Urbanisation and growing household incomes are driving demand for residential real estate and growth in the retail sector. Real estate sector plays an important role in fulfilling the needs and demand for housing and infrastructure in the country and is an important pillar of the economy. While this sector has grown significantly in recent years, it was largely unregulated, with absence of professionalism and standardisation and lack of adequate consumer protection. It had no sectoral regulator like there are for other specific sectors like insurance, telecom, stock markets etc. History is witness to the fact that whenever sectoral regulators like SEBI, IRDAI, TRAI etc have been formed, they have helped in deepening the market and made it more robust. Though the Consumer Protection Act, 1986 was available as a forum to the buyers in the real estate market, but it was not adequate to address all the concerns of buyers and promoters in this sector. The lack of standardisation was constraint to the healthy and orderly growth of industry. In keeping view on the above problem, Parliament enacted the Real Estate (Regulation and Development) Act, 2016
Real Estate (Regulation and Development) Act, 2016
It aims at protecting the rights and interest of consumers and promotion of uniformity and standardization of business practices and transaction in real estate sectors. It attempts to balance the interest of consumers and promoters by imposing certain responsibility on both. It seeks to establish symmetry of information between promoters and purchaser, transparency of contractual condition, set minimum standards of accountability and a fast track dispute resolution mechanism. This act is extended whole over India except Jammu & Kashmir.
Some of the major provisions of the Act, besides mandatory registration of projects and Real Estate Agents include:
- Depositing 70% of the funds collected from buyers in a separate escrow account in case of new projects and 70% of unused funds in case of ongoing projects, a step to prevent a diversion of funds which usually happens and in turns results in delays of projects.
- Projects with plot size of minimum 500 sq.mt or 8 apartments shall be registered with Regulatory Authorities.
- Both developers and buyers to pay the same penal interest of SBI’s Marginal Cost of Lending Rate plus 2% in case of delays.
- Liability of developers for structural defects for five years and
- 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.
Real Estate Regulatory Authority (RERA)
A Real Estate sector has seen unprecented growth since Independence and it remains unregulated till Real Estate (Regulation & Development) Act, 2016 came into force. We have already witnessed that whenever there is regulatory establishes like SEBI, IRDAI, TRAI etc then growth of sectors widens. Real Estate (Regulation & Development) Act, 2016 mandates that RERA would be established by each of the states and UT for administering real estate sector in the respective state/UT. A state can have more than one RERA or two states can have same authority. The government established this authority to exercise the powers conferred on it and to perform the function assigned to it under the Act.
Composition of Authority
The authority shall consist of a chairperson and not less than two whole time members to be appointed by the appropriate government.
Functions of Authority
- To register and regulate real estate projects and real estate agents registered under the Act.
- To publish and maintain a website of records, for public viewing, of all real estate projects for which registration has been given, with such details as maybe prescribed, including information provided in the application for which registration has been granted.
- To maintain a database, on its website, for public viewing, and enter the names and photographs of promoters as defaulters including the project details, registration for which has been revoked or have been penalised under this Act, with reasons therefore, for access to the general public.
- To maintain a database, on its website, for public viewing, and enter the names and photographs of real estate agents who have applied and registered under this Act, with such details as may be prescribed, including those whose registration has been rejected or revoked.
- To fix through regulations for each areas under its jurisdiction the standard fees to be levied on the allottees or the promoter or the real estate agent, as the case may be.
- To ensure compliance of the obligations cast upon the promoters, the allottees and the real estate agents under the Act and the rules and regulations made there under.
- To ensure compliance of its regulations or orders or directions made in exercise of its powers under the Act.
- To perform such other functions as may be entrusted to the Authority by the appropriate Government as may be necessary to carry out the provisions of the Act.