Know About Real State Act

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Know About The Real Estate Act, Which Will Help You To Protect Yourself From The Dodgy Builders

The Logical Indian

October 10th, 2016

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Image Courtesy: economictimes|economictimes

Know About Real Estate Act

The Real Estate (Regulation and Development) Act, 2016, aims to bring a great relief for the people who buy apartment for residential or commercial purpose. Generally, buyers invest their whole life savings or spend a major part of their life paying EMIs to Banks. The Builders have always been accused of ‘exploitative conduct’ and unfair trade practices. As the Buyers struggle for possession of their flats, the legislative step all set to supplement the existing regulatory architecture to address the buyers’ grievances through a mix of structural and behavioral remedies may prove to be a revolution in the Real Estate Sector.


The Real Estate industry is one of the largest generators of economic activity and plays an important role in the development of the country’s infrastructure. The Indian real estate sector being one of the most globally recognized sectors assumed prominence with liberalization of the Economy. Restrictive legislations and lack of transparency in transactions were main impediments to the growth of this sector. Despite plethora of laws governing this sector, the situation remained unsatisfactory. Being one of the largest employers and contributors to national growth, the real estate sector was strangely characterized as unregulated and unrecognized. The lack of a central regulator for this industry, as present in most other important sectors (finance and telecom for example), was astounding.
Though the Consumer Foras (Consumer Courts) safeguard the interests of buyers with no commercial purpose, the recourse is only curative and is not adequate to address all the concerns of buyers and promoters in that sector. It only provides remedy to the Consumers after the harm is caused whereas the 2016 Act seeks to nip such problems in the bud.


Some of the key features of the Act:

  • Authorities under the 2016 Act

The 2016 Act provides for the constitution of three Authorities namely:

  • Real Estate Regulatory Authority(“RERA”) : It is an authority to be established in every State for promotion and regulation of Real Estate Sector. It shall be vested with powers of a civil court to conduct investigations and impose penalty for contravention of the provisions of the Act. An appeal against its Order may be preferred within 60 days to the Real Estate Appellate Tribunal (“REAT”). The Authority shall be established by the states by April 30, 2017.
  • Real Estate Appellate Tribunal : One Tribunal may be established for two or more States or Union Territories. It is an Authority to be established to hear Appeals against the Orders of RERA. Appeal by the aggrieved party against the order of the REAT may be preferred in the High Court within 60 days from the day of communication of the Order, except if the order or decision of the Appellate Tribunal is passed with consent of the parties.
  • Central Advisory Council- The Advisory Council will be chaired by Concerned Union Minister and will have ten members representing all the stakeholders of the industry.
  • Registration- No builder/promoter shall advertise, market, book or sell the flats, where area of land proposed to be developed exceeds 5,380 sq.ft.  or number of apartment flats proposed to be developed is more than  8, without registration with RERA. Any ongoing projects where Completion Certificate has still not been obtained by the builder shall also be liable for registration. All the details including the status of the projects of the promoter in the last five years shall have to be furnished by the promoter for the purpose. The penalty for Non-registration may extend up to ten percent of the estimated cost of the real estate project as determined by the Authority or shall be punishable with imprisonment for a term which may extend up to three years.
  • No diversion of the funds- In order to stop the diversion of Funds collected from the buyers to other projects, the seventy percent of the amounts realized for the particular real estate project from the buyers shall be deposited in a separate account to cover the land and construction cost. Also, the promoter can’t accept more than 10 per cent of the project without entering into a written sale agreement.
  • Carpet area- The Consumers are generally forced to buy apartments on the basis of super built-up area. The Act states that developers have to now sell only on the basis of carpet area so that a buyer will get to know how much he is paying for the usable area. Carpet area has been defined by the Act as the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
  • Revocation of Registration- The false and misleading representation will lead to revocation of the registration of the concerned promoter with the RERA.
  • Refund of money: If the promoter is unable to deliver the project on time, the buyers who wish to withdraw from the project have a right to ask for refund.
  • Real Estate Agents: The real estate agents can’t facilitate the sale or purchase of the apartment without registration with the authorities.

There are various other penal provisions and punishment prescribed under the Act in the case of contravention of the order of the authorities. The detailed Rules are to be framed by states under the Act before November 01, 2016. Apart from providing relief to the consumers, the Act will also boost the industry’s credibility and attract more investors. The Union and State Governments will need to commit themselves for implementation of the Act in letter and spirit. Good legislations are of no worth if the provisions are not properly implemented.

Kumar Shanu and Anushka Sharma,

Advocates working on a book about Real Estate Law in India.

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