Real Estate (Regulation and Development) Act, 2016

The Real Estate (Regulation and Development) Act, 2016 under Section 84 envisions that within six months from its commencement date, State Governments will set the rules to carry out the provisions associated with the Act.

1. On 31 October 2016, the centre, through HUPA (Housing & Urban Poverty Alleviation) Ministry, released the general rules of the Real Estate (Regulation and Development) Act, 2016.
2. All these rules are applicable to the Union Territories like Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli and Andaman & Nicobar Islands.

Some Points Under Real Estate Regulation and Development (RERA)

1. Security: The RERA Act requires builders to deposit at least 70% of buyers’ and investors’ money into a special account. They then allocate this 70% solely for construction and land-related expenses. Additionally, developers and builders cannot claim more than 10% as an advance payment before signing the sale contract.
2. Transparency: Builders must provide original plans for all their projects and cannot alter these plans without the buyer’s permission
3. Fairness: RERA has mandated that developers sell properties on the basis of carpet area rather than high-density area.If the project delays, buyers can recover their full investment amount. Alternatively, they may choose to keep their investment and receive monthly returns.
4. Quality: The builder must rectify any issue faced by the buyer within 5 years of purchase. This issue must be rectified within 30 days of the complaint.
5. Authorisation: RERA requires all regulators to register before marketing, selling, constructing, investing in, or booking plots of land. All advertisement for investments once registered with RERA should be accompanied by a unique Project wise registration number.

Salient Features

The government established RERA to enhance accountability and transparency in housing transactions and real estate. Here are the salient features of this Act:

1. Establishment of Real Estate Regulatory Authority in every Indian state in order to monitor as well as adjudicate and arbitrate any disputes with respect to real estate projects in the concerned state.
2. Establishment of a fast-track mechanism for settlement of disputes. An appellate tribunal and dedicated adjudicating officers will handle this process.
3. All real estate projects must register with RERA, giving the authority jurisdiction over them. The authority can reject a project’s registration if it does not follow the guidelines.
4. If a promoter wants to transfer or assign most of their rights and liabilities in a real estate project to a third party, they must obtain written consent from two-thirds of the allottees, along with written approval from RERA.
5. If there is any default from the side of the buyer or promoter, both will be liable to pay an equal rate of interest.
6. If a promoter causes losses to the buyer due to a defective land title or third-party claims on the property, whether under construction or completed, they must compensate the buyer. There is no limitation provided by any law currently with respect to the compensation amount.

1. If a person has any problems regarding violation of the provisions or rules of this Act by a promoter, buyer, or an agent, they can file a complaint with RERA.
2. While conducting an inquiry, RERA can prohibit an agent, promoter, or buyer from continuing any activity related to the complaint.
3. If any of RERA’s decisions regarding a complaint is not satisfactory, the aggrieved party can submit an appeal before the Appellate Tribunal.
4. If the promoter fails to follow RERA’s orders, they will have to pay a penalty. This amount could be up to 5% of the evaluated cost of the property.
5. If anyone fails to comply with the Appellate Tribunal’s orders, they must pay a penalty. This can either be imprisonment for up to 3 years or a fine (up to 10% of the approximate cost of the project), or both.
6. If a company commits an offence under this ACT, anyone in charge of the business at the time of the offence will be held guilty and punished.
7. No civil court will have any jurisdiction with respect to any matter that comes under RERA or the Appellate Tribunal’s jurisdiction. As such, no court can grant an injunction with regards to any action taken by RERA or the Tribunal.

Benefits of RERA

RERA has several benefits for the buyer, promoter, and real estate agent. These include:

1. Standardisation of carpet area: Before RERA the manner by which a builder calculated the price of a project wasn't defined. However, with RERA there is now a standard formula that is used to calculate carpet area. This way, promoters cannot provide inflated carpet areas to increase prices.
2. Reduced risk of insolvency of the builder - Most promoters and developers work on multiple projects simultaneously. In the past, developers could transfer funds from one project to another. However, under RERA, 70% of the money raised must be deposited in a single bank account. Funds can only be withdrawn after certification by engineers, chartered accountants, and architects.
3. Advance payment: As per the rules, a builder cannot take more than 10% of the cost of the project from the buyer as advance or application fees. This saves the buyer from having to source funds fast and having to pay a large amount.
4. Rights to the buyer in case of any defects: Within 5 years of possession, if there is any structural defects or problems in quality, the builder has to rectify these damages within 30 days at no cost to the buyer.
5. Interest to be paid in case of default: Prior to RERA, if the promoter delayed possession of the property, the interest paid to the buyer was much lower than if the buyer delayed payments to the promoter. This changed with RERA, and both parties must pay the same amount of interest.
6. Buyer's rights in case of false promises - If there's a difference between what the builder promises and what's actually delivered, you're entitled to a full repayment of the amount you paid as an advance. In some cases, the builder may be required to pay interest on that amount.
7. If defect in title: If at the time of possession, the buyer discovers that there is a defect in the title of the property, the buyer can claim compensation from the promotor. There is no limit to this amount.
8. Right to information: The buyer has the right to know all the information about the project. This includes plans related to layout, execution, and completion status.
9. Grievance Redressal: If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA. If they aren't pleased with RERA's decision, a complaint can also be filed with the Appellate Tribunal.

Impact of RERA Act

After the Real Estate (Regulation and Development) Act, 2016 enforcement, registration of sale deed of a project unit cannot be done in the office of the sub-registrar without obtaining Occupancy Certificates or Completion Certificates. 

1. Fewer projects will be launched as the promoters and builders will spend time to understand the impact of the Real Estate (Regulation and Development) Act, 2016. The 32 sections that have been added to the Real Estate (Regulation and Development) Act, 2016 will encourage financial discipline in this sector.
2. After the Act implementation, the developers will have to follow several formalities if they wish to make certain changes to the project after its commencement. 

How to Ensure that the Property is RERA Compliant?

Below are the key factors to consider when determining if a property is RERA compliant:

1. If the property area is over 500 square meters, the builders should register it under the RERA Act before launching or advertising a project on that property.
2. Builders must prove that they have deposited 70% of the total payment into a separate escrow account instead of using it for other investments.
3. Builders must get all the necessary consents before advertising a new project. Discounts for early bird bookings and pre-launch offers will not be there anymore.

Penalties Under RERA

For Buyers

For Promoters

For Agents

Applicable penalties under RERA

Under the Real Estate (Regulation and Development) Act, 2016 (RERA), there are certain offences for which applicable penalties are imposed. Listed below are certain offences for which penalties are imposed under applicable sections:

List of States that have Enforced RERA ACT

How to Register Projects Under RERA

For Promoters

• Prepare a checklist and collect all the documents required for registration.
• Obtain the number of the bank account opened as per Section 4 (2) (I) (D) the Act.
• Complete and submit Form A. This is the application form for registration.
• Complete and submit Form B. This is a declaration made by the promoter in accordance with Section 4 of RERA.
• Complete and submit Form G. This is the draft agreement of allotment or sale of the project.
• Submit an affidavit stating that the details entered in Form G aren't contrary to the rules set out by RERA.
• Submit an affidavit stating that no booking amount has been taken from prospective buyers and is in accordance with Section 3 of the Act.
• Pay the fees required for registration which varies from state to state.
• Dispatch a duly-signed hard copy of all of these documents by registered post to the relevant RERA authority.
• Complete and submit Form C which then lets you obtain the registration certificate.

For Real Estate Agents

1. Complete the application form and submit it along with the required documents and fee to RERA.
2. A registration number will be provided to you. You must mention this number for every property sale.
3. You must maintain books of accounts, documents, and records of all transactions on a quarterly basis.
4. Builders must share all information and documents about any project with the buyer.
5. Authorities may suspend you if you misrepresent yourself or commit fraud during the registration process.

How to File a Complaint

Under Section 31 of RERA, complaints can be filed against promoters, buyers, or agents. Here are the steps to follow while filing a complaint are:

• Find a RERA lawyer and file a complaint under the appropriate jurisdiction.
• Fill the complaint as per the rules prescribed by the concerned state in which the project is situated.
• Include the following details:
  • Details of the applicant and the respondent.
  • Address and registration number of the project.
  • A brief statement of the facts as well as the grounds of the claim.
  • If any relief is sought, then details of the relief and interim reliefs (if any).
• Pay the fee. Keep in mind that this amount differs from state to state. For example, the fee in Maharashtra is Rs.5,000, while it is Rs.1,000 in Karnataka.
• Alternatively, you can file a complaint online by visiting your state's RERA website.
• If you aren't satisfied with the decision made by RERA, you can file a complaint with the RERA Appellate Tribunal within 60 days.
• You can also approach the High Court within 60 days if you aren't satisfied with the Appellate Tribunal's decision.

Documents Required to Register a Project Under RERA

In order to register a project under RERA, keep the following documents ready:

1. ITR of the promoter for the last 3 years.
2. Audited balance sheet, profit and loss account, and auditor report of the promoter.
3. Promoter's PAN card and a copy of their Aadhaar Card. If there is more than one promoter, then PAN Card and Aadhar Card copies of all the promoters must be provided.
4. Passport size photograph of the promoter. If the promoter is a firm or a company, then photos of all the members including the director and chairman need to be attached.
5. The legal title deed and any other relevant document which has been authenticated. These documents should reflect all legal rights that the promoter has over the land. If this is not available, the promoter should provide a non-encumbrance certificate. This must be procured from a revenue authority not below the rank of a Tehsildar.
6. If the promoter is not the owner of the land on which the project is being developed, a copy of the collaboration agreement along with the consent of the owner needs to be provided.
7. The layout plan and sanctioned plan of the project which has been approved.
8. A plan of all the facilities to be provided. This includes drinking water facilities, fire-fighting facilities, usage of renewable energy, and evacuation facilities.
9. All location details regarding the project. This should include boundaries of the proposed project down to the latitude and the longitude.
10. An estimated invoice with details which include the sale agreement and conveyance deed proposed.
11. The carpet area, number of apartments, open terrace area, and balcony area, if any.
12. Details of the number of garages for sale and open parking areas available.
13. Names and addresses of real estate agents (if any).
14. Names and addresses of structural engineers, architects, contractors, and anyone involved with the project's development.
15. Declaration under Form B. This declaration states that the promoter or anyone authorised by the promoter cannot discriminate during allotment of the project.
16. Any other document required by the state in which you are registering the project.

Tax Savings Under RERA Act 

The following is the list of tax benefits that can be availed by the borrowers under the RERA Act: 

1. Section 80C: 

• Under Section 80C of the Income Tax Act 1961, taxpayers can claim tax deductions on the principal component of home loan EMIs.
• This benefit is applicable for self-occupied properties only to home loans. 
• The maximum tax deduction available is Rs.1.50 lakh per financial year. 

1. Section 24: 

• Under Section 24, taxpayers can claim tax deductions on the interest component of home loan EMIs.
• The maximum deduction allowed is Rs.2 lakh per financial year. 
• This benefit is applicable only for self-occupied properties. 
• To claim these benefits, the house construction must be completed. 
• The maximum deduction is reduced to Rs.30,000 in case construction takes more than five years. 

Completion Requirement: 

Only after the construction of an under-construction property is complete or for ready-to-move-in properties, can tax benefits be availed by the borrowers under Sections 80C and 24. 

RERA-Registered Projects: 

1. Investing in RERA-registered projects ensures timely construction. 

1. The builder must compensate for the potential tax savings lost due to the delay, if a RERA project takes more than five years to complete 

Look for : Documents Required to Buy Resale Flats

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