Real Estate (Regulation and Development) Act 2016 !!
Project Size and Applicability:
The applicability of the Act has been extended to commercial, in addition to residential real estate. Further, ongoing projects that have not received Completion Certificates have also been brought under the purview of the Act and such projects will need to be registered with the Regulator within three months.
All the residential projects admeasuring 500 sq mtr or more than 8 apartments have to be registered with the authority; thereby ensuring that even the small projects by local developers are brought under the ambit of the Act.
The Act makes it mandatory to the developers to deposit 70 percent of the customer advances or project funds into a separate dedicated escrow account so that these funds are utilized for acquisition of land as well construction of the related project. The escrow mechanism ensures that the customer advances are not diverted towards other project development and the developers does not delay the project on account of lack of funds.
Setting of State Real Estate Regulatory Authority:
The Act has set the stage for the establishment of a government body to be approached in case of redressal of grievances against a developer.
Complete Disclosure of Project Details:
The developer is required to provide ‘full and true’ disclosure to the government body before issuing advertisements for sale or transfer of units or before carrying out any transactions. The disclosures include schedule of development works, land status, status of the statutory approvals received by them, pro-forma agreements, carpet areas and the number of apartments booked. In addition to the project details, the developers are required to disclose names and addresses of real estate agents, contractors, architects, and structural engineers to bring greater transparency to all realty projects and protect buyers’ interests. The disclosure norms enable the customers to take informed decisions by comparing two projects as well as being aware about the project features and timelines.
The Act has made it mandatory to sell the apartments only on carpet-area basis and has put a stop on the current practice of selling on built-up and super built-up area basis.
The Act has made the developer equally liable for the delay in handing over the project, thereby safeguarding interest of the buyers. The Act states that if there are any delays in project, then the developer will be liable to pay interest/damages.
Few other provisions of the Act are:
The developer cannot make any changes to the plan that had been sold without the written consent of the two-third of the buyers.
The structural defect liability period has been increased from 2 years to 5 years post the possession. The buyers can also contact the developer in writing within one year of taking possession to demand after sales service if any deficiency in the project is noticed.
It has been made mandatory to set-up an allottees association within three months of the allotment of major units/properties so that the residents can manage common facilities. We suggest deletion of the highlighted portion as the Act is silent on the specifics.
The maximum jail term for a developer who violates the order of the appellate tribunal of the RERA is three years with or without a fine. The Act has also set-up definite timeline for the disposal of complaints at both appellate tribunals and regulatory authorities within 60 days.
The Act also provides for arranging insurance of land title to safeguard the buyers from defective or fraudulent land titles.