Investments are important for any developing nation. It promotes infrastructure-growth, creates jobs and strengthens the savings of a nation. All these are signs of a thriving and positively growing economy. In India, one of the major sectors which have the potential to attract investments is the Real Estate sector. The Real Estate Sector is expected to reach USD 1 trillion by 2030 and will contribute 13 per cent of the country’s GDP by 2025[i]. Thus, it is one of the priority sectors which has been receiving due attention from our lawmakers. One of the steps taken by the lawmakers is the enactment of the Real Estate (Regulation and Development Act), 2016. Having an impact on both the organized and the unorganized real estate sector, the ultimate aim of the Act is greater transparency and reduction of risks related to this sector. This Act is thus, a positive step in strengthening the confidence and the feasibility of this sector.   

Object of RERA

The object of RERA has been put forth as under:

1.  SETTING UP OF A INSTITUTIONAL MECHANISM: Establishment of the Real Estate Regulatory Authority which would regulate and promote the real estate sector. The other institution established under the Act is the Appellate Tribunal which would hear appeals from the decisions and directions of the Authority and the Central Advisory Council.

2.  CONSUMER INTEREST PROTECTION: Efficiency and transparency in the manner of sale of plots, apartment, buildings and real estate projects which would promote the protection of consumer interests through the establishment of a consumer redressal mechanism

Outline of the Act

The Real Estate (Regulation and Development Act), 2016, hereon referred to as RERA, has been divided into 10 Chapters consisting of 92 sections. Chapter I deals with the Preliminary part (commencement, extent and definitions), Chapter II deals with the Registration of Real Estate Project and Registration of Real Estate Agents, Chapter III deals with the Functions and Duties of Promoter, Chapter IV deals with the Rights and Duties of Allottees, Chapter V deals with the Real Estate Regulatory Authority, Chapter VI deals with the Central Advisory Council, Chapter VII establishes the Real Estate Appellate Tribunal and all other aspects (composition, qualifications, removal of the Chairperson and Members and powers of the tribunal), Chapter  VIII states the offences and gives the penalties for such offences, Chapter IX deals with the Finance, Accounts and finally, Chapter X deals with miscellaneous provisions in the RERA.    

CHAPTER III- FUNCTIONS AND DUTIES OF THE PROMOTER

Definition of Promoter[ii]: Under RERA, the term ‘promoter’ has been defined. It includes: 

i) A person who is involved in the construction of an independent building, apartment buildings or he/she is involved in the conversion of existing building into apartments with the purpose of selling some or all of the buildings to others and his/her assignees

ii) Land project developers (the construction aspect is not important here) for the purposes of sale (whether it is with or without the structures)

iii) Development authority or other public body which may be involved in the construction of buildings or apartments or plots owned by the authority which are placed at the disposal of the allottees by the Government

iv) Apex State level co-operative housing finance society and primary co-operative housing society which constructs the same for their own Members or for allottees

v) Another person who acts in the capacity of builder, colonizer, contractor, developer, estate developer or who claims to hold power of attorney from the owner of the land

vi) Other person who constructs apartments or buildings for sale to the general public

The Explanation to this definition provides for joint liability as promoters of the construction/conversion and the seller of such apartments or buildings are two different persons.  

Functions and obligations as contained in the Act: Considering that RERA aims at promotion of fairness in the real estate sector, one of the distinct features of RERA is the obligations that it has provided regarding promoters in general. This starts with the most basic requirement of due registration with regulatory authority if the project involves allottees[iii]. Adding to this basic requirement is the prohibition of advertising[iv] such activities if the promoter does not register the project.

Certain important provisions which deal with the functions and obligations of the promoter have been discussed as under:

Section 11- Functions and duties of promoter: These functions and obligations are provided for the benefit of the allottees till the conveyance of the building/apartments etc. have been made. The promoter is required to-

1)  Create a webpage upon receiving a login id password once there is grant of registration under Section 5 (1) (a)[v] or Section 5 (2)[vi]. This webpage is for the purposes of displaying all the details as proposed in the application made under Section 4[vii] for registration. The details required are as follows[viii]:

a) details of the registration granted by the Authority;

b) quarterly up-to-date the list of number and types of apartments or plots booked;

c) quarterly up-to-date the list of number of garages booked; 

d) quarterly up-to-date the list of approvals taken and the approvals which are   pending subsequent to commencement certificate; 

e) quarterly up-to-date status of the project;

f) such other information and documents as may be specified by the regulations made.

2)  The advertisement and the prospectus issued or published should be informative and should provide the website address of the Authority, the details of registered project and registered number from Authority.

3)  The promoter has an obligation to provide specifications of- sanctioned plans[ix], layout plans, display site and the time-schedule of completion of the project which will include sanitation, water etc. This information needs to be provided by the promoter at the time of booking and issue of allotment letter.

4) As stated earlier, the obligations, responsibilities and the functions of the promoter under the Act, rules and regulations or the agreement of sale with the allottee shall be till conveyance of the said project. The proviso extends this responsibility if there is a structural defect. This is in accordance with the period provided in Section 14 (3)[x]. In such a case, it will carry on beyond the conveyance of the said project.

5)  The promoter needs to provide the allottees either individually or to the association of allottees, the completion certificate or occupancy certificate[xi] which is to be obtained by the promoter through a regulatory authority.

6)   Promoter needs to make available to the allottees the lease certificate. This lease certificate is to be duly collected by the promoter.

7)  Promoters should provide and maintain essential services at reasonable prices.

8)  Promoter is to enable the formation of cooperative societies of allottees. It is further provided that in absence of local laws, the cooperative society needs to be formed within 3 months.

9)        Promoter needs to execute the registered deed in favor of the allottee. In case of undivided proportionate title, the same needs to be done in favor of the association or competent authority.

10)        Promoter needs to pay all the outgoings until the physical possession is transferred to the allottee. These outgoings have to be paid out of the amount collected by the promoter from the allottees.

Where the promoter fails to pay the same, his liability is to continue even after the physical possession is transferred. The promoter may be penalized as well.

11)  Where any kind of mortgage or charge is created after an agreement of sale is concluded, the same shall not affect the right and interest of the allottee who has agreed to take such apartment or building.

12)        Promoters can cancel the allotment only in accordance with terms of the agreement. Where the allottee is aggrieved by the cancellation then they may approach the Authority  on grounds like the cancellation was not in accordance with agreement of sale or done unilaterally.

13) Other important details are to be maintained by the promoter as specified by the Authority  

Section 12-Obligations of promoter regarding veracity of the advertisement or prospectus: This section deals with the liability of the promoter regarding veracity of any advertisements or prospectus. In case any person makes an advance or deposit and he/she has done the same because of his/her reliability on the advertisement or prospectus then, the promoter is liable to compensate them if any loss is sustained.

Under this Section, the person also has the liberty to withdraw all his/her investments with interest from the promoter. This is an important section which ensures that the promoter maintains a degree of credulity when providing any person with any notice/advertisement/prospectus related to any such plans be it apartments, buildings or others. 

Section 13- No deposit or advance to be taken by promoter without first entering into an agreement for sale: The Act further obligates the promoter to accept any kind of deposit only after an agreement of sale has been concluded. This is a cautionary Section for buyers as well and hence, it becomes all the more important that buyers are made aware of such provisions. This section further strengthens fairness and transparency. The promoter is not to accept more than 10% of the cost of apartment, plot or building as an advance payment or deposit without entering into any agreement of sale or registering the deed first. The section further provides for certain details that have to be provided in the agreement like- specifications on internal and external development works, the dates and time where the payments have to be made by the allottees, rates of interest which are to be paid by the promoter in case he defaults and vice-versa etc. 

These were certain important provisions of the RERA which dealt with areas of promoters responsibility toward the allottees once they are granted a certificate of registration by the authority. It is to be remembered that under general circumstances, the promoter shall be liable till there is conveyance of possession. But there is a continuation in liability under specific circumstances. All in all RERA assumes importance due to its enabling of making the promoters and the real estate agents liable where the process becomes a little shady for the allottee. The ultimate aim of consumer protection is thus recognized through Chapter III of the RERA. 

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[i]Indian Real Estate Sector, https://www.ibef.org/industry/real-estate-india.aspx <as accessed on 5/12/2019>

[ii]Section 2 (zk), The REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016 https://www.up-rera.in/pdf/reraact.pdf <as accessed on 5/12/2019>

[iii] Section 3, THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016, CHAPTER VI- PROMOTER’S OBLIGATIONS http://www.ramanilegal.com/Chapters%20for%20Website/Chapter%206a.pdf <as accessed on 6/12/2019>

[iv] IBID

[v]Section 5 (1) (a) RERA deals with the subsequent grant of certificate of registration once an application has been made to the authority under Section 4 of RERA, https://www.up-rera.in/pdf/reraact.pdf <as accessed on 5/12/2019>

[vi]Section 5 (2) RERA deals with the rejection of application by the Authority, https://www.up-rera.in/pdf/reraact.pdf <as accessed on 5/12/2019>

[vii]Section 4 deals with the application which has to be submitted to obtain the certificate of registration by Authority. It specifies the details which need to be produced in the application. https://www.up-rera.in/pdf/reraact.pdf <as accessed on 5/12/2019>

[viii]Section 11 RERA, ibid

[ix] Site plan, building plan, service plan etc. as provided in Section 2 (zq) RERA, ibid

[x] Section 14 (3), RERA deals with the duty of the promoter to rectify the structural defects within 30 days where the same is brought to his notice by the allottee within a period of 5 years from date of handing of the possession, ibid

[xi] Certificate which permits any kind of occupation as defined under Section 2 (zf) RERA, ibid