Parul Thadani
INTRODUCTION
Real Estate laws in India are under the supervision of state-specific laws and Federal laws. According to Article 246 with Schedule VII of the Indian Constitution, Land falls under the State List, while Transfer of Property and Registration of Property documents fall under the Concurrent List.
Real Estate includes land, the construction of buildings, other immovable property, the air above the land, natural resources attached to the land, and resources below the land. As well as the construction of roads, public spaces are also included in real estate. Primarily, real estate is classified into four types: residential real estate, commercial real estate, industrial real estate, and agricultural real estate. As a result, real estate deals with the construction and development of all types of land. It is a significant source of wealth and investment for both buyers and purchasers.
PRE AND POST THE ACT OF 2016
Real Estate (Regulation and Development) Act, of 2016 was enacted to safeguard the rights of purchasers by reducing the scope of malpractices undertaken by the developers and real estate agents. For this, registration of various documents was made mandatory, such as, Completion Certificate, Occupancy Certificate, Building Plan, and other documents to make the Real Estate sector transparent. It encourages uniform applicability of the laws, business practices and transactions. The establishment of Real Estate Regulatory Tribunal (RERA) was created by the act for the fast track resolution and to regulate the real estate sector. For Appeals to the decisions by RERA the act encourages states to form a Real Estate Appellate Tribunal.
Before the enforcement of the Real Estate (Regulation and Development) Act, of 2016 the real estate sector in India did not have a rigid legal framework to operate the real estate sector and protect the rights of home buyers, and developers had the freedom to operate in a manner that was often opaque and non-transparent.
Home buyers have been claiming for a long time that real estate has been unfairly biased toward developers. As a result, the real estate sector was declining which affected the growth of the real estate market. The home buyers demanded a fair and equal market for the seller and buyer.
Some of the common issues before the enactment of the RERA Act were –
1. Developers often gave delayed possession to the buyers, resulting in financial losses to allottees.
2. Developers frequently deceived home buyers by selling the property based on a super built-up area instead of a carpet area, to extract money unjustly.
3. There was no standardization in the real estate sector, leading to a discrepancy in the pricing of the properties in different parts of cities.
4. Lack of legal framework to hold the developer accountable for their fraudulent practices.
5. Builders often misused the funds collected from buyers as well as often failed to complete the project in the promised time.
6. The agreements before the enforcement of the Real Estate (Regulation and Development) Act, 2016 were executed in an absence of a proper regulatory mechanism. Even though buyers could solve disputes by approaching the Consumer Protection Forum which was designed to safeguard the rights of customers, it failed to provide speedy justice to home buyers and was not a forum specifically designed for the real estate sector.
7. Arbitration for dispute resolution through a clause in the agreement of sale could solve property disputes but the same was extravagant and no standard rules were laid down to decide real estate matters, which created problems in passing an acceptable order.
8. Developers used to change layout plans or cancel the allotment when the market demand increased and charge high rates from buyers through various taxes.
9. Brokers or Real Estate Agents took undue advantage of the home buyers by misrepresenting the development of the project and failing to communicate the relevant information about the project.
Due to many such complications in the regulation of the real estate sector, the need to form an act was recognized by the legislative body, which led to the formation of the Real Estate (Regulation and Development) Act, of 2016. The act aims to promote transparency, accountability, and standardization in the sector and has provided homebuyers with several legal rights and remedies against fraudulent practices. As a result, the enforcement of the Act brought about numerous changes in the real estate sector throughout India in a short period.
Some of the essential changes were –
1. Real Estate (Regulation and Development) Act, of 2016 established a state agency to oversee both residential and commercial disputes. The act aims to promote transparency, accountability, and standardization in the sector and has provided homebuyers with several legal rights and remedies against fraudulent practices.
2. Developers are mandatorily required to register their projects with the respective state RERA authority, which provides relevant information to home buyers and increases transparency in the real estate sector.
3. Promoters and Real Estate Agents are required to register themselves on their respective state RERA Website, which provides relevant information about the pendency of legal disputes against the promoter, details about the previous projects of the promoter for home buyers, and a detailed profile of them that is publicly accessible.
4. RERA has standardized the definitions of carpet area, built-up area, and super built-up area. A standard Carpet Area is used as a way of measuring the monetary worth of the property so that the developers cannot extract illegal money by using measurements of the build-up area.
5. Layout Plan cannot be changed without the prior permission of two third of the total allottees, as it is a mandate to take prior consent of allottees while taking any decision regards to the project.
6. Developers are required to deposit 70% of the funds in a scheduled bank, which can only be used in proportion to the percentage of completion of the project, which reduces the scope of committing fraud by developers.
7. Not more than a 10% deposit or advance can be taken by the promoter before entering into a sale of agreement, which avoids promoters diverting the funds from one project to another new project.
8. Developers are required to hand over the possession of the project to the Allottees within the promised timeline, failing to which they are liable to compensate the Allottees.
9. State-level RERA authorities are required to resolve disputes within a stipulated time, which results in speedy resolution and appeals can be filed in the forum of the Real Estate Appellate Tribunal.
10. Financial reforms like the inclusion of the GST and the liberalization of the FDI have brought a positive effect on the real estate sector.
The RERA Act in detail describes every step that a promoter needs to follow for the construction of a project, a real estate agent needs to follow when dealing with a builder or a seller, an allottee needs to follow when purchasing a property, and in case of any dispute, the Act provides remedies for the aggrieved party and penalties for the wrongdoer.
INTERRELATION BETWEEN CONSUMER FORUM AND RERA
Before the enactment of the Real Estate Regulatory Authority, the Consumer Forum used to deal with matters relating to properties. Following the enactment of the Act, the Consumer Forum’s validity to entertain property disputes was in question. Thereafter, through various judgments, it was decided that the Consumer Forum has the right to entertain a Real Estate dispute.
It was interpreted by reading Section 79 of the Act –
“No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Authority or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.”
Following the enactment of the Act, the Consumer Forum’s jurisdiction to deal with property-related issues was not barred by RERA Act. Further, the consumer has the discretion to withdraw a pending dispute before the Consumer Forum and file an application with Real Estate Regulatory Authority.
In a judgment passed by Supreme Court M/s Imperia Structures Ltd v Anil Patni & Another[1] of 2020, it was held that –
“it may be noted that the Consumer Protection Act was enacted by the Parliament to provide for the protection of the interests of consumers and the said purpose, to establish authorities for timely and effective administration and settlement of the consumers’ dispute and matters connected therewith or incidental thereto. Sections 2(7), 2(33), 2(37), and 2(42) define expressions “Consumer”, “Product”, “Product Seller” and “Service” respectively. Sections 85 and 86 deal with the liability of “Product Service Provider” and “Product Seller”. Sections 100 and 107 of the 2019 Act are to the following effect: –
100. The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.
107. (1) The Consumer Protection Act, of 1986 is hereby repealed.
(2) Notwithstanding such repeal, anything done, or any action taken or purported to have been done or taken under the Act hereby repealed shall, in so far as it Is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act.
(3) The mention of particular matters in sub-section (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeal.
Section 100 of the2019 Act is akin to Section 3 of the CP Act and Section 107 saves all actions taken or purported to have been taken under the CP Act. Significantly, Section 100 is enacted with the intent to secure the remedies under the 2019 Act dealing with the protection of the interests of Consumers, even after the RERA Act was brought into force.
Thus, the proceedings initiated by the complainants in the present cases and the resultant actions including the orders passed by the Commission are fully saved.”
To summarize, the provisions under RERA do not bar Consumer Forum to entertain any complaint filed by land purchasers. This principle laid down in this judgment has been previously stated in decisions passed by various High Courts and National Consumer Disputes Redressal Commission, which permits allottees to seek remedies under RERA, Consumer Protection Act, and Indian Bankruptcy Code.
In various judgments, the court held that the said provision has to be read with Section 88 and Section 89 of the said act –
Section 88 – “The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.”
Section 89 – “The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.”
As a result, the court concluded that the complainant was empowered to simultaneously pursue remedies in both Consumer Forum and RERA under section 88 of the Act. Thus, allottees of flats could avail concurrent remedies under both the Act. It is stated that parallel proceedings in different forums can be filed simultaneously.
EXCEPTION OF SECTION 79
Forgery and fraud can occur in various real estate transactions, such as development agreements, commencement certificates, agreements of sale, or transfer of ownership. In such matters, a civil court can hear a case where a party has been defrauded and a civil remedy can be provided to the aggrieved person.
The civil court may provide relief to the aggrieved party by the cancellation of the forged document, the restoration of the rightful owner’s title, or by providing compensation for any losses incurred due to the forged document.
It is stated in Section 79 of the RERA Act –
“No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Authority or the adjudicating officer or the Appellate Tribunal is empowered by or under this Act…”
Nevertheless, civil courts have the authority to hear cases related to forgery and fraud in the real estate sector.
In the case of High Court of Haryana Sri. Y.N. Sreenivasa v State of Karnataka [2] it was held that –
“The reliefs which are sought for in the said suit are for the purposes of cancellation and/or declaration as regards the validity and bindingness of the gift deed and the sale deed, which cannot be granted in a criminal proceeding. The Civil Court cannot punish the accused for criminal offences of forgery, cheating etc. Hence, though both the proceedings arise from the very same action, I am of the considered opinion that both relating to different aspects, both a suit and criminal complaint would be maintainable and any individual who is affected by any forgery or cheating or like can initiate a criminal complaint for such offences.”
In a nutshell, both civil and criminal cases can be filed against the commission of forgery and fraudulent acts in the real estate sector.
DRAWBACKS OF THE ACT
Although the act has introduced a rigid legal framework to monitor real estate sector, there are few drawbacks in the implementation, such as –
1) The RERA Authority is often understaffed and overworked due to which the developers face the issue of delay in project approvals.
2) The developers often find it difficult to receive timely government approvals for the project which causes delay in timely completion.
3) There is lack of uniformity in implementation of the act in various states, as some states are proactive and strict to enforce the act than other states.
4) A project with an area of land under 1000 square meters is not required to mandatorily register with the regulator, which limits the jurisdiction of the act.
5) The added approvals for project that the developers are required to take cost hefty in amount which leads to higher cost of the projects.
It can be said that the act has been framed in a well thought manner, after doing the ground study of the real estate sector. But, still it faces challenges which require the attention of the law framers for a more efficient functioning of the market.
CONCLUSION
In conclusion, the enforcement of the RERA Act has brought more than a handful of changes to the real estate sector, which has resulted in more transparency and increased demand for properties. But the act lays down the minimum terms and conditions that must be followed by developers, real estate agents, and allottees. It is not guaranteed that all registered properties are safe to invest in; home buyers must remain cautious.
In addition to this, the developers also face problems receiving sanctions from the local authority, which creates delays in the construction of the project. Hence, proper implementation of the act is needed to be achieved.
[1] M/s Imperia Structures Ltd v Anil Patni & Another, Civil Appeal No. 3581-3590 Of 2020
[2] Sri. Y.N. Sreenivasa Vs. State of Karnataka, W.P. No. 15451 of 2019