PRESENTS DISCUSSION ON

1. PRESENTS DISCUSSION ON REAL ESTATE (REGULATION & DEVELOPMENT) BILL, 2011

2. PRESENTED BY Rupendra K Porwal  B.A., B.Com., FCS, LL.M (University of Manchester) Managing Partner RallyMark Legal, Advocates and Legal Consultants, Premier Building, 9 Shahnajaf Road, Lucknow-226001 Website: www.rallymarklegal.com Phone: 0522-3075100 Mob: 80520 45000, 9838597775 E-Mail: rupendraporwal@rallymarklegal.com, porwal_acs@yahoo.com

3. IMPORTANT DEFINITIONS: REAL ESTATE PROJECT includes the activities of - (i) Development of immovable property including construction thereon or alternation and their management; (ii) Sale, transfer and management of immovable properties. IMMOVABLE PROPERTY: Includes land, buildings, rights of ways, lights or any other benefits arising out of land and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, standing crops or grass. PROMOTER: The definition is very wide and covers private and government parties involved in development of real estate projects. DEVELOPMENT : Means carrying out development of immovable property, engineering or other operations in, on, over or under the land or the making of any material change in any immovable property or land and includes re-development.

4. REGISTRATION OF THE PROJECT: • Every real estate promoter shall be required to obtain Certificate of Registration from Real Estate Regulatory Authority (“RERA”), before commencing the work for : • Construction of a new project; • Carry out alteration or conversion of any existing un-developed land. • Incase of an existing and on going project, the promoter shall obtain registration certificate before expiry of 6 months from the commencement of this Act. • However a promoter can carry out its business activities until registration certificate is granted or intimated by RERA that it can not be granted.

5. EXCEPTIONS: • Project on land area not exceeding 4000 sq.mt.; • Any area notified by the Central Government with consultation with State governments or Union Territories. • Where promoter sought and obtained all permissions 1 (one) year prior to commencement of the Act. • Renovation/repairs of immovable property which does not involve re-allotment and marketing.

6. OUR COMMENTS: • 1. The legislation intend: • To control and regulate all planned development of medium and large size real estate projects in the country. • To protect the interest of large number of investors involved in medium and large projects. • 2. Instrumental in improving the quality of construction. • Provision exempts small projects in order to save small developers from onerous and cumbersome registration process and to further protect them from complying the continuous liabilitiy(ies) imposed under the proposed Act.

7. SUBMISSION OF THE APPLICATION: • Promoter shall make an application to RERA for the registration of project in the prescribed form and pay applicable fee. • Application shall be annexed with: • All approvals/sanctions obtained from local authority; • A declaration stating that/about: • (i) Legal title of land. • (ii) Land is free from all encumbrances. • (iii) Project or phase(s) shall be completed within the stipulated time as per T & C of registration. • (iv) 70% of the amount received from the allottees shall be deposited, within 15 days of its realization, in a separate bank account(“Escrow Account”) with a scheduled bank. • .

8. OUR COMMENTS: • There is a possibility that a promoter may not deposit the amount, received from allottees, in the Escrow Account, thereby exposing the project and interest of allottees with the inherent risk of diversion of fund to other projects or siphoning of fund or misappropriation of the fund. • Our suggestions/recommendations: • The Act, rules or regulations made there under should provide: • That Escrow Account should be opened within a period of 7 -15 days from the date of grant of registration certificate. • Escrow Account should be opened with the execution of tripartite agreement among promoter, schedule bank and RERA as a conforming party.

9. Cheques, received from allottees towards the purchase value of property, should be drawn in the name of the project duly annotated with Escrow Account details and should be deposited in the Escrow Account. The electronic transfer of money should also be made in Escrow Account. • Withdrawal of money from the Escrow Account should be done in the following manner: • All withdrawals towards meeting the cost of the project should be carried out with the approval/confirmation of RERA. • Any invoice raised by a contractor should be certified by an independent architect/ structural engineer etc and thereafter should be presented to RERA for its approval/confirmation. • RERA shall have right to verify the facts of the Invoice, and if satisfied will approve/confirm the invoice.

10. Approved/confirmed invoice shall be sent to the bank or necessary intimation sent to the bank to release the approved amount from the Escrow Account. • Promoter may be allowed to withdrawal of 50% profit from the Escrow Account on obtaining occupation certificate and balance 50% should be allowed to be withdrawn on completing all terms and conditions of registration.

11. REVOCATION OF REG.CERTIFICATE: RERA on receipt of a complaint or on recommendation of the Competent Authority may revoke registration, by serving 30 days notice in writing, if a Promoter: • Makes willful default of T & C of Reg. certificate; • Violates T & C of agreement with Competent Authority; and • Involved in unfair practice or irregularities. Upon revocation of certificate, the RERA: • Shall debar promoter from accessing the website and put his name in the list of defaulter; • Shall Inform other Real Estate Regulatory Authorities about such cancellation; • May recommend the Competent Authority to take such action as deemed fit including carry out remaining development work by itself or with the association of allottees.

12. OUR COMMENTS: • This provision bestows wide power with RERA and will act as deterrent for the promoters. • This provision will ensure safety to the allottees wherein their interest would be protected even on revocation of certificate of registration. • The amount lying in the Escrow Account will facilitate completion of the project without imposing any financial burden on any party.

13. OBLIGATIONS OF THE PROMOTER: • Upon receiving the Login ID and password, promoter shall upload complete details of the project on the website of RERA The following information and documents shall be uploaded: • Details of the sanctions/approvals. • Details of enterprise involved in development of the project. • Information about title/ownership of the land. • Details of all encumbrances on such land. • Fortnightly list of bookings. • Template of Sale-Purchase Agreement (“SPA”). • The number and carpet area of each unit. • The layout plan of the proposed project and plan for its execution. • Name and address of real estate agent, if any, for the project. • Name and address of promoter, architect, structural engineer .

14. 2. A promoter shall not : • Issue or publish an advertisement or prospectus or invite public to buy or book in such projects or take advances or deposits without obtaining a copy of certificate of registration from the RERA • Publish any advertisement or prospectus without filing copy of the same with RERA. • Accept any sum of money unless an SPA has been executed. • The promoter shall be liable to compensate to person(s) who make advance or deposit on the basis of incorrect or false information in advertisement or prospectus and return entire amount along with interest to the affected allottees. • The promoter upon execution of the SPA shall provide, site plan with structural design, stage wise schedule for completion, time schedule for connecting municipal services and compliance certificate signed by the owner, architect and structural engineer, to the allottees.

15. 5. The promoter shall also be responsible for obtaining completion certificate from local authority, providing and maintaining essential services and take steps for formation of an association of allottees. • OUR COMMENTS: • Enable a prospective purchaser to take an informed decision about real estate property. • Instill transparency and corporate governance in the working of the real estate promoters. • Help in transforming real estate sector into transparent, credit worthy, organized and compliant sector. • Facilitate banks and financial institutions to evaluate viability of the project for extending financial facility for the project.

16. OBLIGATIONS OF ALLOTTEE: • An allottee shall pay amount of real estate property to the promoter as per the T&C of the SPA. • On /at taking over possession, the allottee(s) shall also be liability to pay registration charges, municipal taxes, water and electricity charge etc. • Our comments: • The provision Shall: • Establish clarity in obligations of the buyers. • Be effective in controlling un-scrupulous purchasers who book large number of units and flip the unit before next installment of purchase value falls due. • Control artificial demand of the real estate property(s). • Ensure completion of the project as per the schedule.

17. ADHERENCE TO APPROVED PLANS: • A Promoter shall: • Develop and complete the project as per approved plans and structure. • Be liable to rectify any major structural defects or deficiency brought to the notice of the promoter within a period of 1 year from the date of handing over of property. • Submit the occupation certificate or completion certificate with RERA and execute registered conveyance deed in the name of the allottees. 2. If the promoter fails to complete or is unable to give possession of a plot or building within the specified time or discontinue his business due to revocation of his license, the promoter shall, on demand, return the amount received by him along with interest and penalty as determined by RERA. . • Our comments: • This provision will act as a deterrent for the promoters. • Ensure completion of the projects on schedule and shall also ensure quality in execution of the project.

18. REAL ESTATE REGULATORY AUTHORITY(“RERA”) 1. Appropriate governments shall establish RERA. The RERA shall be a body corporate having perpetual succession, common seal, with power, to acquire, hold and dispose of property, and to contract, and shall be capable of suing or be sued. • RERA shall consist of a Chairperson and not less than two whole time members appointed by the Appropriate governments on the recommendation of the selection committee. • The chairperson and other members shall have twenty and fifteen years professional experience respectively in urban development, housing, real estate development, infrastructure, economics, planning, law, commerce, accountancy, industry, management, social service, public affairs and administration. • The chairperson and members shall hold office for a term not exceeding three 3 years on until attain the age of 65 years, whichever is earlier.

19. 6. A vacancy caused to the office of the Chairperson and members shall be filled within a period of 3( three )months from the date on which such vacancy occurs. • The Appropriate Government may remove chairperson or other members, if he has been adjudged as insolvent; convicted of an offence involving moral turpitude; become physically or mentally incapable of acting; has acquired such financial or other interest as may prejudicially affect their functioning; and has so abused his position as to render continuation in the office prejudicial to the public interest. • The RERA shall have powers to set up a dispute resolution mechanism for amicable settlement of disputes between the promoter and the allottees or the allottees themselves. • The RERA shall have power on a complaint or suo-moto to call upon such information or explanation from the promoter or appoint person to make an inquiry in relation to the affairs of any promoter, allotttees or any authority concerned. The RERA will have powers Civil Court under Code of Civil Procedure, 1908

20. 10. The chairperson or a member, on ceasing to hold office, shall not, without approval of the Appropriate Government: • Accept any employment or take up assignment with management or administration of any person associated with any work under the Act; • Work, for or on behalf of any person or organization with respect to which chairperson or members, before cessation of office, had acted or provided advice to the RERA. • Give advice to any person using information obtained during the tenure of employment with RERA or enter into a contract of service with, or accept an appointment to a board of directors of, or accept an offer of employment with, an entity with which he had direct and significant official dealings during the term of office. 11. The RERA shall take all possible measures for the growth and promotion of a transparent, efficient and competitive real estate sector and include-

21. To render advice and make recommendations to the Appropriate Government; • To publish and maintain a website to records all real estate Projects applied for; • To act as the nodal agency to co-ordinate efforts of the Appropriate Government; • To fix standard charges through policy or guidelines, or regulations to be levied on the allottees by the promoter or association; • To ensure compliance of the obligations cast upon the promoters and the allottees under the act, rules and regulation made there under • To make an inquiry for compliance of its regulations, orders or directions; • To enter the names of defaulter promoters on its website who have been penalized or whose proposed Project has been cancelled 12. Execution of orders of Authority: If any person fails to pay any penalty imposed upon him under the Act, the RERA shall proceed to recover such penalty in the prescribed manner.

22. Issues and our Comments: • Prescribed Qualifications could lead to unworthy person occupying the position of the members. • Removal of Chairperson and Members should be further looked into to avoid any arbitrary removal. • We recommend that at least the Chairperson should be a retired judge of the High Court. • The provision prohibiting appointment of Chairperson and members in entities having direct dealing with RERA. This provision is prone to circumvention by providing employment or directorship in subsidiaries or holding companies or any other entity promoted or controlled, in any manner, by the promoters of the entities dealing or dealt with RERA under the Act. Hence this provision needs to be further strengthened by incorporating suitable amendment. • .

23. REAL ESTATE APPELLATE TRIBUNAL 1. The central Government shall establish an Appellate Tribunal to adjudicate any dispute between- • Promoter and allottees ; • Promoter and RERA; • Appropriate Government and RERA . 2. Tribunal shall consist of Chairperson, 4(four) full time judicial members and 4(four) technical & administrative members. 3. Chairperson should be retired Supreme Court judge or Chief Justice of a High Court and judicial members should be retired judges of High Court. • Technical & administrative members should possess 20 years experience in housing, real estate, accounts , economics, law and planning. • Removal of Chairperson and members by Central Government in same manner as in case of RERA.

24. Appeal shall be filed within a period of 30 days from the date of receipt of copy of order of RERA • Tribunal shall dispose of appeal as expeditiously as possible and shall endeavor to dispose of appeal within 90 days from date of appeal. • Every order passed by the Appellate Tribunal shall be executable as a decree of Civil Court. • An appeal against any order of the Appellate Tribunal shall lie to the Supreme Court, and every appeal shall be preferred within a period of 90 days. CENTRAL ADVISORY COUNCIL: Central Government shall establish council to advise on implementation of the Act; Major questions of policy; Protection of consumer interest; Foster growth and development at the real estate sector; etc.

25. OFFENCES & PENALTIES: • Punishment for non registration-Imprisonment up to 3 years , or penalty which may extend to 10% of the estimated cost of the project, or both. • Penalty for contravention of other provisions of Act-Penalty up to 5% of the estimated cost of the project. • Punishment for willful failure to comply with orders of the Authority- Penalty up to Rs 1,00,000 for every day which such default continues which may extend to 5% of the estimated cost of the real estate project. • Punishment for willful failure to comply with orders of Appellate Tribunal-Imprisonment up to 1 year or a penalty up to 10% of estimated cost of the project, or both.

26. Offences by Companies If offence was committed with the consent of , or on the negligent part of any director, manager, secretary or other officer of the company, such person(s) shall be liable to be proceeded against and punishment accordingly. MISCELLANEOUS • No court shall have jurisdiction in respect of any matter which the RERA or the Tribunal is empowered and no injunction shall be granted by any court. • No court inferior to that of a Metropolitan Magistrate of first class shall try any offence punishable under this Act. • The Appropriate Government shall have powers to supersede RERA.

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