders issued by the Real Estate Regulatory Authority and the adjudicating officer.
The real estate industry holds a paramount position in revenue generation for both State Governments and the Government of India. Various forms of taxation, including stamp duty, registration charges, and property tax, are imposed on real estate transactions.
Regulations such as RERA were deemed necessary to bolster investor trust in India’s real estate sector. RERA has successfully struck a balance between property buyers and developers, thereby mitigating risks associated with property transactions.
Post-implementation of RERA in the real estate sector, home-buyers have been empowered with access to comprehensive project information and related documents.
Developers are now obligated to ensure the timely possession of properties to buyers, backed by the provision of interest and compensation for any delays. Furthermore, RERA enforces the sale of properties based on carpet area, enhancing transparency and trustworthiness in the industry.
Real Estate Project Registration
The Act outlines the registration procedures for real estate projects, as articulated in Section 3. It mandates the compulsory registration of all real estate projects with RERA to ensure heightened transparency in project marketing and execution.
For ongoing projects that have not obtained a completion certificate at the Act’s commencement date, registration is imperative within a three-month window. Each State RERA is entrusted with the responsibility to either approve or reject registration applications within 30 days from the date of submission by the project’s promoter.
Successful registration grants the project’s promoter a registration number, login credentials, and access to the State RERA’s website to furnish essential project details.
Failure to register carries penalties, potentially amounting to 10% of the estimated project cost.
Furthermore, non-compliance with orders, directives, or decisions issued by the State RERA may result in imprisonment for a duration of up to three years or a fine extending up to an additional 10% of the estimated project cost.
As per RERA, real estate projects must register if the proposed land area to be developed exceeds 500 square meters or includes more than eight apartments.
The Act also mandates the registration of projects lacking a completion certificate (CC) or occupancy certificate (OC) issued on or before the Act’s enforcement date.
During the RERA registration process, builders are obligated to divulge comprehensive project information, including land status, approvals, proposed completion dates, and promoter details.
Developers or builders are strictly prohibited from advertising or marketing any real estate project or its components without mandatory RERA registration.
Real Estate Agent Registration
The Act outlines the registration requirements for real estate agents, as detailed in Section 3.
Real estate agents engaged in facilitating property sales or purchases are mandated to undergo prior registration.
Each real estate agent is granted a unique registration number for every State or Union Territory, which they must cite in all sales transactions they facilitate.
Non-compliance with registration or violation of the stipulations laid out in section 9 (Registration of Real Estate Agent) and section 10 (Functions and Duties of a Real Estate Agent) will result in penalties.
A penalty of ₹10,000 is imposed for each day during which the default persists.
This penalty has the potential to accumulate to an amount up to 5% of the total cost of the plot, apartment, or building, as applicable to the real estate project in question.