The real estate sector in India has witnessed several changes since the Indian economic growth picked up pace in early 2000’s. Further, migration into urban centers, increase in disposable incomes and foreign investments drove demand for all forms of real estate in the country.
Another emerging trend that has been witnessed is that the average age of home buyers has seen a reduction and use of mortgage for purchase of property has been on a rise. In commercial real estate several foreign investors have been acquiring significant stakes in Indian office complexes including SEZs. While the real estate sector continues to grow the need for reforms and institutionalisation was being felt for long. This was propelled by increased litigations and consumer discontent with the practices prevalent across the industry.
The need for regulations and uniform guidelines was also being felt by the industry which continued to be perceived negatively by consumers because of unscrupulous activities of a few. Also a long standing demand by the industry and consumers was largely unmet i.e. delays in grant of project approvals and dispute resolution. There was no better time to introduce Real Estate (Regulations and Development) Act as the Indian Government is focusing on – housing for all, smart cities and infrastructure development, fulfilment of these goals will require enablers such as the Act.
The Act paves way for empowering all stakeholders engaged in the business and consumption of real estate, be it – consumers, real estate developers, brokers/ intermediaries amongst others. One important point to note here is that the Act doesn’t cover the rental arrangements and agreements in any form. However all commercial and residential real estate including plots, apartments, shops, offices and other such properties are all covered under the Act.
While consumer interest seems to have been finally addressed by the adoption of the Act it can’t be ignored that the Government has codified best practices for the first time in this sector and these will go a long way in defining growth from here on. A few of the overarching themes in the Act are following –
1. Consumer rights and protection
2. Regulatory oversight on real estate developers and brokers/ intermediaries
3. Defining the duties of real estate developers and default scenarios
4. Setting up timelines for registration of projects and dispute resolution
5. Clearly defining penalties and liabilities of real estate developer and brokers/ intermediaries
6. Roles and duties of investors
While the Government at the centre has defined roles and responsibilities of real estate developers it can’t be denied that real estate is a state subject i.e. falls under the Concurrent List as per Indian Constitution. Thereby implementation of the Act may see hiccups. However the minimum possible rules have now been set and also it is something that was need of the hour. Overall the (Real Estate Regulations and Development) Act, 2016 is a much needed framework that will not only empower the consumer but also make the industry more competitive and organised.
Below is a list of carefully scripted FAQs after a thorough understanding of the Act and its implications on various stakeholders.
Consumer: A person who has bought/ booked / intends to buy a plot, apartment or building from a real estate developer.
Real estate developer: A person who develops a building or a township of apartments and commercial complexes on an independently or a jointly owned land, which are later partially or completely sold to the consumers. It also includes a person who converts an existing building or apartments thereof and who acts as a builder, contractor or coloniser.
Project: Is a real estate project that is undertaken by real estate developer and a project can be an offering of Units (defined below) of one kind of mixed (i.e. apartments, plots, offices, shop, building)
Intermediary: An intermediary is a person who negotiates the transactions of buying and selling a property between two parties and receives remuneration for the same (It typically includes brokers and property dealers).
Unit: A single apartment, plot, shop or an office which is a part of a building or township being developed
Person: includes i) an individual; ii) a Hindu undivided family; iii) a company; iv) a firm under Indian Partnership Act; 1932 or Limited Liability Partnership Act, 2008, as the case may be; v) a competent authority; vi) an association of persons or a body of individuals whether incorporated or not; vii) a co-operative society registered under any law relating to co-operative societies; viii) any such other entity as the appropriate Government, may specify in this behalf.
Carpet Area: means 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.