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Real Estate (Regulation and Development) Rules, 2016

-By Divya Sharma, Sr. Associate, Delhi Office

Brief Background of the Real Estate Act, 2016 

The Real Estate (Regulation and Development) Act came into force with effect from 26th March, 2016. The Act aims at protecting the rights and interests of Consumers investing their hard-earned income into housing and further it promotes great amount of uniformity & standardization of business practices and transactions in the real estate sector. It attempts to balance the interest of Consumers/Purchasers on one side and that of the Promoters {Land Developer or Builder or a mere Contractor} on the other side by imposing certain responsibilities on both. It also seeks to establish a symmetry of information between the said Consumer/Purchaser & the Promoter, and attempts transparency of contractual conditions and sets minimum standards of accountability along with a fast-track dispute resolution mechanism. 

The Act extends to the whole of India excluding the State of Jammu & Kashmir.  Section 84 of the Act says that appropriate State Governments, upon Notification, shall make Rules for carrying out the provisions of this Act.

The Rules

The Central Government has recently notified DRAFT Rules called as the Real Estate (Regulation and Development) Rules, 2016 which are hitherto applicable to five Union Territories of Chandigarh, Andaman & Nicobar Islands, Daman & Diu, Dadra & Nagar Haveli and Lakshadweep. These Rules mandate –

  • The Developers to furnish detailed information about each of their housing projects on their website including the land details, the apartments / units to be constructed, the likely costs, area of each such apartment / unit, etc.
  • The Developers to then register each such Project with the Real Estate Regulatory Authority (specially developed for such registration); The Developers are mandated to upload each information about the Project including the stage of construction, likely date of commencement / completion of work; Likely date of Occupation Certificate (OC) and the Building Completion Certificate (BCC), etc. The Developer is required to additionally upload on the information about its PAN details, its audited balance sheet and IT details, title document of the land to be developed, encumbrances on the land, if any, car parking areas, etc., for each such Project.
  • The Developers to deposit, within 3 months of the above Registration, at least 70% of their funds, collected for the said Project, into a separate Escrow Bank Account, per Project, which funds shall be used for that Project (and nothing else) alone; This shall ensure timely completion of each such Housing Project.
  • The Real Estate Regulatory Authority to publish details of each such Housing Project, the likely completion, the costs, etc. 
  • The Developers to refund or pay compensation to the Allottee Consumers within 45 days of the payment becoming due.  This payment must be made with interest @ State Bank of India’s (SBI’s) Prime Lending Rate +2%.  [As on date, the SBI PLR rate is at 14.05% which means that interest at 16.05% shall be payable to the Consumers.]
  • The Developers to pay refund / pay Interest at the rate as mentioned above.
  • The Real Estate Agents, dealing with any such Housing Project, to compulsorily register themselves with the Regulatory Authority, upon submission of required documentation.  On being satisfied, the Regulatory Authority shall issue a Registration Certificate which shall be valid for a period five (5) years.
  • The Government to establish, by or before 30th April, 2017 an authority by the name of “Real Estate Regulatory Authority” and “Real Estate Regulatory Tribunal” – both of which shall be vested with Quasi-Judicial powers to adjudicate disputes, if any, that arise between about the Consumers and the Developers.
  • That the first level of dispute adjudication shall be before “Real Estate Regulatory Authority” and appeal therefrom shall be heard by the “Real Estate Regulatory Tribunal”.

Maharashtra Govt too has notified DRAFT Rules called the Maharashtra Real Estate (Regulation and Development) (General) Rules, 2016 which are akin to the Rules notified by the Central Government.   However, here the quantum of Interest payable by the Developer is equal to the prevailing rate of interest fixed by State Bank of India for similar amount of deposit (payable as of 1st January of the year when the refund is due) OR 18% - whichever is lower.

Further, the Real Estate Regulatory Authority of Maharashtra is referred to as the “Authority” while the Appellate Authority is referred to as the “Housing Appellate Tribunal”.   Rest of the provisions appear to be the same.

We now await the final version of the Rules in this regard and also for the actual establishment of the Regulatory Authorities along with their functionaries.