What is Real Estate (Regulatory & Development) Bill, 2016

The Real Estate (Regulation and Development) Bill, which has been envisaged as a landmark reform for the real estate sector has arrived. The Bill is expected to modify traditional practices and bring out a more transparency, governance, accountability and professional approach. The Bill requires every state to draft its respective laws within one year from the date, when Bill becomes the law.

Highlights of the bill

  • All states and union territories (UTs) must establish state level regulatory authorities, called Real Estate Regulatory Authorities (RERAs) within one year of the Act coming into force. Two or more states or UTs may set up a common RERA. A state or UT may also establish more than one RERA.
  • Functions of a RERA include: (a) ensuring that residential projects are registered, and their details uploaded on the RERA website, (b) ensuring that buyers, sellers, and agents comply with obligations under the Act, and (c) advising the government on matters related to the development of real estate.
  • Each RERA will consist of a chairperson and at least two full time members with experience in sectors such as real estate, urban development, law and commerce
  • The Bill requires that all residential projects, with some exceptions, be registered. Promoters cannot book or offer these projects for sale without registering them. Registration is not required for projects that: (a) are less than 1000 square metres, or (b) entail the construction of less than 12 apartments, or (c) entail renovation/repair/re-development without re-allotment or marketing of the project.
  • State governments can establish a lower limit for the exemption. Where a project is developed in phases, each phase must be registered separately. In order to register, the promoter must provide details such as the layout plan of the project, and the carpet area of property for sale to the RERA. .
  • If the applicant does not hear back from the RERA within 15 days of the application for registration, the project will be considered registered. Registration may be revoked after giving 30 days notice to the promoter.
  • On registration, the promoter shall upload details of the project on the website of the RERA
  • Promoter must make the site and layout plans of the project, and the schedule of completion of the project available to the buyer.
  • In case a buyer incurs a loss because of false advertising, and wishes to withdraw from the project, the promoter must return the amount collected, with interest.
  • 70% of the amount collected for the project from buyers must be used only for construction of that project. The state government can change this amount to less than 70%.
  • The promoter shall not accept more than 10% of the total cost of the property as an advance payment without entering into a written agreement.
  • In case the promoter fails to register the property, he may be penalised up to 10% of the estimated cost of the project. Failure to register despite orders issued by the RERA will lead to imprisonment for up to three years, and/or an additional fine of 10% of the estimated cost of the project.
  • The promoter will have to pay up to 5% of the estimate cost of the project if he violates any other provisions of the Act.
  • Real estate agents will have to pay a fine of Rs 10,000 for violating any provisions of the Act, for each day the violation continues.

 

As per the Finance Ministry’s Economic Survey 2015-16, about one fourth of the residential real estate projects are delayed due to lack of capital and commitment by developers, poor project management and delayed regulatory approvals.

However, as per Advocate Pradeep Sharma of Supreme Laws, builders have also been provided with advantages in this Bill 2015. The advantage given to the builders by legislation is that they can also impose a penalty on the allottees for not paying on schedule. In the case of any conflicts with buyers, builders also have the opportunity to approach the regulator.

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