Apart from TOPA, the Real Estate Regulatory Authority has been enacted to regularize property-related transactions. Property has never been a static matter of subject. The laws governing real estate property matters have been framed such that it serves the dynamic nature of disputes arising from the sector due to different circumstances that might arise from the purchase and sale of immovable property.
The procedural aspects of registering and framing agreements for the real estate property authenticate the ownership and rights of that particular immovable property. India has good reports regarding generating currency under foreign investment and the interest earned from the same. The policies made by the government combined with the introduction of Real Estate Investment Trusts has coupled to create a good and at times compelling investment atmosphere in the real estate sector.
Laws In India
Real estate laws help to serve the ever-growing demand for properties built in an area. Real estate property laws deal with the immovable property since all the constructions or housing under real estate property comes under the category of immovable property. The word immovable here is taken under literal terms since the land or buildings in the real estate cannot be moved or is not movable in nature. Real estate laws are enacted for the purpose of legal surveillance.
There are a lot of legal procedures that ought to be done so that no discrepancies arise during the sale or buying of property. Real Estate laws in India are bound by both federal laws and the laws created specifically for each state. The nexus is created mainly because land as such is defined under the state list which is specified under the Constitution of India and all the procedures and documentation processes come under the concurrent list.
Due to this, there is a link created between the buying of property and registering the same. The basic laws in India for real estate property are namely RERA 2016, TOPA 1882, Registration Act 1908, Indian Stamp Act 1899, Indian Easements Act 1882, ICA 1872, FEMA 1999, and FDI Policy. RERA[1] is landmark legislation enacted to ease the laws regulating property sales and legal procedures. Previously there was no single legislation enacted exclusively for the purpose of the real estate sector but RERA has been the handiest and authentic law regulating the real estate sector. Under the existing norms in India, people outside India will not be able to acquire real estate property in India unless and until they are permitted under certain circumstances.
According to the Transfer of Property Act, 1882 the term Immovable property is defined as “immovable property does not include standing timber, growing crops or grass; “instrument”, means a non-testamentary instrument”. Commercial real estate is a huge hit in India. In India, the subject matter regarding the Transfer of Property is given in The Transfer of Property Act, 1882.
However, the Act has been tweaked and amended from time to time to meet the contrasting social necessities, but it was efficient as a whole and it embraces most of the fundamental principles and concepts related to the real estate sector, which are followed to date[2]. Chapter III of the TOPA consists of legislation that facilitate the sale of immovable property. Sections 54[3], 55[4] and 56[5] are the provisions under TOPA that provide sale of immovable property. States like Punjab[6], Uttar Pradesh[7], West Bengal, Karnataka[8] and Andhra Pradesh through various legislations and enactments[9] have set up their real estate industry’s regulations.
These state laws put the responsibility over the developer of the property. Most of the state laws convey similar responsibilities but are different due to the enactment done accordingly. The states are given the authority to draft their own regulations for the real estate sector due to the difference in population, demand and land in each place. Real estate laws aim to fulfill the gap set by the existing municipal laws. Real estate industry is much different than other sectors and there requires a clarity in the legislation due to the huge money involved in the transactions. Initially the Real Estate Regulatory Authority Bill was passed which later was enacted as an act.
The bill allowed the state to draft their own regulatory laws applicable for their real estate industry. The laws in the bill extend upto the local authorities as according to the relation to Entries 6, 7 and 46 of the Concurrent lists according to the Seventh Schedule of the constitution. Just like the regulatory laws the legislation for the real estate sector has to evolve continuously according to the dynamic changes of our economy.
The Real Estate Bill established in 2013 was aided with the support of the government which later came into force in 2016. The constitutional limitations within the Bill were a good starting point for the protection of the consumers. India’s score with the regulatory Index is much lower compared to other countries due to inadequacy of enforcement actions in the real estate sector.
Before the existence of concrete real estate laws, the agents or even the builders of real estate were engaged in forgery activities to legally acquire certain services such as power, water etc. These activities took place due to the absence of a strong base for real estate laws. RERA has brought some milestone changes regarding the laws in the real estate sector of India. The fulfilling commitment from the side of the government into holding a fair play in the real estate business has turned out to be a big relief for the buyers.
Procedural Aspects Under The Real Estate Laws
The purchase of property creates a contractual obligation during the sale and this makes it come under Transfer of Property Act, 1882. Purchase of property is now under the laws governed under RERA. Th because of the inadequacy of the traditional laws of TOPA, 1882 Real Estate (Regulation and Development) Act, 2016, and the body that governs this has the power to authorize the sale, marketing, and development of the projects under the real estate industry.This was developed to promote and protect the rights and interests of the buyers in the real estate industry. RERA calls for mandatory registration of the property purchased and RERA gives a form of assurance through its fast pace redressal system for the disputes. The whole point of registration of land is to ensure a smooth flow in the transfer of title between a buyer and the seller.
India has a good systematic record for the registrations done for the real estate properties due to the growing demand and interest among the people for their investments. Apart from this, the costs involved in the process of registering a real estate property are well handled by the steps covered under The Indian Stamp Act, 1899. The price matters regarding the components of the costs involved changes from one state to another in India.
Transfer of Property Act is another major law involved in the buying and selling of property in real estate. Section 55 of the TOPA says:
Rights and liabilities of buyer and seller. In the absence of a contract to the contrary, the buyer and the seller of the immovable property respectively are subject to the liabilities and have the rights, mentioned in the rules next following, or such of them as are applicable to the property sold” and under this, the rules regarding the sale of a property is mentioned.
Whether it is TOPA or any other real estate property law, before purchasing an immovable property there are few essential steps:
- Completion certificate:
This should be obtained by the buyer of a property and this is usually obtained by the municipal authority when a project is completed.
- Occupancy Certificate:
This certificate which is issued by the local government proves that the building is fit enough for the occupancy of the buyer. This is a fundamental document much needed for day-to-day essentials.
- Building plan:
This essentially produces the blueprint of a particular property if it is housing in nature. The buyer needs to check for the proper registration and approval of the same from the local authorities.
- Encumbrance certificate:
This certificate specifies the current monetary and legal obligations. It mainly shows the status of current ownership and the details regarding the transfer of ownership and the liabilities thereon.
- No objection certificate:
It doesn’t have a legal necessity but can be obtained as a form of societal assurance.
Real estate industry has evolved as one of the most globally recognised sectors. The properties of the real estate industry have been classified under 4 categories namely- housing, retail, hospitality and commercial. Around 30 years back, investments in property under real estate was considered a luxury and were done only as a boost for social status but nowadays it has turned out to be a necessity due to the dynamic changes in the society that calls for investments.
Under Transfer of Property Act real estate property comes under immovable property. Section 3 of the TOPA specifies the interpretation clause regarding the immovable property. Immovable property under TOPA 1882 basically specifies house, factory, manufacturing plant etc which commonly refers to the real estate[10] property only. The transfer of real estate property is a complicated matter since it also involves transfer of ownership at times and therefore it involves various Central and State Government laws.
However, under RERA 2016, there are certain guidelines regarding registration of a property. According to the requirements under RERA, the registration has to be made with regard to any project with more than 8 apartments or if the size exceeds 500 sq. mt. by the builder at every stage of the construction independently along with the state Tribunal[11].
Before the actual implementation of RERA guidelines, there might be some amount of chaos involved but due to the implementation of an organized legal system for the real estate industry, there has been a rise in the investments made in the sector. One of the greatest advantages for buyers is that if in case of non-compliance by any promoter according to the provisions stated as under RERA, the consequence of the same may be a fine of 10% imposed on the developer upon the total cost of the project & repeat offense regarding the same might end him up in jail.
Collaborations Of Real Estate Property Laws
The real estate sector has been experiencing a sea of changes in the past few years due to the response and interests of the people. Further, the execution of the RERA has compelled the owners and buyers to follow a standard procedure for the operation and sale activities concerning real estate properties. In the case of Aftab Singh v. Emaar MGF Land Limited & Anr[12] it deals with the issue that if a particular case falls under RERA and about how the consumer related complaints can be dealt.Here, the application was filed under the Arbitration and Conciliation Act. 1996 to deal with the dispute between the builder and the buyer. Further, it was held that Consumer Protection Act acts as a supplement to the primary legislation and the consumers have a choice regarding their approach either towards consumer forum or via RERA. The connection between different laws enacted can be observed from this case. The builders and owners of immovable properties focus on gaining luck with their collaborations so that they can make the best use of them to avail their benefits.
The collaborations of such property-related issues can lead to benefits regarding profit, share in the area, or at times even the management of the project. After the enactment of specific real estate laws under RERA, the term ‘promoter’ has received a wider significance due to its applicability to both the landowner as well as the developer. According to the framework created by RERA for property laws a developer or an owner of land cannot be assigned to have an inactive or passive role in the growth of the real estate project, and be able to pass over the liability to another party for any mistakes or mishap therein.
The developer and the owner of the land will be interpreted as ‘promoters’ under the legislation created under RERA and accordingly, they will have to coordinate with the obligations and results of non-compliance as spelled out under the appropriation legislation specified. The jurisdictions specified under the Transfer of Property Act, 1882 and the Consumer Protection Act, 1986. are not enough due to the technical aspects involved under law.
Though RERA has a narrow scope of jurisdiction, if the laws under it are implemented in the right way, then the interests of the buyers are protected. The major loopholes given out by the Transfer of Property Act was the registration flaw. Though registration was a mandatory process even under the transfer of property act, there were no checks and penalties imposed on the same.
When we look at the role of Transfer of Property Act, 1882 there is some amount of inadequacy and absence of effective regulation for the protection of consumers. Till the 1980’s the promotion and development of the real estate industry stayed with the state and then later on got passed over to private builders or promoters.
In the case Olga Tellis V Bombay Municipal Corporation[13], Right to life includes right to residence. Right to residence is a part of life enshrined in Article 21.
In the case of Belaire Owners Association Vs DLF Ltd[14] It has been stated that the absence of a uniform authority to control and regulate the real estate industry has led to transparency and business-related ethical issues which made the real estate sector much worse. One of the other most important factors under TOPA and RERA is the role of Goods and Service Tax (GST) imposed on them. RERA being implemented due to lack of transparency under TOPA, now finds it better with the imposition of GST since it brings about a simplified tax structure and accountability. Any new regulatory law has to pass through certain amounts of tests so that it doesn’t turn out to be over regulatory.
The proposed law should always keep in mind about the welfare of the people. Combining the provisions of both TOPA and RERA and all other local real estate laws available we can notice that we also have Maharashtra Ownership Flat Act, 1963. This is one of the locally available real estate laws applicable for that particular state.
All agreements executed post 1st May, 2017 are looked after under Section 17 of RERA and the conveyance for the same ought to be executed within 3 months of the issue date of OC as mentioned in Section 17.
Section 17 of RERA states that the transfer of title is to take place within the period prescribed by local laws. Under the absence of local laws, the time period of 3months from the date of the OC has been prescribed.
When Section 17 of RERA itself makes local laws applicable to compute time period for transfer of title, it is unclear how the Order can make the provisions of MOFA/Maharashtra Rules inapplicable[15]
RERA has not repealed the provisions under MOFA. RERA has an overriding effect in case there is an inconsistency. There is nothing inconsistent in Section 17 of RERA and MOFA, as RERA itself requires the promoter[16] to act in accordance with local laws. Under the Transfer of Property Act 1882, there are certain rights available to the buyer of a real estate property. According to the act the buyer is entitled to the right for the proper delivery of the title and possession of the property[17].
The buyer has certain rights such as the reimbursement rights and enforcement of performance right in case of failure of the same. The buyer under Transfer of Property Act 1882 also has certain responsibilities such as disclosure of material interest, payment of consideration, bearing of loss that has not been caused by the seller and the payment of all dues thereon.
Impact Of Real Estate Regulatory Authority Act 2016
The projects undertaken ought to be registered under RERA[18]. The legislation is likely to create an impact in the real estate sector. A drastic reduction can be observed in the no.of projects initiated by promoters and builders since the industry shall study and analyze such impact of the regulations and policies in the business. RERA came into existence due to the need for an autonomous body from the government to control and regulate the sector dealing with property.RERA came into existence due to the insufficiency of Transfer of Property Act, 1882 and Consumer Protection Act, 1986. Before 2016, the insufficiency in jurisdiction led to a lot of malpractices and fraudulent activities by the people. In the case of Sh. Sukhbir Singh Grewal Vs. M/s. MVL Ltd.[19], the buyer filed a case for the delay caused in getting possession of a building. The Case was filed against the builder and the interim order here was passed through SEBI. Due to this, it was held that:
As the matter is already with the SEBI/SAT, accordingly there is no case left for the present before this authority and to continue further proceedings in the matter. Let the issue be decided by the SEBI/SAT. Once the SAT set aside the order of the SEBI then the only allottee may come to us for proceedings under the RERA Act .
From this we can observe that, though the buyer approached RERA for guiding, it cannot be taken up since the case was pending or ongoing with other tribunals. To avoid confusions, RERA does not enter and make decisions under such circumstances if there is an ongoing scenario. The nexus between the real estate proper laws and other traditional laws can be understood through this. By the use of traditional laws from the central act of Transfer of Property Act there were certain loopholes[20].
Before enacting RERA, the builders and promoters would usually default on their new projects because they started to circulate money collected from one project to their backlogged previous project. However, this is not possible now due to the financial discipline induced in the sector through the additionally created 32 sections to the RERA. The newly created sections strive to ensure smooth flow and higher degree of transparency.
TOPA did not provide any kind of an assurance to the buyers of a property though it had sections pertaining to the sale and buying of immovable property[21]. Under RERA, the builder is made liable after registration[22] for the completion of his project, failing which he would have to pay penalty for the delays caused. This gives a form of assurance and confidence to the buyers of the real estate industry and makes them believe in their investments.
This was the missing element before the enactment of RERA and it has been successfully filled by this Act. According to the act, a Regulatory authority shall act as a separate forum that has been established for the purpose of consumers and is ensured by the appropriate governments and the same comes into force through that. Therefore, a consumer approaching for a property law case or even a developer need not approach a civil court to seek remedy for the dispute but instead the authority has been vested with the powers of a civil court under CPC, 1908[23].
The fundamental prerequisite of having relevant documents and mandatory registration for the real estate industrial properties helps to authenticate and authorize the properties bought and sold in the sector. The turning of RERA Bill to an act has set good standards of professionalism and standardization by providing encouragement towards the investments.
The accountability and transparency created by the RERA has not only benefited the buyers but has also created a boost in the consumer confidence which would instigate the buyers who would, in turn, help the developers to build and increase their reputation and brings them a high esteemed name in the market leading to increase in the no. of projects obtained.
In the case of Suresh V. Swamy Vs. L&T Limited[24], the complainant had paid the entire amount towards the purchase of the property and a default has occurred on the part of the builder. This case gave rise to the concept of force majeure and the contractual obligations that arise due to the insufficiency in completing the project. Upon the implementation of the Real Estate Regulatory Authority, it has been of great significance to the relationship between banks and promoters.
Before the implementation of RERA, banks did not have any trust upon the builders of real estate but now due to the commitment of timely execution of projects and strict impositions of penalty due to default imposed by RERA has improved the confidence of financial institutions. Rampant corruption and lack of trust between the buyers and promoters have been resolved through effective and strong implementation of real estate laws.
In a country like India, an organized legislation like the Real Estate Regulation Act is crucial and essential to have uniform gauges throughout the nation and this has paved the way for a straightforward exchange of real estate transactions. The implementation of a legislation like RERA is a huge milestone in the apt direction to raise awareness and impart basic knowledge within the minds of customers, promoters, builders etc.
In the coming years, according to the norms of RERA, modernization and digitization of land records, real estate land acquisition and GST can also be put forward for the potential growth of the real estate sector. To encourage sustainable development of the real estate industry, along with a customer friendly environment, various measures have been aided to support RERA which would in turn certainly bring impressive changes in the transformation economically and socially.
Real Estate Appellate Tribunal has been initiated for the purpose of resolving the disputes that concerns with the buying of homes and the aggrieved party of the same will not be entitled to any other consumer forums and civil courts concerning such matters. Under Article 246 of the Constitution, Land comes as a matter of subject under List II, 7th schedule and the jurisprudential aspect of real estate is covered under transfer of Property Act, Contracts, Registration of deeds and documents etc.
Similarly, by looking at the guidelines established by RERA it can be said that local laws do have an upper hand in deciding their regulatory framework for the real estate sector of their state. Here, in the case of Vinod Kumar Agarwal vs. Jaipur Development Authority[25] The overriding effect of RERA and the provisions under the same has been brought as an issue under the local laws.
The application of Section 13 has been involved under the Real Estate Regulation Act. At times, RERA’s implication can be seen as a boon to the buyers but imposes a great amount of financial stress on the developers to focus on the timely delivery of the property. The Real Estate Laws are now run mainly on the basis of transparency and self-certification.
Withdrawals from the bank have also been done by a separate account maintained for the project by the promoter due to the guidelines as imposed under the real estate rules. All the decisions regarding penalty and property disputes are brought in front of the forum of real estate authority and then a decision is taken according to the guidelines issued by RERA.
Conclusion
The study made here is an attempt to give clarity regarding The Real Estate Regulatory Authority (RERA) and the purpose of forming the same which ensured transparency, efficiency and accountability into this sector along with the rights and duties of both buyers and developers being clearly defined. The real estate regulatory rules along with the traditional provisions of Transfer of Property Act, 1882 gives a clear picture as to why the real estate laws have been formed explicitly.
From the point of view of the public, the exclusive real estate laws favoured only the buyers of real estate property but in general, the real estate laws were also an integral part for the promoters since it provided the much-needed authentication of transactions related to the real estate industry. The quality of real estate industry has increased multi-fold and the dynamic of real estate industry has changed with the exclusive real estate property laws.
The project has also put forward the understanding that the provisions contained under TOPA 1882 and other traditional or local laws were not found enough for the variety of disputes and the no.of transactions under the real estate industry. The establishment of an autonomous authority has provided multiple benefits economically and has also eradicated malpractices from the promoter’s/ builder’s end.
The planning and development of projects of real estate property in India has become more organised and well equipped due to the availability of custom-made laws. Though local laws take control of each state for the real estate regulation, they differ only by certain among and are mostly united by the general laws applicable for the properties under real estate. To some extent, it can also be noticed that there is a decrease in the amount of competition between the real estate promoters due to the fear of commitment to complete their project within stipulated time.
Though this may have reduced the no.of budding builders but this can be of great help due to the quality standards that it establishes in the country as a whole.
The presence of strong real estate laws during the current period has definitely brought in a lot of positive reinforcement in the society we live in. The penalties and an organised system established through RERA is definitely a brilliant statutory effort which protects the rights and interests of the buyers of real estate property. The mode and efficiency of legislation varies from one state to another.
Real estate sector can definitely be seen as a good potential and the growth of the same can be seen as a nurturing development much needed for the economy. Despite the inadequacy faced in the legislation provided for real estate industry, at all points of time, the society looked upon real estate investment as a future hope and this has now been successfully boosted through a proper regulatory authority which developed a mutual trust between the buyer and the seller of a real estate property.
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