The RERA Impasse

The legal validity of RERA has been the center of discussion ever since it came into existence. Sudip Mullick, Partner, Khaitan & Co. in conversation with Shubham Singh explains the legal implications of Real Estate Regulatory Act (RERA). In the current scenario for a real-estate buyer or investor what will be applicable- RERA or MOFA? The on-going projects mandatorily have to register with RERA. The penal provisions of MoFA (Maharashtra Ownership of Flats Act) rules are applicable up to the date of registration and thereafter RERA comes in force. The provisions of MOFA (State Act) which are inconsistent with the provisions of RERA are overridden by provisions of RERA (Central Act). However, the challenge is to coordinate and correlate the provisions of MoFA and RERA though RERA takes precedence over MoFA. Under MoFA, a consumer can file criminal proceedings against a developer over non-compliance or project delivery issues. In my opinion, giving a criminal angle to civil offence is not appropriate. The overall remedy lies in civil proceedings. The jurisdiction of RERA starts from the registration of the project and there are penalties on the developer for non-registration of projects by the given date. Once the project gets registered under the Act, the authority is required to dispose it under 60 days. If it cannot, it is required to record its reasons for the delay. For a registered real-estate project, the judicial jurisdiction belongs only to RERA and not any civil court. But a criminal complaint can still be filed by the aggrieved person, though not advisable.   The challenges developers are facing with the RERA compliances If there is a delay in the project, developers are required to pay 10% interest to the buyers on the invested amount. If the buyer chooses to let go of the project, he will get the principal amount as well as the interest on the money till that time as compensation. The adjudicating authority decides the quantum of compensation to be given to the buyer. But, there should be a mechanism to analyse the cause of delay – whether it’s solely the developer or various external factors which are beyond the control of developers, Alot of developers enter into a joint development processes which can be revenue or area share basis. This may raise complications for them. Also, delays in government approvals, sanctions etc. also can lead to delays in completion of projects. Though a developer can bring this to the notice of RERA authority, but RERA doesn’t have much power over other authorities. cannot influence other  does not have much say here is a provision  the development is in phases with a lot of common areas, the information gets difficult to upload on the RERA website. This is one of the reasons developers are registering their project phase wise or individual buildings.   Implications of RERA on the real estate market Going forward, RERA will bring a very structured growth. Principally the developers will become project managers. Financial institutions will feel more confident of lending & investing money in real-estate and construction companies will get involved on EPC basis. RERA will definitely bring the required discipline that this industry was waiting for.   While buying a property a homebuyer should check the following considerations: -Building Occupation Certificate and preferably Completion Certificate -The carpet area is as promised by the developer -The apartment is in accordance with the sanctioned plan and environmental laws -The title of the unit/building/property is clear of any encumbrances -If the developer has retained any right towards any future development concerning the purchased unit/building/project -Amenities as provided in the agreement by the developer -If there is any restriction or expenditure on future transfer by the allottee -Whether the parking space/terrace/open space of the unit are sold and/or exclusively granted to T-he quantum of maintenance and outgoings required to be paid -Agreement is duly registered and stamped -Resident’s society or association is formed in time.