1. Introduction :
1.1 In September 2009, the Ministry of Housing & Urban Poverty Alleviation, Government of India, introduced the draft of the Real Estate (Regulation of Development) Act (‘the Act’). It is expected that the Ministry would finalise this Act sooner than later. This article gives an overview of this all-important act for the real estate industry.
1.2 The Act proposes to introduce a radical change in the real estate industry — for the first time a Real Estate Regulatory Authority would be constituted to regulate, control and promote planned and healthy development and construction, sale, transfer and management of residential properties. It aims to protect the public interest vis-à-vis real estate developers and also to facilitate the smooth and speedy construction and maintenance of residential properties. Thus, just as the capital markets have a regulator in the form of SEBI, the banking industry has RBI, the real estate sector would also have an authority. A reading of the Act shows that this is likely to be a State Act with each State having its own Regulator.
2. RERA :
2.1 A Real Estate Regulatory Authority (‘RERA’) would be constituted under the Act. It will consist of a Chairman and two Members. The Chairperson must be a person of the post of the Principal Secretary to the State Government while the Members must be persons with expert knowledge in law, finance, management, urban development, etc. The RERA would have various powers and rights.
2.2 The Act also constitutes a Real Estate Appellate Tribunal to adjudicate any dispute and hear and dispose of appeal against any direction, decision or order of the RERA under the Act. The Tribunal will consist of a Chairman and two Members. The
Chairperson must be a Judge of a High Court while the Members must have held the post of the Principal Secretary to the State Government or must be persons with expert knowledge in law, finance, management, urban development, etc.
3. Application of the Act :
3.1 Although the Regulator would be known as the Real Estate Regulatory Authority, it is important to note that the Act does not apply to all types of property development. It only applies to the construction of the following properties :
(a) Construction of apartments : An apartment is defined to mean a dwelling unit by any name which is a separate and self-contained part of any property located in a residential building. Thus, only construction of residential buildings would be covered. A building constructed only for commercial, industrial, office, retail purposes, would not be covered. However, in certain cases this Act would not apply (see para 4.1 below).
(b) Construction of a colony : A colony has been defined to mean an area of land divided or proposed to be divided into plots or flats for residential, commercial or industrial purpose. Thus, if a colony is to be constructed, then it can include buildings constructed for commercial, industrial, office, retail purposes, etc. However, in certain cases this Act would not apply (see para 4.1 below).
3.2 The Act applies to a promoter, meaning :
(a) a person who constructs a residential building consisting of apartments, for the purpose of selling all or some of the apartments to other persons; or
(b) a person who develops a colony for the
purpose of selling to other persons all or some of the plots, whether with or without structures thereon.
4. Registration of Project :
4.1 The Act provides that a promoter shall not develop land into a colony of plots or construct a building for marketing all or some of the apartments, without registering such project with the RERA. It is important to note that the registration is required qua a project and not qua a developer. Thus, one developer would need to register each and every project to be undertaken by him. However, registration is not required if the number of apartments to be constructed does not exceed four or if the area of the colony’s land to be constructed does not exceed 1,000 square metres (10,764 square feet) or if the number of apartments does not exceed four.
4.2 For making an application for registration, the promoter needs to apply in the prescribed form, submit all the relevant documents and pay the prescribed fees. One of the documents to be submitted is a copy of the approval and sanction from the Competent Authority, obtained in accordance with the building regulations. This means that the application can only be made after the developer receives the IOD/CC for the project and not before that.
4.3 If the RERA does not take any action on the application within 30 days, then it is deemed to have granted its approval. In case, the RERA refuses to grant registration, then it must first give a hearing to the applicant.
4.4 Each registration is valid for three years and can be renewed if the project completion time has been extended for reasons beyond the promoter’s control. A total of two renewals of one year each can be granted. Thus, the maximum time for one registration can be five years.
4.5 The promoter is also required to make an application for allotment of a password on the RERA’s website. If the project has been registered by RERA, then it will also grant a password to the promoter.
4.6 The Act provides an imprisonment of up to 3 years and/or a monetary penalty for non-registration of a project.
