Tag Archives: RERA Act

GST ups demand for ready-to-move-in properties?

24 Friday Nov 2017

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Builders are seeing a surge in demand for ready-to-move-in properties because such apartments with occupancy certificates are not within the ambit of Goods and Services Tax, which has raised overall taxes on property.

An under-construction project attracts a flat GST rate of 12%. In the pre-GST era, the total tax — including VAT, service tax, Swachh Bharat cess and Krishi Kalyan cess — roughly worked out to 9% of the total sale value (cost of land and construction).

According to a recent report, for ready-to-move-in properties, customers need to pay only the registration and stamp duty charges over the sale value. “Queries for ready-to-move-in properties 12 months ago comprised roughly 25% of the overall enquiries, but only 16% of the overall sales. Now, the figure has increased to 25% of the overall monthly moving average sales.  The Buyers who had postponed their decisions in the run-up to GST and the Real Estate Regulation Act (RERA) have returned to the market. The builder has set up a dedicated team to sell ready-to-move-in projects. Usually, ready-to-move-in as an asset class constitutes a small portion of the total revenue for developers as 75%-80% of a project gets sold between launch and completion.

Experts believe that restricted supply of fresh projects after the implementation of RERA has also contributed to the growth in demand for ready-to-move-in houses. Builders are stuck with old inventory and are keen to sell it off before launching new projects.
Under RERA, many developers may move to a format where they would complete the project and then come to market to sell it, in order to minimize risks.

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MAHA RERA to redefine “co – promoter”?

24 Friday Nov 2017

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The Maharashtra Real Estate Regulatory Authority  is set to issue a fresh order on the use of the word “co-promoter” in its rules within three weeks.  The new set of rules will see Maha RERA use another word as per the Real Estate (Regulation and Development) Act, 2016. It will not use the word “co-promoter” and make the land owner liable only if he/she has shares in a project.  If the land owners get area shares or flats in lieu of money, they will be held liable as they would be selling the units. But if they are not involved in the project, there is no question of any liability.  As the word “co-promoter” is not in the statute, Maha RERA would have to issue a fresh order stating the new word to be used for the land owners with shares in properties and those who do not, the official added.

What led the Maharashtra Government to implement this step?

Maha RERA had withdrawn its order making land owners equally liable as that of builders and developers as part of the Act and it was submitted as an affidavit in the Bombay high court (HC) last week.

In the petition filed before the Bombay High Court, the validity of the Order was primarily challenged on the ground that Maha RERA was not empowered to introduce any such new term. “The impugned office order is tantamount to legislation,” the petition stated. The respondent (MahaRERA) cannot legislate for the state, much less for the Union.

Could the land owner or the society be held responsible along with the developer. It is good that Maha RERA has withdrawn its earlier order on the issue of co-promoter being liable. The wrong has been corrected.’’

A RERA Bench in Greater Noida?

24 Friday Nov 2017

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The Noida Extension Flat Owners Welfare Association (NEFOWA) ,a Noida based Welfare Association for homebuyers, have demanded that the Tribunal should set up a bench in Greater Noida to be more accessible to homebuyers, since the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has been functioning out of Lucknow for the last four months.

The members state that at least 30,000 complaints for various builder projects have been made from Noida and Greater Noida so far but the outreach of RERA to more buyers could only increase if the distance is bridged between the court and the buyers.

For each complaint, the hearing is being scheduled at least twice or thrice if not more. For the buyers who have complained, this entails that they visit Lucknow a many times the hearing is scheduled. Most hearings are during weekdays so people have to take leave from work to attend these. Because Noida and Greater Noida are construction heavy sites, at least a bench of the Tribunal should be located here.

RERA has been constituted to protect the interests of the buyers, so primarily it shouldn’t it be accessible? So far almost 80% RERA Complaints are being made from Noida and Greater Noida as these two cities have the highest concentration of new apartments.

Buyers entitled to seek damages in pre – RERA cases?

03 Friday Nov 2017

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The Central Government, in a move to secure the home buyers of the under constructed property, for which they have paid money and are awaiting completion, has enforced that such Buyers can seek redressal from the Central RERA Act, even if the Developer has commenced the project and failed to deliver the possession of the property, even before the Act was brought into effect.  It was recently reported that the Builders in the state of Maharashtra have objected to the existing buildings to be brought under the purview of RERA Act.  Nearly 13000 projects have been registered in the state of Maharashtra, have labelled the piece of legislation concerning the ongoing projects as stringent.  The case was brought before the Bombay High Court, wherein the Court observed that section 18 of Central RERA Act, makes the Builder liable to return the amounts already received with interest and pay compensation if he fails to complete or give possession.  If the buyer opts to withdraw from the project, compensation ought to be paid to him.  If the buyer opts to continue with the project, and in the event of delay, he is entitled to interest for every month of delay till the date of possession.  In this event, the RERA acts as a facilitator to help the buyer to regain the amount.  Does this mean that the original builder is the one who would have to pay the compensation or interest and not the new one?

Public interest at the cost of private impairment?

03 Friday Nov 2017

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The Center and State Government of Maharashtra have stressed that a law can be made in public interest to overturn a private contract. Both were defending the new Real Estate (Regulation and Development) Act (RERA) and its provisions against a constitutional challenge from builders who questioned its retroactive application on pending projects under old agreements.

The Government can, contrary to the builders’ plea, make a law which has the effect of changing obligations under an existing contract which seeks  to emphasise that RERA has a ‘retroactive’ application on pending unfinished projects. There is no constitutional guarantee that the terms of a contract will have to maintained. The legislature is empowered to bring in law in public interest that may impair or completely over turn a private contract and its obligations.

The new real estate regulatory law enacted by the Parliament last year came into force on May 1 this year, is facing a constitutional challenge from several builders and the Bombay High Court is tasked to decide on its validity. Home owners have intervened to support the law which provides that a builder is liable to return amounts to flat buyer if possession not granted by the date mentioned in the agreement. The builder may have to return the amount with interest and compensation if the buyer withdraws from the project and also pay interest per month till possession is handed, if the buyer stays on with the project.

Why is the Government hell – bent on supporting the homebuyers rather than the contractors?  The answer is that the larger interest of home buyers is being protected in public interest by RERA, an act which is meant to bring in transparency and accountability for development of real estate sector.What RERA seeks to do when it says that the authority will ensure completion of a project after its registration has been revoked for defaults by its builder promoter, is only to finish his unfinished work, which was his obligation. The rights of the buyers are kept in mind and thereby their interests is of paramount importance.  Does this mean that we would no longer see a diluted RERA anytime in the future?

RERA contains conflicting provisions?

01 Wednesday Nov 2017

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The Bombay high court which is hearing a challenge to constitutional validity of the new Real Estate Regulatory law observed that its “adjudicatory provision should have been more elaborate” to cover various situations that can arise when a builder’s registration is revoked. The Real Estate Regulation and Development Act provides for compensation to a flat purchaser from a builder for delay in possession beyond the date specified in the agreement for sale.

The Counsel appearing for builder said the provision under section 18(1)(a) of RERA which stipulates the compensation that an adjudicatory officer can fix when combined with provisions of the Act was in conflict with another provision under section 4 the Act that mandates a builder to specify the time period by which he will complete a project. He said that a builder may give a new date for possession while registering an ongoing project if the earlier deadline has already expired, but the Act seeks to hold him down to the date mentioned in the agreement made with a buyer.

He also said that when the compensation clause is combined with one where the RERA Authority is allowed to revoke a builder’s registration for lapses and defaults, leaving the builder bereft of any benefits from sale of unsold flats but saddled with any liabilities he may have with banks or other financial institutions, it clearly breaches his fundamental right to carry on trade.

The Division bench heard the submissions wherein the Senior Counsel suggested that the section be modified to supplant the possession deadline to mean any “new timeline” a builder may have submitted while registering an ongoing project. An alternate that could be suggested is that the compensation clause must be “read down” by the court to ensure that only when a builder defaults in meeting the deadline can he be made liable, not in every case of delay which could be for other reasons too.

The Senior Counsel also contended that that “revocation amounts to expropriation” and the project is “confiscated” by the RERA Authority which can then give it to a contractor or association of allottees for completion. But will the project be allowed an extension then? How can the builder then be asked to pay compensation especially when 70 percent of his project fund is already deposited. There could be scenarios where a builder may have taken loans and defaults on them and the property is attached by a bank. “Where shall the earlier promoter go? Where will the money be? Who will disburse,how ?” he observed at the hearing to decide on the validity of various sections of RERA. The Bench also referred to the aim of the Act which is to “regulate the real estate sector”. The question  is whether only the builders were being regulated or the entire scenario.

Is the consumer (homebuyer) a king in reality?

07 Saturday Oct 2017

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The advent of RERA and GST has brought in much needed transparency and accountability to the reality sector.  The RERA and GST, which is touted to be a buyer friendly legislation, is also acting as a protective guard for the buyers.  However, are the buyers aware of their rights and privileges under the RERA and GST? All home-buyers must mandatorily seek the RERA registration number, without which no project can take place in a locality.  To achieve this, they ought to visit the RERA website of the respective state or union territory to check if the developer and the project is registered with the regulator.  The website of the regulator would inturn disclose all the details related to sanctioned plans, layout, approvals, etc). The title deeds initially did not disclose the carpet area and would merely mention the UDS.  With the advent of RERA, a carpet area is also included in the project list as well as would find itself in the title documents.  A carpet area according to RERA is the net usable area, which excludes the balcony, verandah and terrace and includes area under internal walls. Developers also ought to mandatorily deposit 70 per cent of collection from customers into a separate account, which will be used for payments towards land and construction cost.  The promoters of the project would now have to post quarterly updates of progress of projects on the website for public viewing, which would inturn give the homebuyers a clear idea of the progress of the project.  In case of any delay beyond the period of completion and possession, the home buyers would be entitled to a compensation in case the project gets delayed.  Additionally, a developer cannot also make any changes in sanctioned plan, without two – thirds buyers’ consent before making changes.  In case of any contravention by the Developer, a homebuyer could exercise his option of filing complaints against developers and real estate agents in the consumer court or to RERA authority.

Apart from RERA, GST also passes on certain benefits to the homebuyers.  With the advent of GST, a homebuyer is relieved of the complex tax structure such as VAT and Service Tax, which is now replaced with GST at a unified 18% slab.  The Developers would get input credit, which would in turn be passed on to the buyers.  GST rate on under construction properties is fixed at 12%, whilst the completed and ready-to move-in properties are out of the GST purview.

Therefore, are the ‘consumers’ “king” in reality?  If so, would they exercise their kingship?

Rajasthan RERA to impose 10% of project cost on erring Builders as penalty?

02 Monday Oct 2017

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The Rajasthan Real Estate Regulatory Authority would now impose 10% of the project cost on developers who have not registered their ongoing projects with the regulatory authority till September 30.

The authority had given September 30 as the deadline to register ongoing projects after paying 2% of project cost as penalty, since the extended deadline is now over and that the regulatory authority would now increase the penalty rate by 8% and thereby impose 10% of the project cost and registration fee on developers to register their ongoing projects with RERA. Under section 3 of RERA Act, 2016 developers were provided 90 days to register after the Act came into effect on May 1 in the state.  The RERA website online portal was launched on 1st June 2017.   It became mandatory for all the builders and real estate agents to register on the website till July 31. However, on the request of developers an extension of one month was provided till August 31 to register with regulatory authority after depositing Rs 50 per square metre.  The official sources quoted that in the past few months new project launches have come down by 80% in the state due to various factors such as demonetisation, GST and RERA.

Therefore would the realty sector gain momentum once the existing inventory would be sold? Would the sales increase now that the move by the Rajasthan RERA  to penalise erring developers engineered with a view to eradicate non-serious developers from the realty sector?

Developer issued Notice by TNRERA after transfer of projects?

02 Monday Oct 2017

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The Tamil Nadu Real Estate Regulatory Authority, (TNRERA)  has received complaints against a promoter, who transferred his housing project to another developer, who inturn abandoned the project due to lack of funds. The Authorities have now taken hold of the situation and have issued a notice to the original promoter of the now abandoned projects.  According to certain official sources, approximately 70 homebuyers have complained had complained about the project at Medavakkam, one of the upcoming residential sectors of South Chennai District.  The Developer had obtained Planning Permission for approximately 340 houses from the Chennai Metropolitan Development Authority and he subsequently transferred it to another promoter.  However, the original promoter had failed to apprise the Development Authority of the second developer taking over the project from him, due to which the Regulatory Authority were constrained to send a Notice to the original developer, after receipt of the complaints from the homebuyers. Construction for the project that was to consist of multiple blocks was not completed and even one apartment was not handed over to a buyer.   According to sources the buyers had paid more than 25 lakh to the builder.  The regulator has assured the buyers that further action would be taken against both the erring developers.  The housing project, which does not possess completion certificate, was not registered with the real estate regulator in the state. It also does not figure in the list of housing projects exempted by the CMDA from the purview of the RERA Act on grounds of submitting application seeking completion certificate.  Would the Developer be penalised as per the act, since the RERA Act, does not mandate for a second Developer from taking over the project?

Projects not registered under RERA cannot be sold by Agents?

01 Sunday Oct 2017

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 Registered real estate agents cannot offer their services to sell housing projects that are not registered under the Tamil Nadu Real Estate Regulatory Authority (TNRERA).  According to sources with TNRERA, those, who have registered as agents with the realty regulator can provide their services for buying or selling housing properties between the promoter and buyer, only for the projects registered with the state’s RERA.   About 110 real estate agents have registered with the TNRERA after the constitution of the realty regulator in the state on June 22 this year. Of these, 43 are individual real estate agents and the rest 67 have registered under the category of firms, as per the data available.  While an individual should pay Rs 25,000 as registration fee, those not registered under the category such as firms, should pay Rs 50,000 as registration fee.  The Tamil Nadu Real Estate (Regulation and Development) Rules, 2017 states that the real estate agent shall maintain and preserve books of account, records and documents in accordance with the provisions of the Income Tax Act, 1961.  As per TNRERA rules, home buyers can register their grievances against the real estate agents for poor services with the real estate authority.