Article by Avani Parnami. Edited by Chinmay Jain.
Non registration of RERA can be disastrous for your business as there are several liabilities involved.
However, land in India is a subject matter of state list under seventh schedule of the constitution and ‘Transfer of property other than agricultural land’, ‘ registration of deeds and documents’ and ‘ contracts other than for agriculture land’ fall under the concurrent list of the constitution.
In India there are several real estate laws which are governed and impacted by state specific laws and federal laws. However, by the time you reach the end of this article, you will know how you can register yourself with RERA without any issues!
Now, the following are some of the key laws or legislations governing real estate-
- The Transfer of property act, 1882- This acts deals with concepts of movable and immovable property such as sale, exchange, mortgage, lease etc. This act is a central act and the states have to adopt the provisions of this act.
- Indian easement act, 1882- As the name suggests this act deals with Easementary rights to immovable property.
- Registration Act, 1899- This act deals with transfer of immovable property and the requirements of registration and documents related to it.
- Right to fair compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013- This acts mainly governs the purchase of private property for public purposes by the government and the compensation and rehabilitative measures to be undertaken by the government.
- Land Revenue codes- Some states have planned their own land revenue codes according to the requirements of the states. These codes majorly deals with agricultural land and revenue and tenancy and matters related to that.
- Indian Stamp Act, 1899- As the name suggests this acts deals with payment of stamp duty and matters related to that.
- The Real Estate (Regulation and Development) Act, 2016 (RERA) – This act works in a way to protect the interests of consumers and governs development and sale of real estate projects. It was through this act that it was established a speedy trial through the Real Estate regulatory Authority and Appellate tribunal and this act made registration of projects and key players in the real estate sector compulsory.
Other than these acts there are other local and state laws which govern matters related to real estate such as development, slum rehabilitation, building ownership, apartment ownership, property tax and Special economic zones (SEZs), etc.
Now the focus of this article as mentioned is about the RERA. First of I will Start by introducing to the Real Estate (Regulation and Development) Act, 2016 (RERA).
RERA was passed in 2016 in the parliament but it came into effect on 1st may, 2017. As mentioned earlier the act works in way to protect the interest of customers and help in boost investment in the real estate sectors. This act increased the efficiency in work by bringing transparency in the sale or purchase of the real estate.
This Act also established Real Estate Regulatory Authority in every state for the regulation of real estate and this also acts as an adjudication body for speedy trial.
This Act was passed because there were several problems faced by the real estate sectors such as regulation, huge amount of black money, cheating instances, delays in projects, issues in prices and deals and the main problem no authority for readdressed.
The main objectives of this act are-
- Increase transparency and accountability in transactions.
- Increase investment domestic as well as international.
- Provide uniform regularity.
- Empower and protect the house buyers.
- Establish authority for grievances.
Some of the key provisions which are established by this act are-
- Establishment of authority- This act allows the state to establish more than one authority for regulation with the some requirements like- “Register and maintain a database of real estate projects; publish it on its website for public viewing, Protection of interest of promoters, buyers and real estate agents Development of sustainable and affordable housing, Render advice to the government and ensure compliance with its Regulations and the Act.”
- Real estate appellate tribunals- The decisions of the authority can be appealed in these tribunals.
- Registration- The act mandates that all the projects with minimum 500 sq.mt or eight apartments need to be registered with regulatory authority.
- Deposits- 70% of the funds needs to be deposited from the buyers to a separate bank account for the construction of the project.
- Cap on advance payment- This act prohibits the promoter to accept more than 10% as an advance payment on any project unless they have entered the agreement for sale.
- Punishment- In case of violation of any order or law there is punishment of 3 years for the developers and 1 year for the agents and buyers.
There are some other provisions also which are established under this act such as Carpet area, liabilities etc.
The following are some of the advantages after the establishment of this act-
- Delivery of flats– There are often promises made by the developers to deliver the flat on time but they hardly ever do that. But after this act there are to be strict rules followed by the developers and they have to ensure to do the desired work on time.
- Projects details– During the construction stage the builders often change the features and amenities different from the plan but as per this act there can be no change in the plan.
- Clearances– The builders often make offers and discounts to attract buyers and the buyers enticed by the offers does not bother about the clearance and due to this the flat or building is not delivered on time. This act ensures that the clearances are received by the client before sealing the flat.
- After sales– According to this act if the buyer finds any deficiency in the development of the building the buyer can contact the builder within 5 years of the project.
The above were some of the advantages of the act but a coin has two sides therefore it has some disadvantages or criticism as well.
No past real estate project can be included under this act, the government agencies may cause delays which takes up a lot of time to clear a project, and there is no compulsory regulation for projects which are less than 500 sq.mt.
The act was enacted centrally and the state had to adopt the act. There are some states where the Real Estate (Regulation and Development) act, 2016 has still not being applied and adopted.
So now, let’s talk about developers. RERA has expanded its boundaries and under section 9(1) of the act has made mandatory for Developers, real estate agents, builders, promoters etc. like you to register them under the act. Under section 9, it is prohibited to operate as a real estate agent without any registration.
The objective of making the registration mandatory is to standardize the real estate sector by crating transparency. Therefore the act requires the real; estate agents to get certificate of registration.
The Procedure to Register with RERA
- To register as a Real Estate developer (agent)-
The procedure to register as real estate developer starts with filing of an application form ‘Form G’ along with the applicable fee and documents required. After the filing of the application you will be provided with a registration number from the regulator.
You are required to maintain the accounts book, record and documents of transactions on quarterly basis.
You have to share all the information about the project and documents to the buyer. You can be suspended for the misrepresentation or fraud during the registration process.
- To Register As A Developer With RERA
- You have to provide brief details of the enterprise including its name, registered address, type of enterprise, proprietorship, societies, co-operative society, partnership, companies etc.;
- Particulars of registration including the bye-laws, memorandum of association, articles of association etc. as the case may be;
- Name, address, contact details and photograph of the real estate agent if it is an individual and the photograph of the partners, directors etc. in case of other entities;
- Self-attested copy of the PAN card;
- Self-attested copy of the address proof of the place of business.
Now, before you go ahead, you should consider the type of your business legal structure. While a sole proprietorship is great for the flexibility in conducting business, it is terrible when it comes to raising funds for your business.
Therefore check out these-
- Should You Start Your Business as an LLP or Private Company
- How You Can Register an LLP
- How You Can Register a Private Company and One Person Company
The registration as developer is valid for 5 years from the date of receipt. The registration can be revoked or cancelled in case of breach of any duty under the act by the developer.
According to section 9(4) if no communication of acceptance or rejection of the application has been made in the 30 days after filing for registration, the individual will be considered as registered.
Section 10 of RERA mentions about the conditions and roles of the registered prating agents and developers. Some of them are as following-
- You are not allowed to facilitate sale of unregistered property.
- According to rule 14 the maintenance of account books and documents have to be done
- You are advised to keep away from any unfair trade practices as enumerated under the rules assistance to enable the allotted and promoter to exercise their respective rights and fulfill their respective obligations at the time of booking and sale of any plot, apartment or building, as the case may be
- You are requested to follow the rules and provisions of the act as prescribed.
These roles are also mentioned in the registration certificate provided.
The Procedure to Register Real Estate Projects
Real estate is one of the largest industries in India but despite that fact it was the unregulated and unauthorized for many years. With the purpose of introducing regulation in this industry RERA was enacted.
One of the salient features of RERA is the registration of real estate projects by the ‘promoters’.
A “real estate project” is defined as the development of a building, converting an existing building or a part in apartments, development of land into apartments / plots for the purpose of selling and includes common areas, development works, all improvements and structures thereon and all easement, rights and appurtenances belonging to such building or land or structure.
The act has given the specification of which projects needs to be registered and which does not.
Who Needs to Register with RERA?
The specified persons are required to register the real estate project with authority are as follows:
- Any person who constructs or who wants to builds an independent building or a building consisting of apartments or modification of existing structure into apartments to sell apartments to the persons.
- Any person who develops the land into a project, to sell projects to other persons.
- Any development authority or another public body in respect of allotters of
- Buildings or plots constructed by such authority or public body on who owns land or placed at their disposal by the government.
- Plots owned by development authority or which is placed at their disposal by the government to sell the apartments.
- A state-level cooperative housing finance society and a primitive cooperative housing society which constructs the apartments or buildings for its members or to the allottees.
- Any person who acts himself as a builder, colonizer, contractor, developer, estate developer or by any different name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale.
Who Does Not Need to Register?
The following are the real estate projects which are not require registration according to section 3 of the act-
- The projects whose area of land does not exceed 500 sq.mt or numbers of apartment are not more than 8.
- If the promoter has received the certificate of completion of the project prior to the commencement of RERA.
- When the work is only limited to renovation or repairing and it does not include any advertising or marketing.
- On-going project- All the on-going project which has not received completion certificate as on 1st may 2017 shall be required to get registered with the respective real estate state authorities.
- New project- According to RERA act every project needs to get a registration certificate before advertising, marketing, booking, offer and promotion.
- Periodical update- The act mandated every promoter to update the status of the registered project quarterly with respective state authorities.
- Separate bank account- It is necessary for every promoter to maintain a separate bank account for every project and shall deposit 70% of the prescribed collected amount which would be withdrawn as the prescribed manner.
Application of Registration with RERA
According to section 4 of the act you as the promoter have to file an application along with prescribed fee and the documents.
The following are documents you need to submit with application-
- An authenticated copy of the approvals and commencement certificate obtained from the competent authority
- Sanctioned plan, layout plan and specifications of the proposed real estate project as sanctioned by the competent authority
- A declaration by the Promoter supported by an affidavit inter alia stating:
- that the Promoter has a legal title over the land on which development is proposed;
- the details of all encumbrances on such land;
- the time period within which the Promoter undertakes to complete the real estate project;
- That the Promoter would deposit 70% of the amount realized for the real estate project from the allottee (s) from time to time in a separate bank account.”
Other than paper registration there is also an option of online registrations. When the act was enacted on 1st may 2017 the state governments were notified on 11th July to make the agents available an online portal on their websites of RERA to make the process of registration for the developers to be easy.
Validity of registration
The registration will be valid for the time given by the promoter to complete this real estate project mentioned in the affidavit submitted along with application.
The registration of the project can be extended by a receipt given by the promoter under two circumstance-
- Force Majeure – Any nature or unavoidable situation like war, flood etc., due to which the project has been affected
- Other than force Majeure – If the circumstances and causes are reasonable according to the authority it may extended the time limit for one more year.
Revocation of registration
The registration of a real estate project can be revoked if the required rules and compliances are not followed. The authority can revoke the registration on the basis of a complaint or suo moto by the authority.
The authority will give a 30 days prior show cause notice to the promoter stating the grounds of revocation and give the promoter a chance to explain as to why the registration should not be cancelled.
After the promoter’s reply it seems reasonable to the authority the registration will continue otherwise it will be cancelled.
The grounds for issuing the show cause notice can be following-
- If the Promoter defaults in doing anything required under RERA;
- If the Promoter violates any terms and conditions of the approval granted by the Authority;
- If the Promoter is involved in any kind of unfair practice or irregularities such as any misrepresentation or false representation and / or publication of any advertisement / prospects of services that are not intended to be offered; and / or
- If the Promoter indulges in any fraudulent practices.
Consequence of Non-Registration
Under section 59 of the act if the real-estate project has not been registered there is penalty of up to 10% of the estimated project cost and in case of the continued default an additional 10% of the estimated project cost and up to three years of imprisonment.
There is a provision under section 31 of the act that allows the aggrieved party to complaint against the promoter to the authority if there is a violation of provisions.
The authority has the power to levy a penalty to the promoter if the is a non-compliance to the rules.
Problems faced during registration by agents-
RERA made an effort and made mandatory for all the projects to be RERA registered under the RERA act but there are certain problems and disadvantages faced during this process.
- Some of the developers were not able to register their projects before the deadline given by the government due to problems faced host issues while registering on online portals of their concerned authority. The problems were from the side of the government. The states were notified about the online portal as soon as possible (mentioned above) before the deadline i.e. 31st July but in many states the portal was still not working till 7 days i.e. 25th July before the deadline. An expert said addressing this issue that the developers are facing problems while uploading their project details especially who are not familiar with technology and therefore this is not a time for error.
- Miscommunication between government site- It was pointed out by Raman Sastri, chairman, Sterling Group that there is lack of communication between the government agencies dealing with registration process as it was very time taking. The government agencies should try to make the process smooth so the developer can get his registration within 30 days. He quoted-
“A developer has to entertain eight government departments before he can start his project, including NGT, fire and power. There should be diktat for all the bodies that regulate our business.
Completing a building is the developer’s responsibility but many a time the government agencies don’t act in time and developer is unable to finish his projects.”
- Awareness about the Act- The concern was shown that as RERA act is a new form of legislation to work and understand it might be difficult for the staff to understand this and misleading information can be sent to a client.
- The staff at the higher level and the management might to be able to comply with it but staff at the lower level might still be operating in such manner those unknowingly creating risks.
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Author Bio- Avani Parnami is a BA.LLB student from Symbiosis Law School Hyderabad and an intern at WinSavvy. Connect with her on LinkedIn.
Editor Bio- Chinmay Jain is a BA,LLB student from Institute of Law, Nirma University and an intern at WinSavvy. Connect with him on LinkedIn.