Section 13 provides that the promoter cannot accept a sum more than 10 percent of the apartment / plot cost as an advance payment / application fees. For any further collection towards the apartment / plot cost, the promoter is required to enter into an ‘Agreement for Sale’ with the allottee.

As per section 4(2)(l)(D) third proviso, the promoter is required to get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such chartered accountant and it shall be verified during the audit that the amounts collected for a particular project have been utilized for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project.

As per section 4(2)(l)(D) first and second proviso, the promoter is required to withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the project. In addition, the promoter is permitted to withdraw from the separate account after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.

Section 4(2)(l)(D) provides that the promoter shall maintain a ‘separate account’ for every project undertaken by him wherein seventy percent of the money received from the allottees shall be deposited for the purposes of construction and land cost. The account has to be self maintained and is not an escrow account requiring the approval of the Authority for withdrawal. Section 4(2)(l)(D) clearly provides that the funds can only be used for construction and land cost.

As per section 4, the validity of the registration granted to a project shall be the period declared by the promoter under section 4(2)(l)(C), at the time of making the application for registration, within which he would complete the project.

Section 19 provides for the various rights of the allottees. This section specifies various rights which the allottees have against the promoters including those which the promoters are liable to fulfill based on the agreement entered into with the allottees, namely – stage-wise schedule of completion of the project and the services, claim timely possession of the apartment / plot, entitlement to necessary documents and plans etc. Section 20 provides for the various duties of the allottees, which provide for matters relating to payment regarding the apartment / plot, liability towards interest for delay in payment, responsibility to take possession, participate in formation of association etc.

As per section 3(2) the following projects do not require to be registered under the Act: (a)Where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight, inclusive of all phases; (b)Where the promoter has received completion certificate for a real estate project prior to commencement of this Act; (c)For the purpose of renovation or repair or re-development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building, as the case may be, under the real estate project

As regards the ambit of the Act, there is no distinction between an ongoing project and a future project, i.e. both ongoing / incomplete projects and future projects are covered under the Act. Section 3(1) first proviso provides that promoters of ‘all ongoing projects which have not received completion certificate will need to register their project with the Regulator Authority, within 3 months of its commencement’.

Section 3(1) provides that all projects within a ‘planning area’ will require to be registered with the Authority. ‘Planning Area’ has been defined under section 2(zh). However, section 3(1) second proviso gives powers to the Authority ‘in the interest of allottees’ to order / direct the promoter to register projects beyond the planning area, which has the requisite permission of the local authority.

The Act covers both residential and commercial real estate. Section 2(e) defines ‘apartment’ and section 2(j) defines ‘building’ which include both residential and commercial real estate.

Section 2(y) defines the term ‘garage’, which can be sold to the allottee independent of the ‘apartment’.

Section 2(v) defines ‘estimated cost of the real estate project’, which means “the total cost involved in developing the real estate project and includes the land cost, taxes, cess, development and other charges”. The determination of the estimated cost of the real estate project is necessary due to Chapter VIII of the Act, which provides that penalties would be imposed on the promoter, for violations prescribed under the Act, based on the estimated cost of the real estate project.

Section 2(zf) and section 2(q) respectively, define ‘occupancy certificate’ and ‘completion certificate’. Occupancy certificate relates to the occupation of the apartment/building, which has provision for civic infrastructure such as water, sanitation and electricity and is habitable. Completion certificate relates to the completion of the entire project certifying that the project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority.

Section 2(zf) and section 2(q) respectively, define ‘occupancy certificate’ and ‘completion certificate’. The two definition are very broad and uses the term ‘by whatever name called’. Thus, if in a State/UT only one certificate is issued which provides for both the aspects covered under the two definitions, it would suffice the requirements under the Act.

Section 2(n) defines ‘common areas’ to include ‘community and commercial facilities’, thus they are an integral part of the project, to be handed over to the Association of Allottees.

Section 2(n) defines ‘common areas’ to include ‘open parking areas’, thus open parking areas cannot be sold to the allottees.

As per section 2(d) an allottee includes a person who acquires the said ‘apartment / plot’ through transfer or sale, but does not include a person to whom such plot, apartment is given on rent.

As per the Explanation to section 2(zk) “where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made there under”.

The Real Estate Act is intended to achieve the following objectives: a) Ensure accountability towards allottees and protect their interest b) Infuse transparency, ensure fair-play and reduce frauds & delays c) Introduce professionalism and pan India standardization d) Establish symmetry of information between the promoter and allottee e) Imposing certain responsibilities on both promoter and allottees f) Establish regulatory oversight mechanism to enforce contracts g) Establish fast- track dispute resolution mechanism h) Promote good governance in the sector which in turn would create investor confidence

The Real Estate Act is intended to achieve the following objectives: a) Ensure accountability towards allottees and protect their interest b) Infuse transparency, ensure fair-play and reduce frauds & delays c) Introduce professionalism and pan India standardization d) Establish symmetry of information between the promoter and allottee e) Imposing certain responsibilities on both promoter and allottees f) Establish regulatory oversight mechanism to enforce contracts g) Establish fast- track dispute resolution mechanism h) Promote good governance in the sector which in turn would create investor confidence

The Act covers all bodies (private and public) which develop real estate projects for sale to the general public. Section 2(zk) defines the term ‘promoter’ which includes both private and public real estate promoters. Thus, both Development Authorities and the Housing Boards, when involved in sale are covered under the Act.

The real estate sector has grown in the recent years but has largely been unregulated from the perspective of consumer protection. Though, consumer protection laws are available, the recourse available therein are only curative, but not preventive. This has affected the overall potential growth of the sector due to absence of professionalism and standardization.
Source: Ministry of Housing & Urban Poverty Alleviation, Government of India Real Estate (Regulation and Development) Act, 2016 – Frequently Asked Questions (FAQ) Disclaimer: The Frequently Asked Questions (FAQs) and the responses therein are for general information and guidance only. These questions and responses have been framed keeping in view possible doubts that may arise and are not based on individual cases; therefore, it is not to be taken as a final view of the Ministry of specific legal interpretation of the extant provisions of the Real Estate (Regulation and Development) Act, 2016.