The Changing Face Of RERA: What Is New?

In order to provide relief to homebuyers and stop builders from using loopholes in the Real Estate (Regulation & Development) Act, 2016, efforts are being made by state authorities to provide more teeth to the law. Recently, Housing Minister Hardeep Singh Puri said all real estate projects would eventually come under the ambit of the law once states were ready with the infrastructure required for the law to function.

“There have been some attempts at tweaking the Act so far as ongoing projects are concerned. As mechanisms are being set up are being established in states, all projects will get covered by the law… it is going in that direction,” said the minister

Here is how state RERA bodies are making a change- 

Small projects need not register

The Maharashtra Real Estate Appellate Tribunal has ruled that projects which met either of the two conditions- developable area of less than 500 sq meters or less than eight flats need not come under MahaRERA’s purview. The order by the three-member bench exempted the developer Geetanjali Aman Constructions from registering the project with MahaRERA and also set aside the Rs 30 lakh penalty imposed on the firm.

The law now covers long-term lease properties

While there is a common notion and understanding in the real estate sector that the Real Estate Act covers only projects listed for sale, Bombay High Court ruling suggests otherwise. In a recent hearing, the court has said that the provisions of the real estate regulatory law are applicable to long-term lease or ‘agreement to lease’ as well.

The case which involved compensation for a delay of six to seven years in possession of three apartments booked on a 999-year ‘agreement to lease’ has been passed on to the adjudication officer under the Maharashtra Real Estate Regulatory Authority.

The court has pointed out that only because the legislation excluded allotment when given under rental arrangement, does not exclude long term lease as it would defeat the purpose of the real estate law. The court has also dismissed the appeals filed by the Lavasa Corporation which is developing a township project, registered under RERA. The court held the developing authority responsible and under section 18 the compensation will have to be provided by the developer with interest for delay in giving possession in terms of ‘agreement of sale’ as the project was registered with the RERA. The court mentioned that it necessitates an inference, with developers executing ‘agreement of lease’ and conveniently using the loopholes of the act. Since in this case, the applicant has paid 80 per cent of an apartment’s purchase price and the 999 years lease is as good as sale.

Earlier, the adjudicating officer under RERA had held that since the agreement was not of 'sale', they cannot seek compensation from the developer (lessor). However, the turnaround by the Bombay High Court has set new landmark and relief for those buyers who have registered with the development authority and have entered into an agreement of lease but are waiting for the possession. 

Complaints against unregistered projects will also be entertained

After an order from the Bombay High Court, the MahaRERA will now allow homebuyers to file complaints against unregistered builders and projects as well. The authority will accept the complaints from August 16 for which consumers will have to pay Rs 5,000. The MahaRERA has uploaded a form under the “source information” category and would enable the payment facility for those desiring to file complaints from August 16.

Obtain occupancy certificate within three months

The MahaRERA has directed builders in Mumbai to obtain the occupancy certificate (OC) for the building within three months or pay an interest amount to residents of the building. The order holds a huge significance for a city where more than 10,000 buildings do not have the OCs. Since in the past two decades, several builders have violated the FSI and other building rules, the civic body denied them their OCs. 

Force majeure clause not applicable

The MahaRERA has also ruled that developers cannot use the force majeure clause for lack of approvals and financial crises. The order has been passed against Hindustan Construction Company’s subsidiary Lavasa Corporation, which is facing insolvency proceedings. In the complaint filed by one of the homebuyers who purchased the flat in April 2010, the developer had promised the delivery on or before April 2014, but failed to do so owing to an order by the environment ministry. The MahaRERA has directed Lavasa to return the buyer the principle amount along with 10.65 per cent interest.

About past projects

Ever since the Act has come into effect, there has been a lot of debate, anguish and disappointment among homebuyers as the regulation does not cover past projects that have received completion certificates at a time when the law was implemented on May 1, 2017. However, the chairman of Haryana RERA, Gurgaon Bench, has said that the real estate law applies to past projects as well, and anyone with a grievance against a realtor can approach the authority.

According to KK Khandelwal’s interpretation, the RERA can adjudicate any dispute between a seller and a buyer in a real estate project, even if the project has received a completion certificate before the law was enforced. Earlier, the Panchkula bench of Haryana RERA ruled in favour of the buyer who had complained against the builder for not complying with sale agreement in the project which was completed before RERA was implemented. The Bench cited Section 11 of the act that a project promoter has to fulfill all sale agreement obligations and it does not exclude projects which are not registered with RERA. Also, Section 34 (f) of the law says that the authority needs to ensure all stakeholders of the real estate sector fulfill their obligations.

In the past, the Haryana RERA had received a lot of flak from homebuyers for diluting the rules. Now, the Punjab & Haryana High Court has stayed Haryana RERA order to hike registration fee for brokers. The court has come to the rescue of realty agents, who had moved court after the state real estate regulator asked them to pay higher registration charge.

Earlier, the Haryana RERA had ruled that an “individual” was different from his brand name. Based on that interpretation, the authority had asked several registered brokers in the state to pay Rs 2.5 lakh for licence renewal. An individual broker is liable to pay only Rs 25,000 as registration fee.

Housing society is also a promoter

In a recent order, MahaRERA has said that a housing society is also a promoter. The Authority said Bombay HC drew conclusion that society being owner of the land is not responsible by relying on Maharashtra Ownership of Flats Act definition of promoter. But with RERA, the legal position has changed. RERA's definition of promoter is comprehensive and clarifies that “redevelopment project is covered and that liability of the persons constructing or converting buildings into apartments and those who sell apartments to different persons shall be joint”.

Home buyers to pay in accordance with a project's progress

The Madhya Pradesh RERA has ordered that a government agency -- be it a board or authority -- can charge money in a dated schedule only if the project is complete. But if a project has been announced or is an ongoing one, the money demanded from buyers has to be linked with construction.

Home buyers can remove developers from the project

The MahaRERA has issued a standard operating procedure to allow homebuyers to remove a developer in case the project was delayed. The project would then be handed over to an expert panel for completion. Such action will be initiated only against non-litigated projects. The SOP has been issued under section 37 of the RERA Act, 2016, with reference to sections 7 and 8. Also, the authority will only consider complaints received from an association of allottees and not from single homebuyers for such action.