Advocate Abhi Sheth

Real estate sector has been a highly unorganised sector paving way for many corrupt activities, defaults and delays much to the dismay of real estate property buyers. There was a compelling need to have a law that brings in systematisation and transparency in the field.

Hence, Real Estate (Regulation and Development) Bill, 2016 was passed by the Rajya Sabha on 10th March, 2016.

Here are ten points you must know about this important Real Estate Bill.

1) The preamble of the bill lays down the objective – ‘to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment of building, as the case may be, or sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto.’

2) Therefore, in order to achieve the aim of a better-organised real estate sector, Section 20 provides for establishment of Real Estate Regulatory Authority. It is to be established by State Government within a year from the Act coming into force. It shall consist of a chairman and two members. They shall be appointed by the appropriate government on recommendation of a Selection Committee consisting of the Chief Justice of the High Court or his nominee, the Secretary of the Department dealing with Housing or Law Secretary from persons having adequate knowledge in the field of housing, real estate development, infrastructure etc., with professional experience of at least 20 years in case of Chairman and 15 years in case of members.

3) Chapter II of the  Real EstateBill mandates registration of all promoters, agents, structural engineers, architects, contractors, layout plans, approvals, agreements etc.

4) In order to ensure timely completion of project as buyers at present do not get possession of the property for a long time due to delay in construction, Section 4(2)(D) of the Real Estate Bill provides that 70% of the amount realised from the allottees shall be deposited in a separate account to cover the cost of construction and land cost and shall be used only for this purpose. In fact, the Section also provides that the amount can only be withdrawn after it is certified by the architect, engineer and a certified chartered accountant to ensure that the withdrawal is in proportion to the percentage of completion of project.

5) The explanation to Section 2 (za) of the Real Estate Bill provides that the rate of interest payable by promoter to allottee in case of default or delay is the same as the interest payable by allottee to promoter. The period for payment of interest by promoter shall be from the day he receives amount to the day it is refunded.

Also, Section 59(2) provides that the promoter shall be liable for an imprisonment of 3 years or penalty that extends to 10% of the cost of the real estate project if he violates the orders, directions or decisions issued under the Bill.

6) Under Section 11(4)(e), promoter has a duty to enable the allottees to form the allottees’ association within three months from the date on which majority of allottees have booked their plots. Also, under Section 14, promoter has to follow all the sanctioned plans, layout plans and specifications for construction and any change in them can only be done after obtaining consent from the allottees.

7) Section 31 states that an aggrieved person can approach the Authority or adjudicating officer to file complaints. The functions of the Authority among other things is to create a robust grievance redressal forum, to provide for amicable settlement of disputes between promoters and allottees through dispute resolution forums, digitisation of land records to guarantee conclusive property titles.

8) According to Section 35, the Authority will have the same powers as that of a civil court and can also take up cases suo moto and order inquiry into the same.

9) Under Section 3 of the Bill, no promoter can advertise, market, book or offer for sale or invite people to purchase plot, apartment or building unless the real estate project is registered with the Authority. Moreover, Section 12 imposes obligation on the promoter for veracity of the advertisement or prospectus. If a person makes an advance or deposit on the basis of the information provided in the advertisement and suffers loss or damage by reason of incorrect or false statement in the advertisement/prospectus, then the promoter is liable to compensate the allottee.

10) The buyers can make an informed decision as under Section 4(2)(b) the promoter has to submit details of all his completed and on-going projects in the last five years to the authority along with details like delay in completion, delay in payment, type of land etc.

While, digitisation and the attempt to bring in transparency will surely improvise the real estate sector, what needs to be noted is the number of approvals that every project needs and the time taken to issue each of these. Approvals like Intimation of Disapproval, Commencement Certificate, NOC, building completion certificate, occupancy certificate etc., further delay the entire process of real estate construction. Hence, along with this bill, there is a need to bring about better administrative reforms in the sector in order to make the process faster.

  The Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, popularly known as MOFA was repealed by section 56 of Maharashtra Housing (Regulation & Development) Act 2012 which came into force on 6th Sept 2015.

And then The central Act : Real Estate (Regulation & Development) Act 2016 have repealed the Maharashtra Housing (Regulation & Development) Act under section 92 which came into force from 1st May 2016.

Now many of my friend were under the impression that MOFA is still prevailing. Let us visit General Clause Act Section 6 :

Effect of repeal. ?Where this Act, or any 1 [Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not?

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.

The General Cluse Act says that an Act once repealed cannot come into force automatically. Suppose Act Z was repealed / scrapped by Act Y and Act Y was repealed by Act X. Hence Act Z cannot come to life automatically unless a separate provision or Act is passed to revive it.

The Maharashtra Act which repealed MOFA had condition for MOFA repeal :

Provided that, the repeal shall not affect,— (a) the previous operation of the law so repealed or anything duly done or suffered thereunder, or (b) any right, privilege, obligation or liability acquired, accrued or incurred under the law so repealed, or (c) any penalty, forfeiture or punishment incurred in respect of any offence committed against the law so repealed, or (d) any investigation, proceedings, legal proceedings or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, proceedings, legal proceedings or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if this Act has not been passed : Provided further that, subject to the preceding proviso and any saving provisions made elsewhere in this Act, anything done or any action taken under the provisions of the law so repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act; and shall continue to be in force accordingly unless and until superseded by anything done or any action taken under this Act. (2) Any reference in any law or in any instrument or other document to the provisions of the law so repealed shall, unless a different intention appears, be construed as a reference to the corresponding provisions of this Act.

Which means all cases, right, interest and liabilities incurred during the MOFA’s period will be in offing and all courts and agreements will adhere to MOFA provisions for transactions entered into during MOFA’s period.

Hence, MOFA is scrapped / repealed by Maharashtra Housing Act and Maharashtra Housing Act is repealed by Central Real Estate (Regulation & Development) Act 2016 since 1st May 2016.

Henceforth, all matters will be treated under central Act. Even Article 254 says that in case of confusion as to Act enacted by Center and State on the same subject, then Central Act will prevail and will have supremacy on state Act.

All buildings which have not got OC will have to take license from RERA Under Real Estate (Regulation and Development) Act 2016, it is mandatory to register all ongoing real estate projects. Let us understand the provisions of the new Act. The Act will regulate all real estate development process and real estate transaction process in the country. The Act came into force from 1st May 2016. Though housing is a state subject, new Act wants all state to establish Real Estate Regulatory Authority.

According to Sec 20 (1) after the establishment of the Authority, which will be within one year from date of commencement (1st May 2016) all new and ongoing projects will have to register with the Authority within three months. The relevant section says : 3. (1) No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act: Provided that projects that are ongoing on the date of commencement of this Act and for which the completion certificate has not been issued, the promoter shall make an application to the Authority for registration of the said project within a period of three months from the date of commencement of this Act: Now , the problem is hundreds and thousands of buildings do not Occupation Certificate. Once the Commencement Certificate along with IOD (Intimation of Disapproval) is granted the project is treated as under construction.

Even after ten or fifteen years, the building is occupied, many transaction take place and housing finance availed but the building is not finished in the eye of law unless it gets Occupation Certificate (OC) or Building Completion Certificate (BCC) whichever is applicable. All estate agents who sell flats in these buildings will also be liable to penalties imposed under the Act because the Act says in Sec 10 no broker should facilitate any sale in projects which do not have license or approval from RERA Authority. Any building which not got OC is under construction and all under construction buildings must be registered with RERA. If there is no license to the building or OC then all those who are instrumental will be liable for punishment which could be imprisonment and fine. All builders who have not got the OC for their property need to register it with authority. One cannot run away with this provision as Authority are tracing unscrupulous builders who do not complete projects. Thousands of buildings in Mumbai, Pune, Bangalore, Delhi and elsewhere in the country have not got OC since last 15 to 20 years.

All these buildings will have to be registered under the authority as under construction projects and builders will have to bring in OC. If not then no broker or no buyer will purchase properties without OC. All the occupants of such building will have trace builders to get them OC or file consumer complaint against builders or start the process of getting OC of their own which requires huge capital and penalties.