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RERA'S WAY FORWARD IN 2018!!
One of the major concerns raised by developers is that RERA, while covering ongoing projects, is trying to regulate in a retrospective manner, prompting some developers to challenge the constitutional validity of RERA itself
The Real Estate (Regulation and
Development) Act, 2016 (“
RERA
”) which
came into effect on May 1, 2017 had at
its heart the interest of home buyers while
balancing the interests of all stakeholders
in the real estate space. The onus has thereafter been
on enforcement agencies to ensure that RERA is strictly
enforced in the same spirit in which it was drafted,
which depends on the timely delivery of homes to
buyers and not on the amount of penalties and levies
imposed or collected from promoters/developers or the
amount of interest provided to buyers or how many
registrations got canceled.
As per the records shared by the Ministry of Housing
and Urban Affairs, about 20,000 projects have been
registered under RERA in the past 6 months. While a
section of real estate developers has started using the
registration under RERA even as a marketing strategy,
others appear to be still shying away in view of the
penal provisions of RERA.
One of the major concerns raised by developers is that
RERA, while covering ongoing projects, is trying to regulate
in a retrospective manner, which has also prompted some
developers to challenge the constitutional validity of RERA
itself.
Upholding the validity of RERA as a beneficial legislation,
the High Court of Maharashtra in a recent judgment of
D. B. Realty & Another has observed that the act of providing
the proposed date for the completion of ongoing projects is a
voluntary act by a developer, and as such, the provision gives
a fair chance to developers to provide a date of completion of
the project which could be different from the date as provided
in existing contracts. It also gives teeth and discretion to the
Regulator to review the time proposed by a developer (from
a perspective of buyer’s benefit) to either grant or reject the
proposal of the developer.
The Hon’ble Court has also observed that the consequences of
breach of RERA apply only once a project is registered under
RERA, and in that sense, the application of RERA is not
retrospective but is only prospective in nature. Further, the
Hon’ble Court has clarified that by harmonious construction
of the provisions of RERA, the interest of the bonafide, non-
defaulting promoters have been taken care of, and if there
existed exceptional and compelling circumstances behind
developers’ inability in the completion of a project within the
stipulated time and manner, the Regulator has the power to
grant further extension, without penalizing them, though
this condition shall apply only on a case-to-case basis.
The Hon’ble Court has clarified that the provisions relating to
penalty are compensatory in nature and a balance has been
struck under RERA by ensuring that not only developers but
also buyers are penalized for delays attributable to them
in making payments on time and getting the documents
registered once a developer has issued the handover notice.
A view is that the judgment and actual implementation
of RERA may put a lot of pressure on projects which are
already at the implementation/construction phase and
which require registration under RERA for being completed
within the time declared by them, so much so that the entire
project borders on viability. Thus, from the perspective of
developers, it is pertinent that enforcement agencies ensure
that developers are not subjected to excessive regulation or
rigid conformity to formal rules
in a manner that the provisions
of RERA or bureaucratic actions
hinder and prevent actions and
decision-making, ultimately
hampering the intention behind
the enactment of RERA, i.e.,
timely completion of projects.
The focus thus needs to be on
enabling timely completion in
a manner which is beneficial
to buyers as well as developers
rather than on penalizing
developers for non-compliance.
Inferring the apprehension
amongst developers, the
government has reiterated that
RERA is for promotion and not
for the strangulation of the
development of the country
and intends to come up with
a single-window clearance to
remove exploitation, corruption,
middlemen, and unwanted delay in approvals.
A spate of litigations has been triggered in this initial phase
as clarity sets in on these aspects. In a recent order of the
Bombay High Court where, on an appeal filed by home buyers
against the Regulator for denying them compensation
for delay by Epitome Residency in handing over flats, the
same Court referred the matter back to the Regulator for
reconsideration with an observation that the principles of
natural justice were not followed. The developer in this case
had contended that the delay was caused due to the loss
of files in the Mantralaya fire and incorrect classification
of land under CRZ for years before it was rectified by the
order of the High Court in 2016, and therefore, the delay
was clearly beyond the control of the developer.
Provisions of RERA required developers, projects, and
agents to mandatorily register their projects (including ongoing projects for which completion certificate was
not issued) with the Real Estate Regulatory Authority
(“Regulator”) established under RERA by July 31, 2017.
Although a project not registered until such date would
have been deemed to be unauthorized by the Regulator,
several states provided exemption from the ambit of RERA
to certain categories of ongoing projects.
The role of the states therefore has been very critical for
the smooth implementation of RERA. Keeping most of the
ongoing or incomplete projects out of the ambit of RERA
by some states needs to be rectified as once the ambit of
RERA is effectively widened, more projects will come under
the regulation and these can be tracked for the benefit
of buyers. Also, the states need to fasten the process of
constituting regular Real Estate
Regulatory Authority.
A recent half-yearly report,
India Real Estate, released by
Knight Frank India on 10th
January 2018 has credited the
government of Maharashtra for
proactively implementing RERA
in letter and spirit. As per the
report, effective implementation
of RERA coupled with falling
real estate prices has led to
lifting the real estate market in
Mumbai, resulting in 19 percent
increase in residential sales
in the Mumbai Metropolitan
Region (MMR) between July and
December 2017 as compared to
the same period in 2016, which
witnessed demonetization.
However, at the same time,
it is interesting to note that
as per the recent order, the
Maharashtra Regulator refused to entertain an application
filed by Shanti Niketan Cooperative Housing Society,
Vikhroli (East), against Matrix Construction, a builder, for
failing to handover new flats even after 11 long years, citing
that disputes with regard to the redevelopment of housing
societies fell outside the ambit of RERA. Therefore, it would
be interesting to see how in the long run RERA would
benefit the residents of Mumbai, where it is estimated
that almost 85% of the entire construction is in the form of
redevelopment of housing societies.
We surely are gearing up for interesting times, especially
since the thrust of the government is on the growth of
the real estate sector for overall economic growth of the
country, for which customer confidence is the key, and a
lot will hinge upon how effectively the government and
the Regulator collectively work with other stakeholders
towards bringing back the same.
Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.
