Presentation on Real Estate (Regulation & Development) Act 2016 and its Draft Rules- Its Impact on Real Estate Developers and Consumers. It also Highlights Lacuna in the Legislation and its draft rules which needs serious consideration by Ministry of Law & Justice.

1. THE REAL ESTATE
(REGULATION AND DEVELOPMENT)
ACT, 2016 and Draft Rules
Jash Vaidya
ILS Law College Pune
Blog: www.jashvaidya.wordpress.com
Mail: jashvaidya.vaidya@gmail.com
11th July 2016

2. Real Estate Act 2016 is Divided into 92 Sections
(22 Sections are not Notified as on 11-07-2016)
Chapter III
Functions and
Duties ofPromoter
Section 11 –18
(Yet to be notified)
Chapter-I
Preliminary Section
Section 1-2
ChapterII
Reg of RE Projects and
Agents
Section 3 –10
(Yet to be notified)
ChapterIV
Rights and Dutiesof
Allottees
Section 19
(Yet to be notified)
ChapterV
The Real
Estate Regulatory
Authority
Section 20 – 40
Chapter VI
CentralAdvisory
Council
Section 41 – 42
Chapter VII The
Real Estate
AppellateTribunal
Section 43 – 58
Chapter IX
Finance,Accounts,
Audit and Reports
Section 73 – 78
Chapter X
Miscellaneous
Section 79 – 92
(Sec 81-92 notified)
Chapter VIII
Offences, Penalties
and Adjudication
Section 59 – 72
(Sec 71/ 72 notified)
Object of this Act
 Transparency in Real Estate
Transactions
 Protection of Consumer Interest
 Establishment of an
adjudicating mechanismfor
speedy dispute redressal
 Establishment of Real Estate
Regulatory Authority
Nature & Structure of RERA 2016
Structure
RERA is a Central Act with some authority delegated to State Government just like the Electricity Act 2003 Created
under Entry 6 & 7 of the Concurrent List in 7th Schedule of the Constitution of India

3. History of the Act
Timeline Step
1963 MOFA Enacted – First Act in India on Real Estate Regulation
1963 & 1972
KSRA Act 1960 , KAOA Act 1972 , Karnataka Apartment Ownership Rules
1974 & Karnataka Owners Flats Rules 1975.
2012
MHRA 2012 replaces MOFA . MHRA provided for establishment of the
Regulatory Authority , the Housing Appellate Tribunal & Deemed Conveyance !!!
20th Aug 13 Rajya Sabha - Real Estate Regulation and Development Bill Introduced
9th Sept 13 Lok Sabha -Bill Referred to Standing Committee
13th Feb 14 Lok Sabha - Standing Committee submits its report
7th Apr 15 Union Cabinet ( NDA ) Gives approval to amendments in the Bill,
6th May 15
Rajya Sabha Bill introduced referred to its standing Committee / Select
Committee
30th July 15 Rajya Sabha - Select Committee submits report after 17 sittings in all.
10th Dec 15 Union Cabinet accepts 20 major amendment's to the bill
10th Mar & 15th Mar 16 Rajya Sabha and Lok Sabha Pass the Bill
25th Mar 16 The Real Estate (Regulation and Development) Act, 2016 published in the Gazette

4. Act can come into force sooner as Powers given to State Government
6
Step Timeline
Publishing of Act in Official Gazette 26th March 2016
Date of Act Coming in Force 26th April 2016 MHUP Notified 69/ 92
Sections 22 Sections not Notified
Effective date 1.5.2016
Ministry of HUPA to Frame rules for UT without
legislatures Ministry of Urban Development to frame
Rules for Delhi .
Under Section 84. (1) within a period of six months of
the commencement
MHUPA – Draft Rules for public comments
published on 24th June 2016 inviting public
comments by 8th July 2016 .
State Government to frame Rules Under Section 84. (1) Within 6 months of Notification i.e by
31.11.2016
State Government MUST setup Real Estate
Regulatory Authority
1 year from act coming into force
(April 2017)
State Government to setup Real Estate App.
Tribunal
1 year from act coming into force
(April2017)
Status of RERA as on 8.7.2016

5. 6
Status of RERA - Sections not notified
• The sections notified are related to establishment , incorporation , Composition of The Real Estate
Regulatory Authority (RERA) , Term of office , Salary and allowances payable to Chairperson
and Members and Framing or rules .
• Framing of rules under Section 84. (1) within a period of six months of the commencement
precedes importance over all activities .
• Section related Obligations, Functions and duties of promoters , Rights and duties of Allottees ,
Penalties for contravention of any section will be notified once regulation and rules are notified
Section Comment
Section 11
Section 17
Section 19
Section 59 - 70
Functions and duties of the promoter
Transfer of title by the promoter
Rights and duties of Allottee
Punishment for Offences . Penalties and Adjudication

6. RERA Act- Hits and Misses – Consumers
Hits Misses
• Increased focus on the timely completion
• A step towards safeguarding investment, as
70 per cent of the sales receipt will now be
locked in an escrow account.
• Improved quality of construction due to a
defect liability period of five years.
• Balanced builder-buyer agreements.
• Faster dispute resolution mechanism through
dispute settlement forums and appellate tribunal.
• Sale on the carpet area to help improve
transparency.
• An increasingly-regulated broker environment.
• Greater visibility into the developer’s
delivery track record , availability consents and
permits , Approved plans .
• Carpet Area not an Accurate measure …. FSI ?
• Past completed Projects of Developer not
included . Opacity on past Track Record
• Escape route of floating multiple group
companies for each project . Doctored project
information and balance Sheets
• The timelines of approvals by regulatory
authorities have not been defined.
Can lead to blame game and prolonged
tripartite litigation
• Slightly higher prices of properties due to the
reduced competition.
• Longer Waiting period . Higher EMI Costs ?

7. RERA Act Hits & Misses (Promoters/Agents )
Hits Misses
• A better regulated sector brings efficiencies =
Higher investments (FDI) and possible reduction
of the cost of funds
• Elimination of fly by night operators =
Consolidation of players
• Greater visibility into the developers’
delivery performances
• Higher focus on project delivery capabilities
• Power of RERA disproportionately
Coercive .
• Fixing a rigid capital reserve ratio (70 percent
deposit and 10 percent booking amount) in
the statute itself imposes greater liquidity
constraints on developers …more black
money Transaction's ?
• Conflicting Sec 88 and 89 Allottee hapless
and Promoter can take recourse to litigation
under a less stringent rule ? Ex Deemed
Conveyance in the repealed MHRA ?

8. Judicial Mechanism under RERA
Source : Black arrow Masterclass – Real Est outlook 29.6. 2016

9. Draft Rules – Open Issues and teething troubles
RERA Section Draft Rule
Sr.
Comment
Sec 13 S/s 2 and
Sec 84/2/h
9 While RERA mandates a balanced Agreement with precise details ( s/s
2 ) Draft rule 9 does not provide a model agreement with balanced
and harmonized terms . Annexure A reads “ to be inserted “ Can lead
to builders pushing lopsided agreements ? Law is silent if RERA has
powers to moderate /amended / reject whole or part of Agreement
proposed by builder .
Sec 88 and Sec 89 ?? Rules are silent on this contradiction . Section 88 Vs 89 of RERA –
Contradictory – Provisions of RERA will be in addition to and not in
derogation to any other law currently applicable
If MOFA / KFOA has a stronger provision in favour of Allottee should it
prevail ? Would Promotor take recourse to a less stringent provision and
litigate ?
3 (a) and
(b)
If the promoter company is a joint venture or partnership , all partners
must follow the procedure of giving details .
Rules must specify Balance sheet should be last years Statutory Balance
Sheet an audited one for tax purpose . Loophole to be plugged .
Rules seem to be published in haste .Chapters not aligned between Act and
Rules so make a difficult reading .
Ex. Chapter IV of Act = Rights and duties of Allottees – Chapter IV – Rules –
Details to be published by Promoter on Website of Authority

10. RERA Section Draft Rule Sr. Comment
4 ( 1 ) and ( 2) (b) 4 (1 ) and ( 2 ) Rules must clarify that this information must also include
all enterprises with whom promoters / Key management
personnel have had significant No of Transactions during
last 5 years
31 ( 1 ) 36 and 37 Definition of Aggrieved person should be alike insurance
industry ( insurable interest ) including Voluntary consumer
association ( not related to the property ) as aggrieved
would Excessive litigation and cause delays in project .
59 ( 1 ) 35 ( 2 ) The RERA Act Cl 59(1) already lays a fine equal to 10% of
the cost of the project. If that is not paid, or if the violation
continues, RERA has three options for imposing an additional
penalty: (a) An additional fine of 10% of the cost of the
project (b) Imprisonment of “up to” 3 years c) both (a) and
(b) above.
Instead of giving a “crime-vs-penalty” look-up table that
acts as a guide based on the scale/gravity of the crime. The
rules have “commuted” the prison term into a fixed rate:
10% of the project cost. How can the Rules overturn the Act,
and make it impossible to follow it??
Draft Rules – Open Issues and teething troubles

11. Critical Analysis of the Act
• Escalation of Project Costs
• Neglects Commercial Projects
• Does not deal with menace of Black Money
• Conflict between the State Law and Central Law
• Definition of Allottee
• Section 88 vs Section 89 of the Act – Contrary
Provisions
• Act does not cover flats below 500 sq m & 8 Flats
– small real estate projects aren’t covered within
ambit of the act

12. References
Bare Acts / Government Notification's
1.The Real Estate ( Regulation and Development ) Act 2016 NO. 16 of 2016 dated 25.3.2016
2. MHUPA Notification SO 1554( E) notifying 69/92 Sections of the act
3. Report of Select Committee of Rajya Sabha dated 30th July 2015 on the Real Estate ( Regulation& Development) Bill 2013
4. MHUPA Draft rules titled “Union Territories of Chandigarh, Andaman and Nicobar Islands, Daman and Diu, Dadra and
Nagar Haveli,
Lakshadweep’ Real Estate (Regulation and Development) Rules, 2016. (0-17034/18/2009-H (Vol. IX) (Part III) / FTS No.
15980)2
Law Firms
1. Lexology India 3rd June 2016 “Does attempt to regulate the real estate sector help “ Sudip Mallik Khaitan and Co
2. Juris Corp, Highlights of Real Estate Bill 2016
3. AR Gupta & Associates, Real Estate (Regulation & Development) Act 2016, Indian Property Show at London
4. Samvad Partners Real Estate (Regulation & Development Act) 2016
5. Vaish Associates, Power to buyer- the new Real Estate (Regulation & Development) Act 2016
Consultant’s / Industry Bodies / Advocacy Groups
1. CREDAI and NAREDCO presentations at various chapters
2. Fight for RERA - Karnataka Chapter Google Group . Discussions and presentations by Mr Nagaraj Aras
News Articles / Audiovisual Material
1. NAREDCO Knowledge Seminar on Real Estate (Regulation and Development) Bill 2016 (18th March 2016) - Presentation
by Mr Parimal Shroff Decoding the RERA Act and panel discussions
2. Money life foundation presentation by Mr Pranay Vakil ( MD Knight Frank India ) and Mr Parimal Shroff 2011