Real Estate Regulatory Authority (RERA) – How it Has impacted the buyers?

The real estate (regulation and development) Act 2016 was enacted on 1 May 2016, with the purpose of protecting the interest of home buyers, and to protect them from the monopoly of the developers.

In order to provide speedy and hassle-free redressal to disputes, the Act provides for the establishment of the Real Estate Regulatory Authority (RERA) which is responsible for regulating the real estate sector.

The main purpose of the Act was to bring transparency in the functioning of the Real Estate sector with improved project delivery, regularized pricing, quality of construction, etc to attract the investors to invest in the real estate industry.

After the implementation of the RERA, it is the buyers who have benefited the most. Before the Act, it was impossible for the buyers to know about the cost of the land, cost of construction, or about the sanctioned plans. However, now, the buyers can have access to all such information.

In order to keep a check on the quality of the construction, the Act, increasing the liability of the developer, states that if for 5 years there is any defect in the building, then the developer has to rectify it within 30 days without any cost.

The RERA Act, 2016 also solves one of the major problems of false promotion and Advertisement. Earlier the developers used to dupe the buyers with false promises. However, now since it is mandatory to carry the RERA registration number in the advertisement, there can be no false advertisement anymore.

The important benefit given to buyers under RERA Act 2016 is that now they can claim compensation from the developer if the possession is not given as per the agreement. Section 18 of the Act, empowers the buyers to approach the adjudicating authority if the possession has not been given as per the agreement.

Return of the Amount and compensation

Under the RERA Act 2016, section 18 of the Act states that if the promoter 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 or as promised by him, then, if the buyer wishes to withdraw, the promoter shall be liable to return the amount with interest to the buyers.

And if the buyer does not intend to withdraw from the project, the promoter shall pay him, interest for every month of delay, till the possession.

In one such case of Jayesh Tanna, ITMC Developers Pvt. Ltd v Maharashtra Real Estate Regulatory Authority & Others, the developer entered into an agreement with the buyers in January 2015 for the sale of flats in its project SAPPHIRE, and promised to give the possession of the flat to the buyers by July 2015.

However, the developer failed to hand over the possession on the agreed date. Then, the buyers approached the Maharashtra Real Estate Regulatory Authority under Section 18, of the RERA Act 2016 for the return of the amount and the compensation.

The Tribunal directed the developer to return the amount at 10.05% per annum from the date of receipt and to instantly deposit the 50% of the said amount with the tribunal.

Then, the developer approached the high court of Bombay, which upheld the decision of the tribunal with reference to the payment of the amount to the buyer while restoring the appeal of the developer in front of the Appellate Tribunal subjected to the payment of amount and compensation to the buyer.

In another case of Sunil Gupta Vs. Umang Realtech Pvt. Ltd. the ordeal of the buyer comes to light, and how these contracts are unilaterally constructed in the favor of the developer.

The buyer who is a resident of Gurgaon, Haryana entered into the contract with the developer in April 2012 for the purchase of the flat, whose possession had to be granted to the buyer by December 2013. However, the buyer did not get possession of the said apartment in the said period.

It was then that RERA Act 2016 had come into effect and it had become mandatory for all the developers to register the project with the RERA. The Buyer approached the RERA Haryana, under section 18 of the Act for the compensation.

The Adjudicating authority after looking into the matter came to the conclusion that since the developer had failed to deliver the possession of the apartment on time to the buyer, causing immense suffering to the buyer.

The developer was asked to return the complete amount with a 10.05% interest per annum since the date of default within 90 days. Such has been the effect of RERA, that the buyers are no more at the receiving end of the developers. The high penalty and the swift imposition have the developers in fear.

Are the Provisions of RERA applicable to the ‘Agreement of Lease’ executed between the developer and the buyer?

The developers in order to defraud the home buyers construct the contract in such a way, that they do not have any liability if the project gets shelved.

One such case is of Lavasa Corporation Limited vs. Jitendra Jagdish Tulsiani and Ors where buyers booked the apartment and entered into an agreement with the developer/promoter for buying the apartment on the basis of the lease for the period of 99 years in the Township being built by the developer.

The buyers were promised possession within 24 months. They had paid most of the consideration amount, approximately 80% of the sale price with all the substantial amount towards the stamp-duty and the registration charges. However, they did not get possession even after the time period of 24 months.

It was then, the buyers approached the Maharashtra Real Estate Regulatory Authority (Maha RERA), under section 18 of the RERA Act, for the return of the amount and compensation.

The Adjudicating Authority held that as the ‘Agreements’ entered into between the parties are clearly the ‘Agreements of Lease’ and not an ‘Agreement of Sale’ they do not fall under the ambit of RERA and no relief can be given to the buyers.

However, the Appellate Tribunal overturned the decision and held that the ‘Agreements of Lease’ will fall under the ambit of RERA.

Giving clarity on the said issue the High Court of Bombay finally held that, depriving the buyers of enjoying remedy available under Section 18 of Act was as good as allowing unjust enrichment on part of the developers.

Therefore, in the said circumstances the ‘Agreements of Lease’ will fall under the jurisdiction of RERA.

Conclusion

The real estate (regulation and development) Act 2016, is still in its nascent stage and is slowly taking the form, but it surely has changed the way the real estate industry functions. A few years from now, the real estate industry would have been revolutionized.

The fast track courts instituted under the RERA have saved the buyers a lot of their hard-earned money and have also enabled them to seek compensation. The Registration of the property with the Regulatory Authority has allowed the buyers to have access to all the information regarding the property. The RERA Act had been a big win for the buyers.

Author: Payal Goyal

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