Archaic laws governing real estate in India were among the most cited causes behind a recent slump in the property market. This is the reason why when the Central government recently passed the Real Estate (Regulation and Development) Act, 2016, many expected the new legislation to change the face of the real estate market. While it may take some time for the new law to show results, as the government is yet to notify some of the sections of the law, the positive sentiment has set things in the right motion.
Some of the key features of RERA are:
(a) every real estate project proposed to be developed which exceeds 500 sq. mtrs.;
(b) or where the number of apartments proposed to be developed exceeds 8;
(c) projects that have not received a completion certificate as on 1 May 2016; and/or
(d) projects for redevelopment that would involve selling and marketing, have to be mandatorily registered with the Real Estate Regulatory Authority (Authority) established under RERA and failure to do so would attract a penalty of upto 10% of the estimated cost of the real estate project.
(ii) 70% of the amount received from a real estate project is required to be kept separately in an escrow account which is to be utilised for that project only. Therefore, a promoter or developer can no longer divert funds from one real estate project to another project.
(iii) Also the promoter or developer, as the case may be, is responsible for all obligations, responsibilities and functions specified under RERA, till conveyance of all the apartments, plots or buildings to the purchasers has been completed. In case the promoter or developer fails to do so, then such promoter or developer has to return the amount invested by the purchaser and also compensate any loss suffered by the purchaser.
(iv) Per the RERA a promoter or developer cannot transfer majority rights and liabilities in a real estate project to a third party without obtaining the prior written consent from two-third of the purchasers and written approval from the Authority.
(v) If a promoter or developer, as the case may be, does not comply with the orders of the Authority, a penalty can be levied on the promote or developer for every day during which such default continues, which may cumulatively extend up to 5% cent of the estimated cost of the real estate project.
(vi) Failure to make timely payments would invite payment of interest from the buyer to the developer.
(vii) The jurisdiction of courts has also been barred in relation to suits or proceedings for any matters which statutory authorities under the RERA have the power to adjudicate. Further, no injunctions may be granted by any court for any action taken or which may be taken by statutory authorities under the RERA.
So we can see that the Government has been taking several measures to protect the interests of purchasers as several violations of consumer rights in the real estate sector had been seen in the past.