Ministry of Housing and Urban
Poverty Alleviation notified the much-awaited Real Estate Rules on 31st
October, 2016. With the enactment of the Real Estate (Regulation and
Development) Act, 2016 which was partly brought into effect on 1st May, 2016,
the rules and regulations to govern such an industry was required and model
regulations were circulated to give effect to the governing of the real estate
market. Thus, the Real Estate (Regulation and Development) (General) Rules,
2016 have been notified as it was stipulated in the Real Estate (Regulation
& Development) Act, 2016 which aims to bring transparency and set
accountability in the sector. The same are applicable to the five Union
Territories without Legislature viz., Andaman & Nicobar Islands, Dadra
& Nagar Haveli, Daman & Diu, Lakshadweep and Chandigarh.
The Real Estate act, 2016 is a
major step in protecting the interests of consumers/buyers and also protects
them from various kinds of frauds being played upon by the builders and also
beneficial to genuine builders and developers. The newly notified rules will
bring greater transparency in builder-buyer agreements and also makes it
mandatory for builders and developers for timely construction of projects and
possession thereof without applying any hidden charges etc. The said Rules also
stipulate that the builders shall furnish additional information regarding the
ongoing projects besides depositing 70 per cent of unused funds in a separate
bank account to ensure their timely completion. The developers shall also be
required to refund or pay compensation to the buyers/allottees with an interest
rate of State Bank of India's highest marginal cost of lending rate plus two
per cent within 45 days of the payments becoming due. The new rules
stipulates that the developer, within three months of applying for registration
of a project with the Real Estate Regulatory Authority shall deposit in a
separate bank account, 70 per cent of the amount collected and unused for ensuring
completion of ongoing projects. The developers shall also have to publish
all kinds of vital information in respect of the said project including status
of the project with photographs floor-wise, status of construction of internal
infrastructure and common areas with photos, etc.
In order to make the provisions
of the said Act more effective, the Rules also provide for compounding of
punishment with imprisonment for violation of the orders of Real Estate
Appellate Tribunal against payment of 10 per cent of project cost in case of
developers and 10 per cent of the cost of property purchased in case of
allottees and agents. Compliance with reasons for punishment shall be complied within
30 days of compounding.
Under the Rules, adjudicating
officers, Real Estate Authorities and Appellate Tribunals shall dispose of the
complaints within 60 days. The Real Estate Regulatory Authorities have to
publish on their websites the information relating to profile and track record
of promoters, details of litigations, advertisement and prospectus issued about
the project, details of apartments, plots and garages, registered agents and
consultants, development plan, financial details of the promoters, status of
approvals and projects etc. The provisions of the Act further provides that
Real Estate Regulatory Authorities are required to be put in place by April 30,
2017 before full Act is brought into effect.
Briefing of Specific Rules:
Regarding Ongoing Projects:
The rule regarding the ongoing
projects clearly specifies that the ongoing projects that have not received
completion certificate in specified time, developers will have to make public
the original sanctioned plans with specifications and changes made later, total
amount collected from allottees, money used, original timeline for completion
and the time period within which the developer undertakes to complete the
project, duly certified by an Engineer/Architect/practicing Chartered
Accountant. Promoter shall also declare size of the apartment based on carpet
area even if it was earlier sold on any other basis. It has also made mandatory
for the developer to deposit in a separate bank account 70% of the amount
collected and unused for ensuring completion of ongoing projects within three
months of applying for registration of a project with the Real Estate
Regulatory Authority.
Registration of Projects:
It has now been notified that for
registration of projects with the authorities, developers will be required to
submit authenticated copy of PAN card, annual report comprising audited profit
and loss account, balance sheet, cash flow statement and auditors report of the
promoter for the immediate three preceding years, authenticated copy of legal
title deed, copy of collaboration agreement if the promoter is not the owner of
the plot. Promoter also has to declare information regarding the number of open
and closed parking areas in the project. Promoter shall upload on the webpage
of the project, within 15 days of expiry of each quarter information regarding
number and type of apartments or plots, garages booked, status of the project
with photographs floor-wise, status of construction of internal infrastructure
and common areas with photos, status of approvals received and expected date of
receipt, modifications in sanctioned plans and specifications approved by the
competent authority.
The requirement of disclosing
Income Tax returns proposed earlier has been withdrawn in the final
Rules keeping in view the confidentiality attached with them and as
pointed out by legal experts and promoters.
Registration Fees:
In order to incentivize
registration of projects and Real Estate Agents with Regulatory Authorities,
fee for the same has been reduced by half based on suggestions from promoters
for reduction of fee. For registration of projects, the fee has been reduced to
Rs.5 per sq.mt for up to 1,000 sq.mt area and Rs.10 per sq.mt beyond this limit
subject to a maximum of Rs.5.00 lakh per project. For commercial and
mixed development projects, it will be Rs.10 and Rs.15 per sq.mt subject to a
maximum of Rs.7.00 lakh. For commercial projects, it will be Rs.20 and
Rs.25 subject to a cap of Rs.10 lakh per project. For plotted
development, it is Rs.5 per sq.mt with a ceiling of Rs.2.00 lakhs.
A cap has been placed on the
total amount of registration fee based on the suggestion of real estate
bodies.
Fee for renewing registration of
projects with the Regulatory Authorities would be half of the registration
fees.
For registration of Real Estate
Agents, fee now prescribed is Rs. 10,000 for individuals and Rs. 50,000 for other entities as
against Rs.25,000 and Rs.2,50,000 proposed in the Draft
Rules.
Similarly, fee for renewal of
registration of projects and agents has also been reduced to Rs.5,000 and
Rs.25,000 respectively.
Interest to be paid in case of
delay:
Developers will be required to
refund or pay compensation to the allottees with an Interest Rate of
SBI’s highest Marginal Cost of Lending Rate plus 2%.
It is also stipulated in the
rules such payment to the allottee shall be made within 45 days of it
becoming due. This interest applies to payments due to the developers by
the allottee which is to be paid within the period to be specified in
the Agreement of Sale.
Fee for appeals and complaints:
For every appeal to be made to
the Real Estate Appellate Tribunal, fee proposed is Rs.5,000. For every
complaint to be made to Regulatory Authorities and Adjudicating Officers, fee
proposed is Rs.1,000.
Compounding of punishment:
Rules provide for compounding of
punishment with imprisonment for violation of the orders of Real Estate
Appellate Tribunal against payment of 10% of project cost in case of developers
and 10% of the cost of property purchased in case of allottees and agents.
Compliance with reasons for punishment shall be complied within 30 days of
compounding.
Under the Rules, Adjudicating
Officers, Real Estate Authorities and Appellate Tribunals shall dispose of
complaints within 60 days.
To enable informed decisions by
buyers, Real Estate Regulatory Authorities shall ensure publication on their
websites information relating to profile
and track record of promoters, details of litigations, advertisement and
prospectus issued about the project, details of apartments, plots and garages,
registered agents and consultants, development plan, financial details of the
promoters, status of approvals and projects etc.
Ministry of Urban Development is
working on similar Rules which would be applicable for real estate sector in
the National Capital Region of Delhi while the State Governments and other UTs
with Legislatures are required to notify Rules for application in respective
domains.
With notification of Real Estate
Rules by the Ministry of Housing & Urban Poverty Alleviation, States and
UTs are expected to do so soon. As per the provisions of the Real Estate
(Regulation and Development) Act, 2016, Real Estate Regulatory Authorities are
required to be put in place by April 30, 2017 before full Act is brought into
effect, the next day.
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