Since India’s economy began to grow more rapidly in the early 2000s, the real estate market there has undergone several changes. In addition, the country’s demand for all types of real estate was fueled by migration into urban areas, an increase in disposable income, and foreign investments.
The average age of home buyers has decreased, and more people are using mortgages to buy property, which is another new trend that has been noticed. Several foreign investors have been acquiring sizeable stakes in Indian office complexes, including SEZs, in the commercial real estate sector. While the real estate industry is still expanding, institutionalisation and reforms have long been needed. Increased lawsuits and consumer resentment of industry-wide practices were the driving forces behind this.
The industry, which continued to be viewed negatively by consumers due to the dishonest actions of a few, felt the need for regulations and uniform guidelines as well. Delays in the granting of project approvals and the resolution of disputes were another long-standing demand by the industry and consumers that went largely unmet. The Real Estate (Regulations and Development) Act could not have come at a better time given the Indian government’s focus on infrastructure development, smart cities, and housing for all. These objectives will need enablers like the Act to be achieved.
The Act paves the way for all parties involved in the purchase and sale of real estate, including consumers, developers, brokers, and intermediaries, among others. It’s important to note that the Act in no way applies to rental agreements and arrangements. However, the Act applies to all types of commercial and residential real estate, including lots, apartments, stores, offices, and other similar properties.
While it appears that the consumer’s interest has finally been considered with the passing of the Act, it cannot be denied that the Government has codified best practices for the first time in this industry, and these will play a significant role in defining future growth. The Act’s main themes include the following, to name:
1. Consumer protection and rights
2. Regulation of real estate developers, brokers, and intermediaries
3. Defining real estate developers’ responsibilities and default scenarios
4. Establishing project registration and dispute resolution timelines
5. Clearly outlining the penalties and liabilities of real estate developers and brokers/intermediaries
6. Investor roles and responsibilities
It is undeniable that real estate is a state subject and, as such, falls under the Concurrent List under the Indian Constitution, even though the central government has defined the roles and responsibilities of real estate developers. Thereby implementation of the Act may see hiccups. But now that the minimum requirements have been established, it was necessary to do so. The (Real Estate Regulations and Development) Act, 2016, provides a much-needed framework that will not only empower consumers but also make the industry more organized and competitive.
After carefully considering the Act’s effects on various stakeholders, the list of carefully crafted FAQs that follows was created.
Term definitions that are frequently used in this document –
Consumer: A person who has purchased, reserved, or plans to purchase a building, apartment, or plot from a real estate developer.
Real estate developer: A person who constructs a building or a township of apartments and commercial complexes on privately or jointly owned land, which is then partially or completely sold to consumers. A person who converts an existing building or apartments in it and acts as a builder, contractor, or coloniser is also included.
Project: Is a real estate development project undertaken by a real estate developer, and a project can be an offering of Units (defined below) of one type of mixed-use development (i.e., apartments, plots, offices, shop, building)
Intermediary: An intermediary is a person who negotiates the purchase and sale of real estate between two parties and is compensated for doing so (It typically includes brokers and property dealers).
Unit: A single apartment, plot, shop, or office that is part of a developing building or township.
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 on 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 areas and exclusive open terrace areas, but includes the area covered by the internal partition walls of the apartment.