_Leader of the pack

The Real Estate (Regulation & Development) Act (RERA), 2016 (the Act) has finally become a reality. As per the Act, states were required to have rules in place by 1 May 2017 to govern the sector in their respective states. While there are some states that have done the needful, Maharashtra is the leader of the pack. The state has notified its rules, has an up and running website of its real estate authority (the Authority) and has an interim chairman. The state will soon have a regular chairman. As regards the stakeholders, builders have started getting their projects registered on the website of the Maharashtra Real Estate Regulatory Authority (https://maharera.mahaonline.gov.in/). Thus the ball has been set rolling with regards implementation of the rules that will govern the real estate sector in the state of Maharashtra. While stakeholders from the supply side have started to take the first steps towards conforming to the new rules of the game, homebuyers should be a happy lot as the new real estate rules will solve most of their grouses that they had with stakeholders from the supply side.

High level of discipline. Post 1 May 2017, no developer in Maharashtra can advertise or sell projects, without getting the same registered with the Authority. As regards ongoing projects, they have a window till 31 July 2017. During this window period, the developers can market their ongoing projects, but to do the same beyond 31 July 2017, they will need to get it registered with the Authority by 31 July 2017. The developer needs to submit the necessary documents about the project and about himself when applying for registration. Even the ongoing projects need to be registered with the Authority. As per the rules framed by the state, an ongoing project is one that has not received an occupancy or completion certificate when the rules came into force, i.e. as on 1 May 2017. Once registration is granted, the developer will be provided with a log in ID and password through which he will be required to create his web page on the website of the Authority. The developer needs to update his web page every quarter. This information provided by the developer will be accessible by the homepage through the Authority’s website. In both the cases, new and ongoing projects, the project schedule has to be given and the project needs to be completed within that time. Failure to complete the project within the stipulated time will lead to expiry of registration, which can only be extended under two circumstances—in case of force majeure and if the delay has happened for no fault of the developer. Upon expiry of registration, the developer cannot access his web page, which basically means he can no longer market the said project. The extension so granted will be on a case-by-case basis and will not exceed one year. This means that developers will have no option but to complete their projects in time.  The statement issued by the interim chairman of the state RERA that the Authority will look into the reasons for delay and if officers are responsible for those delays, then the Authority will pass strictures against them. This step will further boost the chances of projects being completed in time. The Authority will also forward those cases to the concerned department so that necessary action can be taken. This also means that if developers face delays in getting timely approvals, they can seek help of the Authority. Further, the Authority will have the power to revoke the registration granted if the developer does not work as per schedule or indulges in any unfair trade practice. This means that developers will need to play the game strictly within the rules as laid down by the state.   

More than a mere facilitator.  The Act also stipulates that only registered real estate agents can operate in the sector. This means that the real estate agent, be it a company or an individual, has to get registered with the Authority. There is a list of disclosures that the real estate agent needs to submit to the Authority in a prescribed format to apply for registration. While the rules framed by most of the states are silent on the number of days the Authority can take to grant registration to an agent, provided his paperwork is in place, in Maharashtra the registration will be granted within seven days from applying for the same. The registration so granted to a real estate agent will be for five years in Maharashtra. As per the rules in the state, the real estate agent has to apply for renewal of registration at least sixty days prior to expiry of the registration. The application has to be accompanied with all the updated documents that were submitted at the time of applying for registration. The renewal granted for registration to the real estate agent will be valid for five years from the date of its renewal. The rules framed by Maharashtra clearly specify that the real estate agent will prominently display the number of his registration certificate at the principal place of business and at its branch offices. Further, a registered real estate agent in the state will be required to quote the registration number in all documents related to marketing, sale/purchase of a real estate project. The registration granted by the Authority can be revoked if the real estate agent deviates from the path as laid by the rules formulated by the state. By creating the above mentioned filters, the rules will ensure that only serious and dependable players operate in the sector. Most importantly, to be counted, especially among developers, the real estate agents need to be more than a mere facilitator. They will need to provide a more constructive and advisory role.

Boon for homebuyers. The provisions of the rules framed by Maharashtra will ensure that there is transparency in the sector. For homebuyers it means that they will now be able to take an informed decision before they select the house of their choice. This is the biggest gift that the rules framed by Maharashtra will give to homebuyers. The homebuyers may however, face a challenge in sifting through the wealth of information at their disposal. This is where the advisory and constructive role of a real estate agent will set in. Apart from increased transparency, the rules framed by Maharashtra have also put the homebuyers and developers on a level playing field.

Level playing field. Before RERA came into force, among the many grouses that homebuyers had was that the agreement for sale was heavily loaded in favour of the developer. Rules framed by Maharashtra deal with this issue. It prescribes a model agreement for sale that needs to be entered into between a developer and a homebuyer. The model agreement for sale lays down the exact amount of money that the homebuyer will need to pay the developer at every stage of construction. Even in case of delay with regards to payments by the homebuyer and in case of delay by the developer in handing over the project, both stakeholders will be liable to pay the same rate of interest. The only condition under which a developer can terminate the sale agreement is if a homebuyer defaults thrice and thereafter the developer needs to provide a 15-day notice period to the homebuyer.

Disciplinary action. There are strict penalty provisions for the players, to ensure that players from the supply side, who have passed the filters, play the game strictly within the rules as laid down. In case of any deviation, the Authority has the power to levy penal provisions as mentioned in the Act. Rules framed by Maharashtra are largely in line with the Act but the state has made some changes on the following point. 

Changes in the sanctioned plan. As per the Act, with regards to making alterations or additions to the sanctioned plan of the apartment or the building or common areas, the promoter shall not make any such alterations or additions without the previous written consent of (i) the allottee in case of any alterations or additions to the sanctioned plan of the apartment, or (ii) in case of any alterations or additions to the sanctioned plan of the building or the common areas, at least 2/3rd of the allottees other than the promoter who have agreed to take apartments in the building. Maharashtra has tweaked this provision to a certain extent. The rules for Maharashtra clarify that the pervious written consent of at least 2/3rd of the allottees may not be necessary (i) for implementation of the proposed plans/specifications as disclosed in the agreement executed with the allottee prior to registration, or (ii) for any alternations or additions or modifications in the sanctioned plans, layout plans and specifications of the building and common areas that are required to be made by the promoter in compliance of any direction or order by a competent authority. Further, the model form of agreement for sale prescribed under the rules of Maharashtra, additionally provides that such prior consent of allottee(s) would not be required in case of all projects (ongoing and new projects) where such alteration or addition is required by any Government authorities or due to change in law. 

Systems in place. As already stated above, Maharashtra is among the first states to have the necessary systems in place that will ensure that the rules framed by the state are implemented in full letter and spirit. The state has notified its rules, has appointed an interim chairman and has allocated space to the Authority. It will appoint a regular chairman soon. Further, real estate developers and agents have started the process of registration on the Authority’s website. 

Conclusion. The manner in which Maharashtra has gone ahead and made the state RERA ready and implemented the rules, could well be a learning ground for states that are either midway through the process or are yet to make a move on. The stakeholders have gone ahead to comply with the provisions as laid down in the rules. The swiftness with which the state machinery has made the state RERA ready, gives us the confidence that it will smoothen out any niggles, if at all they crop up in the future, with the same alacrity. The real estate market in the financial capital of the country will certainly emerge as a much more evolved one, in the future. All this will ensure that the real estate market will be safer and cleaner for homebuyers to realise their dream of owning a home, in the costliest city of India.