SC Upholds Application Of RERA To Real Estate Projects Ongoing At Act's Commencement

Coverage of this Article

KEY TAKEAWAYS

-The Supreme Court on Friday affirmed the Real Estate (Regulation and Development) Act, 2016's retroactive applicability to real estate projects that were already underway when the Act was passed. 

INTRODUCTION

-The Real Estate (Regulation and Development) Act, 2016, is an Act of the Indian Parliament that aims to safeguard home buyers while also assisting in the growth of real estate investments.

BACKGROUND

-In this case, the RERA's single member ordered the promoter/real estate developer to return the main amount plus interest in response to a complaint filed at the request of the home buyers/allottees.

OBJECTIVES OF RERA

-To safeguard the allottees' interests and assure their accountability

SOME MAJOR BENEFITS OF THE RERA

1. Standardized carpet area

2. Rate of interest on default

3. Reduces the risk of builder insolvency/bankruptcy

4. Right of the buyer in case of false promises

WHY DID THE RERA BECOME IMPORTANT AND NECESSARY

-Home owners have long complained that real estate transactions are unbalanced and significantly skewed in favor of developers. 

LANDMARK JUDGEMENTS ON RERA

1. Aftab Singh v. Emaar MGF Land Limited & Anr

2. Vinod Kumar Agarwal vs. Jaipur Development Authority (Rajasthan RERA)

3. Sushil Ansal vs. Ashok Tripati, Suarabh Tripathi [2020]43 NCLAT

4. Mr. Jatin Mavani Vs M/s. Rare Township Pvt. Ltd [MahaRERA]

5. Sanjeev Dhakar Vs. M/s. Arkanade Realty( MahaRERA Mumbai)

CONCLUSION

-The Rera Act of 2016 is broken into ten chapters, each of which is divided into 92 sections.

KEY TAKEAWAYS

The Supreme Court on Friday affirmed the Real Estate (Regulation and Development) Act, 2016's retroactive applicability to real estate projects that were already underway when the Act was passed. The bench, which included Justices Uday Umesh Lalit, Ajay Rastogi, and Aniruddha Bose, stated that the RERA Act does not apply to projects that have already been finished or for which a completion certificate has been issued before to the Act's implementation. The court dismissed Promoters/Developers' claims that the first provision to Section 3(1) of the Act violates Articles 14 and 19 (g) of the Indian Constitution.

INTRODUCTION

The Real Estate (Regulation and Development) Act, 2016, is an Act of the Indian Parliament that aims to safeguard home buyers while also assisting in the growth of real estate investments. The Act creates a Real Estate Regulatory Authority (RERA) in each state to regulate the real estate industry and serve as an adjudicating authority for quick resolution of disputes. The Rajya Sabha approved the bill on March 10, 2016, while the Lok Sabha approved it on March 15, 2016.

The Act came into effect on May 1, 2016, with 61 of the 92 sections having been notified. The remaining provisions took effect on May 1, 2017. The central and state governments must notify the Rules under the Act within a six-month statutory time frame.

In 2013, the bill for the Real Estate Regulatory Authority (RERA) was introduced. Based on the recommendations of a Rajya Sabha committee that evaluated the bill, the Union Cabinet of India accepted 20 substantial revisions to the bill in December 2015. The Bill was referred to a selection committee, which issued its report in July 2015. Congress, the Left, and the AIADMK, on the other hand, have issued dissent notes in response to the report. The bill was approved by the Rajya Sabha on March 10, 2016, and the Lok Sabha on March 15, 2016.

BACKGROUND

In this case, the RERA's single member ordered the promoter/real estate developer to return the main amount plus interest in response to a complaint filed at the request of the home buyers/allottees. The Developer went to the High Court with a writ petition contesting the Tribunal's jurisdiction. The High Court decided to dismiss the writ petition. One of the issues explored by the Apex Court in the appeal was whether RERA is retrospective or retroactive in its functioning, and what legal consequences it will have if tried on the anvil of the Indian Constitution.

Taking note of the statutory provisions, particularly Section 3 of the RERA, the court stated that the Act covers all "ongoing projects" that began previous to the Act and for which no completion certificate has been obtained.

OBJECTIVES OF RERA

RERA seeks to achieve the following goals:

• To safeguard the allottees' interests and assure their accountability
• Maintaining transparency and lowering the risk of fraud
• To bring about pan-India standards and professionalism.
• To improve the flow of accurate information between buyers and sellers of homes
• To make both the builders and the investors bear more responsibility.
• To improve the sector's resiliency and, as a result, raise investor confidence.

SOME MAJOR BENEFITS OF THE RERA

• Standardized carpet area

Previously, the carpet area on which the builder bases the price of the property was not defined. Each builder/developer had their own way for calculating Carpet Area.

The carpet space for the same unit would be calculated as 1500 sq ft by one builder and 1400 sq ft by the other builder. Because there was no standard formula for calculating the Carpet Area, this used to happen. The RERA Act, on the other hand, has explicitly specified this, and all builders/developers will use the same formula to calculate carpet area.

• Rate of interest on default

In the event that the buyer defaults on payment or the builder fails to complete the project, both parties will be charged the same rate of interest. Previously, if the builder delayed possession of the property, the interest paid by the builder to the house buyer was lower, and if the buyer defaulted, the interest paid by the buyer to the builder was higher. There was no interest payment equivalence between the two parties. The RERA Act now clearly states that the interest rate for both parties must be the same.

• Reduces the risk of builder insolvency/bankruptcy

A developer frequently has numerous projects under construction at the same time. Previously, builders were able to move cash generated from Project A to Project B's building. This is no longer allowed since, with the implementation of RERA, the builder is required to deposit 70% of the project's revenue in a separate bank account. He can only withdraw money from such an account once the project is completed and certified by a civil engineer, architect, and a practicing chartered accountant.

• Right of the buyer in case of false promises

If the builder's obligations do not match the actual project, the buyer has the option to withdraw from the project, in which case he is entitled to a full refund of any money paid as an advance or otherwise, plus interest and compensation.

WHY DID THE RERA BECOME IMPORTANT AND NECESSARY

Home owners have long complained that real estate transactions are unbalanced and significantly skewed in favor of developers. The goal of RERA and the government's model code is to promote a more equal and fair transaction between property sellers and buyers, especially in the main market. It is envisaged that RERA will make real estate purchases easier by increasing accountability and transparency, provided that states do not undermine the central act's provisions and spirit. The RERA will be the first regulatory body for the Indian real estate business. The Real Estate Act requires each state and union territory to establish its own regulator and set forth the guidelines that will regulate the authority's operations.

LANDMARK JUDGEMENTS ON RERA

● Aftab Singh v. Emaar MGF Land Limited & Anr

• In this instance, there was a disagreement about whether a consumer complaint could be brought against the builder if the lawsuits were filed under RERA.
• The circumstances of the case are as follows: the builder pledged to construct villas and have them ready for delivery within a certain time frame, but he failed to do so.
• Following that, he filed an application under the Arbitration and Conciliation Act of 1996, requesting that the judicial authority refer the parties to arbitration because the principal agreement between the buyers and the builders included an arbitration clause.
• Following that, a consumer complaint was filed against the builder in the forum, but he claimed that the forum had jurisdiction to hear the case because it was already ongoing under a separate statute and authority.
• The Supreme Court ruled that the Consumer Protection Act is a supplement to another statute, rather than a suppression of a privilege granted by another statute. The act's forum is not to be confused with a civil court.
• A consumer's availability of an alternative remedy under a statute does not exclude him from seeking the forum.
• Despite the fact that RERA has laws specifically safeguarding developers and builders, as well as guaranteeing buyers' rights to considerable compensation, none of this restricts or limits the right.
• The fact that Section 71 of RERA grants adjudicatory powers does not preclude a person from exercising their rights under the CPA.
• The agreement does not preclude the parties from resorting to a forum for redress of concerns, according to the NCDRC in the same instance.
• As a result, it is now a well-established principle that customers have the choice of approaching the RERA forum or the Consumer Protection forum for redressal of their complaints.

● Vinod Kumar Agarwal vs. Jaipur Development Authority (Rajasthan RERA)

• The issue at hand was whether RERA's regulations would take precedence over those of local laws. The applicability of Section 13 of the Real Estate Regulation Act was also a legal issue.
• The provision states that the project's promoter will not accept any amount greater than 10% of the total amount until the agreement for sale and other conditions have been met.
• The facts of the case are that the authority requested more consideration than the 10% rule, and it argued that the rationale for this is because the state's local act, the Rajasthan Improvement Trust Rules, 1974, allows for it.
• They further claimed that the respondent was not required to carry out specified development in that region.
• While the petitioner argued that the provisions of RERA indicate that it was enacted by the Central Legislature and that it would take precedence over state laws.
• As a result, in accordance with Section 13 of RERA, the power should be given to finalise the sale deed and complete the agreement before requesting any further funds. The tribunal agreed with the arguments and stated that Central Law would apply in this case, as well as the fact that the aforementioned clause is mandatory in nature, requiring the power to execute the sale agreement.

● Sushil Ansal vs. Ashok Tripati, Suarabh Tripathi [2020]43 NCLAT

• In this case, a decree was challenged in the NCLAT, which ordered the company to file for insolvency in order to pay a sum of rupees 73 lakh that had been awarded against them by UP RERA.
• The topic was whether or not home buyers may be considered financial creditors. The forum concluded that home buyers can seek enforcement of their decree through civil law, but they cannot seek remedy from the IBC.
• According to the 2019 amendment, it is a basic need that either 100 purchasers or 10% of the allottee file bankruptcy, but the truth that must be missed is that if there are only 100 buyers, the firm can be forced to file bankruptcy by only two or three persons.
• When it comes to implementing an order for repayment due to the promoter's default, it is clarified that a home buyer is not treated in the same way as a financial creditor.

● Mr. Jatin Mavani Vs M/s. Rare Township Pvt. Ltd [MahaRERA]

• The problem in this case is the filing of several RERA proceedings on the same subject matter.
• In this case, the complainant claimed that despite booking an apartment and paying the appropriate consideration, he was not provided the flat on time, and that other buyers similarly sought redress from MahaRERA, requesting that the cancellation fee be waived and the sum already paid be refunded.
• The respondent builder argued that the first complainant never had the agreement registered, and hence it could not be carried out.
• Even after the respondent asked him to engage into a new agreement, he refused, and now he's bringing in other buyers with his plea, which should be dismissed since it amounts to multiple proceedings under the same authority.
• Another point of contention was that he was a member of the developing association and had previously been a party to a proceeding, thus he could not be a party to this claim.
• The MahaRERA took note of this and concluded that the complainant had exhausted his remedies when he first approached the forum, and that he now has no locus standi in approaching the court, because if he is considered an allottee, multiple proceedings before the same court would be allowed, which is not allowed.

● Sanjeev Dhakar Vs. M/s. Arkanade Realty( MahaRERA Mumbai)

• The issue here is that the complainant purchased a flat in the respondent's building for a reasonable price, and that when the property was delivered, a major concern arose regarding the parking space that is supposed to be offered to anyone buying a specific area.
• According to the RERA, the owner or developer is obligated to give parking space to all of the tenants of his territory.
• Another argument made was that the respondent was attempting to show the parking place to other persons, which is a violation of the principal in and of itself.
• After hearing both sides' arguments, the court determined that the respondent, the developer, is bound to provide the appropriate parking space to all of the project's inhabitants who have purchased flats. He is unable to sell that land to anyone else.

CONCLUSION

The Rera Act of 2016 is broken into ten chapters, each of which is divided into 92 sections. The Act begins with the Preamble, which covers title, scope, and commencement, registration of real estate projects and real estate agents, promoter functions and duties, allottee rights and duties, the Real Estate Regulatory Authority, the Central Advisory Council, the Real Estate Appellate Tribunal, various offences, penalties, and adjudication, and finances, accounts, audits, and reports, among other things.

To restore confidence in our country's real estate sector, a rule like RERA was required. It is one of our country's most important cash generators, and it requires a transparent government body to maintain track of developers. RERA will create a level playing field for both buyers and developers, reducing the dangers that people previously faced. RERA is extremely important because it will apply to over 76,000 businesses across the country. This act makes a lot of items mandatory, such as project registration and real estate agent registration. RERA creates a state agency to oversee both residential and commercial real estate transactions. RERA will ensure that the project is completed on schedule, which is a huge comfort for house buyers. RERA will ensure greater precision between developers and buyers, resulting in greater openness.