Government of India has enacted the Real Estate (Regulation and Development) Act 2016 (“Act“) and all the sections of the Act shall come into force with effect from May 1, 2017. Under this Act, Government of Maharashtra vide notification dated April 20th, 2017 notified the Maharashtra Real Estate (Regulation Development) (Registration of Real Estate Projects, Registration of Real Estate Agents, Rates, of Interest and Disclosure on Website) Rules, 2017 (“Rules”) and established Maharashtra Real Estate Regulatory Authority (“MahaRERA”), for regulation and promotion of real estate sector in the State of Maharashtra.
Brief Overview of Maharashtra RERA
Maharashtra is the first state to implement the Act with an objective to protect homebuyers from any discrimination by real estate players (“Developers”). The MahaRERA was established with the objective to allow homebuyers to approach the authority for any lapses on part of the Developers.
Some key features of MahaRERA are:
Sale on Carpet area
Before the implementation of the MahaRERA, Developers sold property based on the built-up area i.e. the carpet area plus the outer walls of the apartment and other common areas. However, after implementation of MahaRERA, Developers have to sell the property on the basis of the carpet area i.e. area which is enclosed within the four walls of the apartment and exclude the area of balcony and gallery of the building. This will help customers to pay only the amount for the area they will be occupying.
Definition of Parking Space
The Rules have notified the definition of the Parking space which was not present under the earlier Act or Rules. Now, the Developer needs to disclose the charges for parking area in the official agreement separately.
Benefits for homebuyers
MahaRERA introduced several provisions with an objective to increase transparency. Some of the benefits are:
- Citizens shall be able to view, on MahaRERA website, all disclosures pertaining to registered projects. This shall enable data driven and informed decision making.
- Developer cannot make any additions and alterations in the sanctioned plans, layout plans and specifications and the nature of fixtures, fittings and amenities etc. without the previous consent of at least two-thirds of the allottees, other than the Developer, who have agreed to take apartments in such building.
- If the Developer fails to complete or is unable to give possession of an apartment, plot or building, in accordance with the terms of the agreement for sale, he shall be liable to pay interest for every month of delay. Further, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him with interest.
- Developer to enable formation of Legal Entity like Cooperative Society, Company, Association, Federation etc. within three months from the date on which sixty per cent of the total number of buyers in such a building or a wing, have booked their apartment.
- Developer shall execute a registered conveyance deed in favour of the allottee within three months from date of issue of occupancy certificate or sixty per cent of the total number of Purchasers in such a building or a wing, have paid the full consideration to the promoter, whichever is earlier.
- In recent past, homebuyers are denied purchasing flats based on their religion, caste and gender etc. Now, builders will not be able to bring the issue based on religion, caste, food preference or cultural. The Rule restricts Developers from discriminating homebuyers on any basis.
- To keep customers safe from estate agent’s fleecing, it is now mandatory for every estate agent to get himself registered with the Government.
Mandate on the Developer(s)
MahaRERA include several mandates to secure the safety of the buyers. Some key mandates are:
- As per Rule 3 (8) of the Rules, the Developer has to disclose land cost, cost of construction and estimated cost of the real estate project as required under the Act. Since penalty is levied on the cost of the project this information is necessary.
- The onus of completing a project within a particular time frame lies on the real estate Developer, failing which the Developer would face penalty and also be sentenced to 3 (three) years in jail making it a cognizable offence.
- As per Rule 4 (2) of the Rules, status of ongoing projects needs to be disclosed as per the last sanctioned plan and also about the status of development of common areas along with the expected period of completion to be disclosed. Chartered accountant (“CA”) needs to certify the number of receivables in respect of sold/allotted apartments and estimated receivables calculated on ASR rates for unsold apartments.
- As per Rule 5 (1) (b) of the Rules, amounts deposited in separate account can be withdrawn by the Developer on the basis of certificate issued by the engineer, architect and CA on the extent of project completed vis-à-vis the estimated cost of the project.
- Registration period includes the period where actual work could not be started due to specific orders from any court of law, Competent Authority, Tribunal etc. or such circumstances as may be decided by the Authority.
- As per proviso to Rule 4 (4) of the Rules, a Developer cannot sell apartments if such Developer has not registered the concerned project within 90 days from the date of the notification.
- As per Rule 3 (6) of the Rules, the registration of project is necessary for the Developer. However, registration of the project may not be required if the project is for renovation or repair or redevelopment purpose and which does not involve marketing, advertisement and selling of apartments.
Establishment of Tribunal
To address the grievances of property buyers, the law mandates formation of a Maharashtra Regulatory Authority Board as a tribunal. The tribunal will comprise of the Chief Justice of the High Court, the law and judiciary secretary and the housing secretary.
The fees for filing a complaint against Developers is Rs. 5000/- (Rupees Five Thousand only) (as per Rule 9 of the Rules) via NEFT or RTGS or any other digital transaction mode. A buyer can file complain online or at MahaRERA Desk in “Form A” provided by MahaRERA. In case the person is not satisfied with the decision made by RERA tribunal or its officer, he may file an appeal before RERA Appellate Tribunal within a period of 60 (Sixty) days from the date of the decision of the Tribunal. If a buyer is not satisfied with the decision of the Appellate Tribunal then he can file an appeal to High Court within 60 (Sixty) days from the date of Appellate Tribunals decision. The complaints received will be probed by the team of 25 officials and once it will get verified, a suitable action, which may include a fine up to 10% of the project cost, will be taken against the builder.
Registration of the Project
Developers were required to compulsorily register their projects with RERA on or before July 31st, 2017, failing which all unregistered works would be deemed unauthorized. Further Section 85 of the Act (notified) mandates that every real estate project with an area over 500 sq. mtrs. will have to register with RERA within 3 (three) months of the notification.
However, Government has issued a clarification via notification dated July 4th 2017, wherein the Government has noticed that promoters are committing some common mistakes while filing the project registration which thereby caused delay in registration process. MahaRERA in their above dated notification clarified that the documents should be legible and not blurred, in case the document is uploaded and if the field is not applicable then a self-declaration to that effect has to be uploaded with the document. It is further clarified that, a mere grant of registration by MahaRERA does not mean that the contents and documents are in conformity with the provisions of the Act and Rules. Even after registration, if it is bought to the notice of MahaRERA that the documents are misleading or incorrect then action shall be taken against such respect. This notification also clarifies that the period of 30 (thirty) days shall start from the day on which the application for registration, complete in all respect is received in the office of MahaRERA.
Online Project Update Facility
As per the circular dated July 18th, 2017, the software application for updating the details of project, in the MahaRERA portal, has been launched by the Government. As per MahaRERA Order vide MahaRERA/Secretary/Order dated 17th April 2017, annual fees of Rs.500/- (Rupees Five Hundred only) shall be levied on promoters for online project update facility. This fees shall be valid for 1 (one) year from the date of payment of fees.
- The state rules have a provision for ‘phases of real estate project’. It seems to notify a set of buildings and even a wing of building as a project. While the Act allows for large projects that are spread over 100 acres to be completed in phases, it does not allow for dividing a project into buildings.
- Maharashtra rules have a new nomenclature called ‘proposed plans’ as per the RERA Act notified by the Centre, only sanctioned plans can be submitted and not proposed plans.
- It also has a provision of ‘last approved sanctioned plan’. RERA clearly states that consent from two-third allottees is required for changes in approved sanctioned plans shared at the time of booking a house. Considering only the last approved sanctioned plan is a clear indication to legalize all changes made by the promoter in the plan subsequent to booking.
- MahaRERA also provides discretionary power to the Authority, to withhold any information or document from uploading on the website for public viewing. RERA does not provide for any such power to be given to the Authority. Providing for such discretionary powers completely defeats the objective of the Act.
- In the absence of an express close shops till registration rule, Developers can continue marketing and sales activities for their ongoing projects till the end of the three-month timeline.
- The nature of prohibition under MahaRERA only prohibits sales and marketing of unregistered projects, it is safe to conclude that sold-out projects pending grant of possession until issue of completion certificate, need not register under MahaRERA.
- Despite the State rules providing templates of the agreements to sell, RERA as well as most of the State rules do not specify whether re-executing transactions with the existing allottees of ongoing projects is mandatory or not. Therefore, without an express provision, such a requirement can also be safely assumed to not apply.
Recent update on MahaRERA
After implementation of the MahaRERA Rules, the Government has issued its first show-cause vide notice to a property broker Sai Estate Consultants for violating provisions of the Act and the Rules. The Government issued a notice for advertising about multiple residential projects that have not been registered under the MahaRERA. The property broker Sai Estate Consultants, however, has already registered itself with the authority. The Act requires brokers to sell or facilitate such activity in registered projects only. “Even though ongoing projects have a 90-day window to advertise, sell and also get registered with the authority, if any broker has got registered during this period, he as per the Rules can facilitate the sale only in such projects that are registered. “The broker has violated Sections 9 and 10 of the Act and Rule 14 of the registration regulation and was imposed with the fine of Rs. 1.20 lakhs.
MahaRERA is a step towards reforming the real estate sector in India, encouraging greater transparency, citizen centricity, accountability and financial discipline. We hope it will soon be implemented in other Indian states too.