RERA Act

Legal Framework of the RERA Act in India

• Historical Context: The RERA (Real Estate Regulatory Authority) addresses vital matters in the Indian real estate industry, including the lack of transparency, delays in project completion, and consumer exploitation. Before the introduction of RERA, the sector often operated under the slightest statutory requirements, resulting in difficulties such as illusory practices and inadequate construction quality. The industry experienced rapid expansion during the 2000s, which strengthened these matters. The demand for improvement increased, especially following the 2008 global financial crisis, which underscores the need for improved fault tolerance. In response to these challenges, the Real Estate (Regulation and Development) Bill was proposed in 2013, with the RERA Act being introduced in 2016. 
• RERA (Real Estate Regulatory Authority): Represents a pivotal enterprise launched by the government of India through the Real Estate (Regulation and Development) Act, 2016, aimed at intensifying translucency, responsibility, and efficiency within the real estate industry.
• Key Features and Objectives of the Real Estate (Regulation and Development) Act, 2016 (RERA)
  • Regulation of the Real Estate Sector: RERA was enacted to regulate the real estate sector, which various irregularities and unethical practices had characterized. It applies to both residential and commercial real estate projects.
  • Transparency and Accountability: One of the primary goals of RERA is to promote transparency and accountability in the real estate market. Builders and developers are required to provide detailed information about their projects, including project plans, approvals, layout details, and completion timelines. This information is made available to the public through an online portal.
  • Project Registration: Builders and developers must register their projects with the appropriate state-level regulatory authority before advertising or selling any properties. This registration process involves providing comprehensive project details, financial information, and legal documents.
  • Advance Booking and Sales: Developers are prohibited from advertising or selling any part of a project before obtaining all necessary approvals and registering it under the Real Estate Regulatory Act (RERA). This prevents fraudulent practices such as collecting money from buyers without delivering the promised property.
  • Project Delays and Compensation: RERA mandates that developers adhere to the promised timelines for project completion. If there are delays, they are required to compensate buyers with interest payments. This provision protects homebuyers from long delays in possession.
  • Quality Control: Developers are accountable for the quality of construction and must rectify any structural defects within a specified period after possession. This ensures that buyers receive a high-quality property.
  • Escrow Accounts: Developers are required to deposit a significant portion of the funds received from buyers into an escrow account. This ensures that the funds are utilized for the specific project and not diverted to other purposes.
  • Dispute Resolution: RERA establishes a fast-track dispute resolution mechanism to address grievances and disputes between developers and homebuyers. This provides an efficient way to resolve conflicts without lengthy legal battles.
  • Real Estate Agents: Real estate agents or brokers must also register under RERA and comply with its regulations. This helps eliminate unscrupulous agents and ensures that buyers and sellers receive professional and transparent services.
  • Promoting Investment: RERA aims to boost investor confidence in the real estate sector by providing a regulated and transparent environment. This, in turn, attracts more investment into the industry.
  • Consumer Protection: RERA protects consumers by ensuring that developers complete projects and designs on time and as promised, imposing penalties for delays or non-compliance. It generates a virtual reservoir for project verification, smoothing the dispute-solving process and thereby improving consumer confidence.
  • State-wise Regulation: RERA varies slightly from state to state in India, as it is implemented at the state level. Each state has its regulatory authority responsible for overseeing and enforcing the provisions of RERA. The Act has significantly improved the real estate sector in India by enhancing transparency, protecting the rights of homebuyers, and promoting ethical practices among developers and real estate agents.

Key Objectives of RERA

• Consumer Protection: RERA's primary objective is to safeguard the interests of homebuyers by ensuring that builders deliver projects on time and follow the promised specifications. It also establishes a grievance redressal mechanism for disputes between buyers and developers.
• Transparency: RERA requires developers to register their projects with the regulatory authority. Detailed project information, including project plans, layout, and financial details, must be disclosed to the public. This transparency helps buyers make informed decisions.
• Accountability: Developers are required to deposit a significant portion of the project funds in a separate escrow account. This ensures that the funds are used exclusively for the development of the registered project, reducing the risk of diversion.
• Promoting Fair Play: RERA encourages fair competition among builders, preventing unfair trade practices and ensuring a level playing field for developers.

Key Provisions of RERA

• Project Registration: All real estate projects with an area exceeding 500 square meters or more than 8 apartments must be registered with the respective state's Real Estate Regulatory Authority (RERA).
• Project Delays: RERA holds developers accountable for project delays and imposes penalties for the same. It ensures that developers adhere to the project's timeline and deliver possession on time.
• Advance Payment: Builders can only demand up to 10% of the property's cost as an advance payment before signing a sale agreement.
• Quality Assurance: Developers are responsible for the quality of construction and are obligated to rectify any structural defects within five years.
• Escrow Account: A minimum of 70% of the project funds collected from buyers must be deposited into a separate escrow account and utilized exclusively for the project's construction.
• Title of the Property: Builders are required to guarantee the title of the property, providing more security to buyers against disputes.

Central Objectives of the Global Framework

• Consumer Protection: Laws are enacted to safeguard buyers and investors from fraud, deception, and unfair practices.
• Transparency: The majority of this system requires developers, agents, and brokers to provide mandatory information regarding property ownership, market values, and project status, thereby enhancing market clarity.
• Licensing and Professional Standards: Licensing conditions ensure that only qualified professionals are permitted to operate in the real estate sector, thereby endorsing ethical standards and safeguards for consumers.
• Dispute Resolution: Several Countries offer mechanisms for settling disputes among buyers and developers, ensuring faster and more favorable resolutions than traditional legal proceedings.

Non-Compliance with the Orders of RERA

• Penalties for Non-Compliance
  • Promoters/Developers: If a developer fails to comply with RERA's directions, they may face fines of up to 10% of the project's total cost, imprisonment for up to 3 years, or both.
  • Agents of Real Estate: Agents of Real Estate who neglect RERA orders may be imposed with fines up to ₹ 1 lakh for the first breach, which will increase up to ₹ 5 lakh for subsequent breaches.
  • Builders: Builders who neglect or fail to adhere to compulsory quality standards or construction deadlines may face monetary penalties and/or detention.
  • Offences, Penalties and Adjudication: Chapter VIII of the Act, Sections 59 to 72, mentions the offences, penalties, and adjudication in RERA matters. 
• Repayment of Amount with Interest: In circumstances where RERA compels a developer to refund the funds paid by a homebuyer due to delays in projects, defects, or any failure or neglect to adhere to this order, it may lead to further legal consequences, including enforcement measures or additional fines. Developers are required to pay interest on the amount they are refunding, and non-compliance can result in more severe penalties or actions under the statute.
• Legal Implementation of RERA Orders: RERA is entitled to approach the Civil Court for the enforcement of its compulsory orders, furnishing the legally enforceable orders. If a developer or agent fails to adhere to the orders of RERA, they may be compelled to participate in the judicial process. The National Consumer Disputes Redressal Commission (NCDRC) or state consumer forums may also be involved in matters where orders of RERA are not followed, especially in cases involving consumer rights.
• Suspension of Registration: If developers, agents, or builders continuously fail to comply with RERA's orders, their registration may be revoked or suspended. This action is intended to deter them from engaging in business activities in the real estate industry. The estate sector until they attain compliance. In utmost scenarios, a project may be blacklisted it may also be removed from RERA's official lists. Non-compliance with the Directives of RERA might result in the suspension or revocation of their operating license.
• Fines for Contempt: Neglecting RERA orders may result in Contempt of Court, where the parties involved may be considered in contempt of the regulatory body's lawful authority. This circumstance may lead to additional fines, legal actions, and, in severe cases, imprisonment.
• Criminal Liability: In cases of significant non-compliance, particularly when it results in the exploitation of consumers, fraud, or breach of trust, RERA assumes the authority to initiate criminal charges against the offending party. This may involve criminal proceedings that might result in imprisonment.
• Further Consequences
  • Damage to Reputation: Builders, developers, or agents who fail to comply with RERA's orders risk reputational harm, making it difficult for them to operate within the industry.
  • Loss of Consumer Trust: Developers who often disregard RERA orders will likely experience a decline in consumer trust, resulting in reduced demand for their future projects and negatively impacting their financial stability.

Procedure for Filing of Lawsuit 

• Eligibility: Decide if you qualify to file a complaint- real estate developers, agents, or homebuyers dealing with issues such as delays in projects, defects in construction, or non-compliance with the statute.
• Visit the Portal of RERA: Access the official website of RERA for your concerned state or the central portal. Then log in and register, set up an account on the portal, and then sign in to reach the section for filing complaints. Select the concerned category, such as delays in projects, construction defects, or non-compliance.
• Complaint Form: Complete the form with the required information about your injustice, the involved parties, and also include supporting documents like contracts, receipts, registration number of RERA, etc. Pay the fees through the online payment system. Lastly, submit your completed form. You will receive a confirmation with a reference number, which you can use to track your complaint.
• RERA Review: RERA will evaluate your complaint by sending a notice to the opposing party, and may arrange a hearing.
• Hearing and Solution: Both parties will present their arguments, and RERA may deliver a judgment regarding compensation, project completion, or penalties.
• Appeal: If needed, there will be an appeal if you are unsatisfied with the decision; you can contest the ruling at the RERA Appellate Tribunal within a period of two months. 

How Can Seasoned Advocates Help You? 

• Grabbing Provisions of RERA: Break down complex RERA laws and highlight rights and liabilities.
• Lodging Complaints: Assistance with lodging and submitting complaints, ensuring all mandatory documents are completed and deadlines are met.
• Hearings and Representations: Advocate for clients during hearings of RERA, effectively presenting evidence and arguments.
• Conflict Solution: Guide you in negotiating a settlement or considering mediation options to resolve the issues without resorting to litigation.
• Safeguarding Developers: Advocacy for developers experiencing complaints, allegations of disputes, and minimizing penalties.
• Appeals: Can file an appeal with the Appellate Tribunal and handle the process of appeals if clients are unsatisfied with a decision of RERA.
• Enforcement: Help in executing orders of RERA, such as compensation securing or completion of projects.
• Legal Updates: Keep clients informed about amendments to RERA laws and guidelines, and advise on compliance.

Conclusion 

To conclude, RERA has initiated a clear and systematic approach to addressing conflicts within the real estate industry, encouraging safeguards for consumers and ensuring that developers, agents, and promoters are held liable. The lawsuit or complaint filing process under the RERA is designed to be effective, enabling consumers to pursue remedies for issues such as delays in projects, defects, and non-compliance matters. The structure provided by RERA not only enhances the resolution of disputes but also fosters trust and integrity in the real estate sector, delivering benefits for both consumers and developers. To know more, contact us.