RERA - The Real Estate ( Regulation and Development ) Act : July 2020

Sunday, 26 July 2020

https://www.reraconsultants.in/whether-it-is-necessary-to-obtain-registration-of-a-project-when-the-promoter-himself-invests-the-funds-required-to-complete-the-project-and-obtains-occupancy-certificate.php

WHETHER IT IS NECESSARY TO OBTAIN REGISTRATION OF A PROJECT WHEN THE PROMOTER HIMSELF INVESTS THE FUNDSREQUIRED TO COMPLETE THE PROJECT AND OBTAINS OCCUPANCY CERTIFICATE ?

by E Suhail Ahmed

Whether it is necessary to obtain registration of a Project when the Promoter has completed the construction and obtain occupancy certificate ?

E. Suhail Ahmed

Partner- TRIALBASE,

Advocates Legal Consultant-RERA CONSULTANTS LLP

The above question is an often repeated question from time to time that the Promoters ask to which the answers were discussed in several fora. However, the question still lingers in the minds of the Promoters.

The answer to the said question is "YES"- it is necessary to register a Project even when the Promoter himself has invested all the funds to complete the Project and wants to sell only after obtaining occupancy certificate.

Under the Act, there is no distinction made as to time when the Promoter proposes to sell and when the new Project is required to be registered. The mandate under Section 3 of the Act is very clear that a Promoter shall not advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate Project or part of it, in any planning area without registering the real estate Project.

From the above, it can be made out that on and from the date of commencement of the act, it has now become mandatory for a Promoter to register the real estate Project before doing any of the aforesaid activities in relation to the Project. The Act does not stipulate as to whether the Project has be registered immediately after the plan sanction or at the time when the Promoter proposes to carry out the aforesaid activities in relation to the Project.

From my experience in dealing with the matters relating to registration of Projects and the method in which the Real Estate Regulatory Authorities are dealing with the registration of the Projects, it can be said that the Promoter should register the Project immediately after obtaining sanctions, failing which the authority may take action for non-registration of the Project if the registration is delayed up to the date of obtaining completion certificate or occupancy certificate. This stand is being taken by the authorities in view of the fact that it would not be possible for the authorities to monitor whether the Promoter s of the Projects for which the registration is not obtained are actually being advertised or marketed or sold, which view is rightly being taken by the authority, as it may become impossible to keep track of all the Projects in a particular State.

A Promoter of a Project would be of the view that since there are no compliances required to be fulfilled by him/her/it if the Promoter has invested all the funds necessary for completion of development of a Project and no sales in the Project are undertaken. If this view is to be accepted, then would become impossible for the regulatory authorities to make sure that the Promoter s do no contravene with the other provisions of the Act and in the even such Promoter s actually go on sale, market and sell the apartments or plots in any Projects and the Allottees are forced to take recourse against such Promoters, in which event, the regulatory authorities would find it difficult to take action as against such Promoters.

In a case where the Promoter is investing all the funds required to complete the Project and does not propose to market or sell the Project, the only formality for the Promoter to comply would be to obtain registration for the Project, Post Registration and Quarterly updates and no other compliances would be required to be fulfilled including the compliance in relation to the financial management of the Project being depositing of 70% of the amounts collected in the Project in such account and upon every withdrawal obtain certificates from the Chartered Accountants, Architects and Engineers. When such compliances would not be required when the Promoter is investing all the funds, it is advisable that the Promoter obtains registration for the Project in order to avoid any complications in future.

https://www.reraconsultants.in/updates-under-rera-quarterly-updates-under-rera.php

UPDATES UNDER RERA, QUARTERLY UPDATES UNDER RERA

by Vinay T

Vinay T

Partner- Venu & Vinay, Chartered Accountants,

Financial Consultant-RERA CONSULTANTS LLP

Every promoter after registration of their project under RERA, shall update on the Authority website complete details of the project including list of number and types of apartments or plots, booked, no of garages booked, list of approvals taken and the approvals, NOC obtained and development, construction status, Including Photos of stage of development, pending litigations and status of the same as per Sec 11 of RERD Act

In addition to above, Promoter shall obtain and update the quarterly certificates received from professionals viz., CA's, Engineer, Architects certifying the

● Status of development work completed (percentage of completion of project),

● Money collected from the Allottees, money spent on project, eligible funds to withdraw from RERA project bank account based on % of completion of development of the project as per Sec 4(2)(l)(D) of the Act –

● Provided further that the amounts from the separate account shall be withdrawn by the promoter after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project

These Quarterly updates will help the buyers / Allottees to know the status of development of project from time to time. It will act as guidance for new buyers to check the movement of units in the project from quarter to quarter before they invest into the project. Buyers can know –

● status of development work with photographs

● no of units sold / booked

● status of various permissions / NoC's

● Litigations and status of litigations

● Modification of plan etc.,

● any other information as may be required to publish

Authority can know the development activity of the project apart from % of completion of project from time to time.

These updates shall be made till promoter complete the project and submit Occupancy Certificate at the end of the project having completed all development work as promised / committed

The quarterly update is mandatory as per Act and Rules, failing which authority may levy penalty as per Sec 60 of the RERD Act, which may extend upto 5 % of estimate cost of the real estate project

At broader level following information, documents, details shall be uploaded

1. Promoter Details – KYC

2. Project Development Details, Schedule

3. Sanctions / NOC's

4. Litigations

5. Professional Certificates

6. Latest Financial statements

7. Brochures / advertisement

8. Brochures / advertisement

9. Authorised signatory if any

10. Company member details

11. Project Schedule – of all development activities

12. Project Cost Details (including TDR)

13. Litigation Details

14. Modification to plan etc

15. Association of Allottees

Section 11 of the Act – FUNCTIONS AND DUTIES OF PROMOTER

The promoter shall, upon receiving his Login Id and password under clause (a) of sub-section (1) or under sub-section (2) of section 5, as the case may be, create his web page on the website of the Authority and enter all details of the proposed project as provided under sub-section (2) of section 4, in all the fields as provided, for public viewing, including—

1. Details of the registration granted by the Authority

2. Quarterly up-to-date the list of number and types of apartments or plots, as the case may be, booked

3. Quarterly up-to-date the list of number of garages booked

4. Quarterly up-to-date the list of approvals taken and the approvals which are pending subsequent to commencement certificate;

5. Quarterly up-to-date status of the project; and

● Such other information and documents as may be specified by the regulations made by the Authority.

https://www.reraconsultants.in/role-of-professionals-charted-accountscas-engineer-architects-under-rera.php

ROLE OF PROFESSIONALS CHARTED ACCOUNTS(CA'S),ENGINEER, ARCHITECTS UNDER RERA

by Vinay T

CA's, Engineer, Architects Professionals play a prominent role under RERA. All promoters shall obtain from these 3 professional's certificates from time to time to withdraw the money from the project Bank Account based on % of development of the project.

1. The engineer shall certify that the items shown in the cost of construction is matching to the physical condition at the site of the real estate project;

2. The architect shall certify that the physical condition at the site is built as per the sanctioned plan; and chartered accountant shall certify the cost incurred on construction cost and land cost;

3. The chartered accountant shall also certify the proportion of the cost incurred on construction and land cost to the total estimated cost of the project

Further few states have notified the drafts of the certificates along with guidance for issuance of these certificates.

We recommend each professional to go through the provisions of the Central Act and State Rules before issuance of Certificate. Few states have separate compliance and additional certifications based on type of project. E.g, Karnataka, Telangana etc., has a provision of bringing back unutilized funds within a period of three months from date of an application for registration of the project with the Authority, deposit in the separate bank account, seventy per cent of the amounts already realized from the allottees, which have not been utilized for construction of the project or the land cost for the project as required under sub-clause (D) of clause (l) of sub-section (2) of section 4

These certificates may be published online by the authorities and can be accessed by Allottees of projects. Follow best practices while issuance of certificates -

1. Don't be biased while issuing report / certificates

2. Don't be under the influence of Promoters

3. Don't be casual on report / certification

4. Collect sufficient documents / information as a working / back up documents

5. If you don't know, ask others

6. If you are not sure - state the fact - report it / Qualify it First time updates under RERA

https://www.reraconsultants.in/advertisement-of-real-estate-project-under-the-provisions-of-the-real-estate-regulation-and-development-act-2016.php

ADVERTISEMENT OF REAL ESTATE PROJECT UNDER THE PROVISIONSOF THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

by Hitendra V.Hiremath

● Authored by Mr. Hitendra V.Hiremath, presently works as Legal Consultant with RERA Consultants LLP and has earlier worked as In-House Counsel at M/s. Shriram Properties Private Limited and thereafter with an investment banking firm Capaegis at Bengaluru, Karnataka, India

What is Advertisement?

Section. 2 (b) of The Real Estate (Regulation and Development) Act, 2016 ("Act") defines advertisement, advertisement means any document described or issued as advertisement through any medium and includes any notice, circular or other documents or publicity in any form, informing persons about a real estate project, or offering for sale of a plot, building or apartment or inviting persons to purchase in any manner such plot, building or apartment or to make advances or deposits for such purposes;

So the definition has made it clear that advertisement includes any mediums i.e., online or print media, used in order to advertise by disclosing the details of the real estate project in order to sell the apartment, plot or building as the case may be.

When Promoters can advertise the Project?

As stipulated under Section. 3(1) of the Act, the promoters of the real estate project are prohibited to advertise, market and thereby book, sell or offer for sale or invite any persons to purchase plot, building or apartment in the project without registering it with the Real Estate Regulatory Authority.

Penalty and Punishment if Promoters advertise Project without registration?

If Promoters advertise, market, book, sell or offer for sale or invite any persons to purchase plot, building or apartment in the project without registering the project with jurisdictional Real Estate Regulatory Authority, then authority as per Section. 59(1) can impose penalty which may extend upto ten percent of the estimated cost of real estate project, failure to remit the penalty imposed then as per Section. 59(2) of the Act, the Promoter shall be imprisoned for a term which may extend upto three years or with fine which may extend up to a further ten percent of the estimated cost of the real estate project, or with both.

What Advertisement materials constitute?

Advertisement materials includes any materials describing the details of project which is marketed and advertised through the Short Message Service (SMS), e-mails, hoardings, prospectus, brochures, newspaper, leaflet, radio, television, social media platforms, websites and/or any other forms of media.

What should the Advertisement materials to include?

As stipulated under Section. 11(2) of Act, all advertisement materials must include the registration number of the project allotted by the Real Estate Regulatory Authority with website of such authority along with such other necessary information incidental thereto. If promoter fails to follow the guidelines as per Section. 11(2) and thereby contravenes, then the authority under Section.61 shall impose a penalty which may extend up to five percent of the estimated cost of the real estate project.

Apart from this the Advertisement materials must be clear and Promoter has to adhere to the following:

● Should not make false/misleading representation about the project.

● The contents must be near to actual.

● Testimonials shall be original and genuine.

● Specifications as mentioned under the marketing materials shall form part of Agreement for Sale to be executed with Allottee/s.

Obligations of Promoter in case of veracity of Advertisement?

As stipulated under Section.12 of the Act, if any person makes any advance on the basis of the information as per the advertisement or prospectus and sustains any loss or damage due to any false and incorrect information then he shall be compensated by the promoter of the real estate project.

The person, who is affected by such false advertisement, is entitled to withdraw from the project and his investment has to be returned with interest at such rate as may be with the compensation.

Who can hear the matters on veracity of advertisement?

The adjudicating officer appointed shall have the authority to hear the matter and decide the compensation based on the loss or damage sustained due to such false or incorrect information in the Advertisement. (Readers can read the article of the author on Ambit and Powers of Adjudicating Officer under the Act, Available at http://www.reraconsultants.in/2019/03/16/analyzing-the-ambit-and-powers-of-adjucating-officer-under-the-provisions-of-the-real-estate-regulation-and-development-act-2016-and-the-karnataka-real-estate-regulation-and-deve/ )

Cases were penalty imposed?

The Maharashtra Real Estate Regulatory Authority on April 5, 2018 imposed penalty of Rs.50,00,000/- (Rupees Fifty Lakh Only) under Section 61 of Act on Piramal Realty for not mentioning Maharashtra RERA website in an advertisement published in a national daily, the advertisement also carried the project's registration number on the second page instead of the first in "very small" font size. The penalty was imposed for contravention of Section. 11(2) of Act and the order stated:

"…on the front page the promoter has not mentioned MahaRERA registration number at all. The registration number is mentioned on the 2nd page in a very small font/print. In the full page advertisement, the MahaRERA registration number is not accompanied by the website address of MahaRERA." (Source: Money Control, MahaRERA imposes Rs. 50 lakh fine on Piramal Realty, April 6, 2018, Available at https://www.moneycontrol.com/news/business/real-estate/maharera-imposes-rs-50-lakh-fine-on-piramal-realty-2544155.html , last visited on March 23rd, 2019 at 02:25pm)

DISCLAIMERS

● This post underlines the information as per the applicable provisions of the Real Estate (Regulation and Development) Act, 2016; and

● We recommend the Promoters to seek the assistance of the Professionals involved in the real estate practice in case of any queries, clarifications with respect to advertisement of the real estate project.

CONTACT

For any other details, clarifications, assistance, advise and other services, please visit www.reraconsultants.in; or can get in touch with us at 080 – 2223 3003 or email to consult@reraconsultants.in

https://www.reraconsultants.in/analyzing-the-importance-of-agreement-for-sale-and-rights-and-duties-of-promoter-and-allottees-under-the-provisions-of-the-real-estate-regulation-and-development-act-2016.php

ANALYZING THE IMPORTANCE OF AGREEMENT FOR SALE AND RIGHTS AND DUTIES OF PROMOTER AND ALLOTTEES UNDER THE PROVISIONS OF THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

by Hitendra V.Hiremath

What is an Agreement for Sale?

As per Section. 2 (c) of The Real Estate (Regulation and Development) Act, 2016 ("Act") defines an agreement for sale as an agreement entered into between the promoter and the allottee.

The definition doesn't actually define an Agreement for Sale, however, the definition can be deduced keeping in mind the objective of the Act, an Agreement for Sale is a binding legal contract entered between the Promoter and Allottee to sell an apartment, building or plot as the case may be. The Agreement for Sale is also required to be notified under the respective state rules and all Agreement for Sale are necessarily required to follow the notified drafts.

An Agreement for Sale constitutes the terms and conditions to sell an apartment, building or plot as the case may be which includes the consideration to be paid for purchase along with the such necessary terms dealing with construction/development, timeline to make payments, obligations in case of default in payments, timeline of delivery, obligations in case of failure to deliver the possession of apartment, building and plot as the case may be along with such other necessary clauses.

Further as per Section. 54 of Transfer of Property Act, 1882 an Agreement for Sale is a promise to transfer/convey a property in future on satisfying certain terms and conditions and such agreement shall not in any manner does not create any absolute rights or interest in the property unless meeting such stipulated terms and conditions.

After the provisions of the Act coming into force, it is now essential that Promoter must include all necessary obligations as per the Act.

Is it necessary to enter into an Agreement for Sale?

Yes, an Agreement for Sale gives a right to the allottee to own an apartment, building or plot as the case may be on satisfaction of the conditions agreed under the Agreement for Sale. Likewise, the Promoter shall also get a right to receive consideration under Agreement for Sale on fulfilling certain terms and conditions.

When an Agreement for Sale is entered and Is it necessary to be registered?

As per Section. 13(1) of the Act, an Agreement for Sale needs to be executed with allottee, if the Promoter intends to accept a sum more than 10% (ten percent) of the cost of the an apartment, building or plot as the case may be and such Agreement for Sale has to be registered.

What are the necessary provisions an Agreement for Sale should constitute as per Act?

As per Section. 13(2) of Act, an Agreement for Sale should include the following:

● Particulars of development of project including the construction of building and apartments.

● Necessary specifications and details of internal and external development works.

● Dates and manner by which the payment towards the cost of the apartment, building or plot as the case may be are to be made by the allottees

● Date of handing over of possession of the apartment, building or plot as the case may be

● Applicable rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default; and

● Such other particulars, as may be prescribed or agreed between the allottee and promoter not being in contravention to the object of the Act.

What are the rights and obligations of Promoter under Act in furtherance of entering into an Agreement for Sale?

As per Section. 11(4)(a) of the Act, the Promoter shall be responsible for all obligations, as agreed with allottee under the Agreement for Sale.

The promoter as per Section. 11(4)(h) of the Act, after executing an Agreement for Sale with respect to an apartment, building or plot as the case may be, shall not mortgage or create charge. If in case a mortgage or charge is created by Promoter then it shall not affect the right and interest of the allottee.

Further as per Section. 11(5) of Act, the Promoter can only cancel the allotment of an apartment, building or plot as the case may be, as per the terms of the Agreement for Sale.

What are the rights and obligations of Allottee under Act in furtherance of entering into an Agreement for Sale?

As per Section. 19(1) and (2) of the Act, the allottee is entitled to know all information with respect to project or with respect to his apartment, building or plot as the case may be, as agreed under the Agreement for Sale.

As per Section. 19(4) and Section. 18(1) of the Act, the allottee is entitled to claim refund of entire amount paid along with interest and compensation, if the Promoter fails to comply or give possession of apartment, building or plot as the case may be in accordance with the terms of the Agreement for Sale or as per proviso of Section. 18(1) of the Act, if the allottee does not intend to withdraw from the project then allottee is entitled to the interest for every month, till the handing over of possession at such rate as may be prescribed.

As per Section. 19(6) of the Act, the allottee is responsible to make necessary payments in the manner and time specified as per the Agreement for Sale, further as per Section. 19(7) of the Act, the allottee shall be liable to pay interest for delay in payment as agreed, however the liability towards payment of interest by allottee can be reduced by the Promoter as per Section. 19(8). In case of cancellation by allottee, the promoter can withhold the booking amount i.e., upto 10% (ten percent) of the cost of the apartment, building and plot as the case may be.

As per proviso to Section. 11(5) of Act, the allottee is entitled to approach the Authority if promoter cancels the allotment of apartment, building or plot as the case may be, and such cancellation is not in accordance with the terms of the agreement for sale, unilateral and without any sufficient cause.

Who can hear the matters for violation of rights and duties of Promoter and Allottee?

Adjudicating Officer appointed as per sub-section (1) of Section 71 of the Act is empowered to hear the matters. A complaint under Section.31 of the Act can be filed by an allottee for violation of his rights under Section.18 and 19 and the promoter can file a complaint as against allottee for violation of duties as mentioned under Section.19.

Judicial Pronouncements

In Prakash Chand Arohi v. M/s. Pivotal Infrastructure Pvt Ltd, Complaint No. RERA-PKL-COMP.49/2018 decided by Haryana Real Estate Regulatory Authority, Panchkula. In the instant complaint, Mr. Rajan Gupta, Chairman observed the following:

In the instant complaint, it was held:

1. All agreements executed prior to the Act coming into force are valid except which are held as invalid by higher courts and which are universally acknowledged as such, as unfair trade practices.

2. Agreement for Sale with respect to apartment, building or plot as the case may of an ongoing or new project shall be executed in accordance with the model agreement annexed with the rules.

3. All agreements made preceding the date of the Act coming into force shall be enforced by RERA in accordance with RERA and in accordance with the terms and conditions settled between the parties. If promoters of an ongoing project have revised the schedule of completion of a project while getting the project registered with the RERA, the revised schedule will not be automatically applicable on the existing buyers. Existing buyers will be entitled to delay compensation.

DISCLAIMERS

● This post underlines the information as per the applicable provisions of the Real Estate (Regulation and Development) Act, 2016; and

CONTACT

https://www.reraconsultants.in/whether-registration-of-a-real-estate-project-is-mandatory-if-promoter-intends-to-lease-the-project-instead-of-sale.php

WHETHER REGISTRATION OF A REAL ESTATE PROJECT IS MANDATORY IF PROMOTER INTENDS TO LEASE THE PROJECT INSTEAD OF SALE?

by Hitendra V.Hiremath

INTRODUCTION

It is necessary to understand the definition of 'Lease' much before discussing the registration of real estate project wherein the promoter intends to lease the project. Section. 105 of the Transfer of Property Act, 1882 defines "a lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee. Who accepts the transfer on such terms.

Lessor, Lessee, premium and rent defined: The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be rendered is called the rent"

Now, looking onto the definition of the term lease, the essential ingredients of a lease are i) transfer of a right in the property; ii) duration of lease and iii) payment of consideration. Further, it is clear that a lease can be made for perpetuity on receipt of the rent or premium.

Now, the answer as to whether a real estate project is compulsorily required to be registered if the promoter intends to lease the apartment, building or plot, as the case may be, instead of selling is not specifically dealt under the provisions of The Real Estate (Regulation and Development) Act, 2016 ("Act"). However the definition of the Allottee has to be taken into account to interpret the same, as per Section.2 (d) of the Act, an allottee in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold ( whether a freehold or leasehold) or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent;

Further Section. 11(4)(c) of the Act dealing with function and duties of promoter stipulates that promoter shall obtain the lease certificate, where the real estate project is developed on a leasehold land, specifying the period of lease, and certifying that all dues and charges in regard to the leasehold land has been paid, and to make the lease certificate available to the association of allottees;

WHAT DOES THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016 MANDATE?

Section.3(1) of the Act deals with prior registration of real estate project with real estate regulatory authority which stipulates that no promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area without registering the real estate project with the Real Estate Regulatory Authority established under this Act.

The provision deals with only sale of the apartment, building or plot, as the case may be and is silent over the registration of real estate project where the promoter intends to lease the same instead of sale.

IS IT NECESSARY TO REGISTER THE REAL ESTATE PROJECT IF THE PROMOTER INTENDS TO PROMOTE THE PROJECT IN A MANNER THAT LEASE AMOUNTS TO SALE?

We are of the view that a real estate project has to be registered irrespective if the promoters intention either to sale or lease due to the following reasons:

1. If the proposed lease is for perpetuity: If the promoter enters into an Agreement of Lease with no end date and without having any provision for cancellation or termination.

2. The period of lease is for 99 years or more, wherein the transaction essentially cannot be termed as lease but may be a sale as leaseholder by virtue of the term of 99 years ought to acquire the rights of an allottee as mentioned under Section. 19 of the Act for example in State of Karnataka, the statutory bodies like Karnataka Industrial Area Development Board used to allot the land on 99 years clause of lease cum allotment wherein the same was diluted to ten years for land parcels less than 2 acres recently. Further, even the process of allotment of plot to an allottee in State of Karnataka by Karnataka Housing Board is on lease cum allotment basis.

JUDICIAL PRONOUNCEMENTS:

1. In Lavasa Corporation Limited v. Individual Allottees,, the Bombay High Court held that the provisions of the Act, shall apply for the agreements styled as agreement to lease executed for a time of 999 years on payment of substantial consideration. The Bombay High Court further held the following:

2. Nomenclature of the document cannot be relied upon and such the contents of the agreement have to be read in order to ascertain the intention and understanding between the parties. Just is terming a document as 'agreement of lease' will not take away the right of allottee as mentioned under the Act.

3. Definition of allottee should not be construed in a restrictive manner and will include the leaseholders if the transaction is not essentially a lease, but a sale.

4. In Commissioner of Income Tax, Tamil Nadu v. Rane Brake Lining Limited, the Madras High Court relied upon the apex court ruling of R K Palshikar (HUF) v. CIT, MP Nagpur holding that in a lease of plot of 99 years, the assessee had parted with an asset of an enduring nature and accordingly the transaction amounted to transfer of a capital asset.

CONCLUSION:

We are of the view that any real estate project being developed with an intention to lease in perpetuity by receiving substantial amounts of consideration being equivalent to the sale price of the apartment, building or plot, as the case may be shall required to be registered

However, leasing arrangements for relatively shorter duration, where major part of price of apartment, building or plot, as the case may be will not be paid to the promoter shall require further in detail examination by the Real Estate Regulatory Authorities. We hope that all the Real Estate Regulatory Authorities shall come down with the clarifications and notifications in this regard in near future.

DISCLAIMERS

● This post underlines the information as per the applicable provisions of the Real Estate (Regulation and Development) Act, 2016; and

CONTACT

https://www.reraconsultants.in/2019-04-20-modification-of-sanctioned-plan-after-commencement-of-real-estate-project-necessary-compliances-under-the-real-estate-regulation-and-development-act-2016-.php

MODIFICATION OF SANCTIONED PLAN AFTER COMMENCEMENT OF REAL ESTATE PROJECT – NECESSARY COMPLIANCES UNDER THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016.

by Hitendra V.Hiremath

● Authored by Mr. Hitendra V.Hiremath, works as Legal Consultant with M/s. RERA Consultants LLP and has earlier worked as In-House Counsel at M/s. Shriram Properties Private Limited and thereafter with an investment banking firm Capaegis at Bengaluru, Karnataka, India

INTRODUCTION

It is necessary to understand as what does a sanctioned plan means under the provisions of the Real Estate (Regulation and Development) Act, 2016 ("Act"), as per Section. 2(zq) of the Act, a sanctioned plan means the site plan, building plan, service plan, parking and circulation plan, landscape plan, layout plan, zoning plan and such other plan and includes structural designs, if applicable, permission such as environment permission and such other permissions, which are approved by the competent authority prior to start of a real estate project; so the definition has included all plans not only limiting building plan but including all other requisite permissions required to be obtained from the competent authorities with respect to a real estate project.

As per Section.4(2)(d) of the Act, the promoter while filing an application for registration of a real estate project has to upload the sanctioned plan along with other documents as stipulated under Section.4(2) of Act and other documents as stipulated under the respective rules.

After commencement of development of real estate project, due to varied reasons if the promoter intends to modify the existing sanctioned plan of the real estate project, the promoter has to obtain the written consent by two-third allottees of the real estate project.

This post in brief details the requirements, in case the promoter intends to modify the existing sanctioned plan for the real estate project.

FUNCTIONS AND DUTIES OF PROMOTER WITH RESPECT TO SANCTIONED PLAN

It is necessary to know as to what are the functions and duties of the promoter with respect to sanctioned plan being uploaded whilst registering the project before knowing the process of modification of plan sanction, following are the functions and duties of the promoter under the provisions of the Act:

● As per Section. 11(3)(a) of the Act, the promoter at the time of booking and issue of allotment letter shall be responsible to make available the allottee the sanctioned plan, layout plans, along with specifications, approved by the competent authority by display at the site or such other place as specified by the regulations made by the Authority;

● As per Section. 14(1) of the Act, the promoter shall develop and complete the real estate project in accordance with the sanctioned plans, layout plans and specifications as approved by the competent authorities.

Similarly the allottee under Section. 19(1) and 19(5) of the Act is entitled to obtain the information pertaining to the sanctioned plan, layout plan by the Promoter for the real estate project. Failure on part of the promoter to provide the information and details of the sanctioned plan, then allottee shall have a right to withdraw from the project and promoter shall be liable to pay entire amount paid by the allottee with the applicable interest.

NECESSARY COMPLIANCES UNDER THE ACT IF PROMOTER INTENDS TO MODIFY THE SANCTIONED PLAN:

Section. 14 of the Act deals with the necessary compliances to be made, if promoter intends to modify the sanctioned plan:

Section.14: Adherence to sanctioned plans and project specifications by the promoter:

(1) The proposed project shall be developed and completed by the promoter in accordance with the sanctioned plans, layout plans and specifications as approved by the competent authorities.

(2) Notwithstanding anything contained in any law, contract or agreement, after the sanctioned plans, layout plans and specifications and the nature of the fixtures, fittings, amenities and common areas, of the apartment, plot or building, as the case may be, as approved by the competent authority, are disclosed or furnished to the person who agree to take one or more of the said apartment, plot or building, as the case may be, the promoter shall not make—

(i) any additions and alterations in the sanctioned plans, layout plans and specifications and the nature of fixtures, fittings and amenities described therein in respect of the apartment, plot or building, as the case may be, which are agreed to be taken, without the previous consent of that person:

Provided that the promoter may make such minor additions or alterations as may be required by the allottee, or such minor changes or alterations as may be necessary due to architectural and structural reasons duly recommended and verified by an authorised Architect or Engineer after proper declaration and intimation to the allottee.

Explanation.—For the purpose of this clause, "minor additions or alterations" excludes structural change including an addition to the area or change in height, or the removal of part of a building, or any change to the structure, such as the construction or removal or cutting into of any wall or a part of a wall, partition, column, beam, joist, floor including a mezzanine floor or other support, or a change to or closing of any required means of access ingress or egress or a change to the fixtures or equipment, etc.

(ii) any other alterations or additions in the sanctioned plans, layout plans and specifications of the buildings or the common areas within the project without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such building.

Explanation.—For the purpose of this clause, the allottees, irrespective of the number of apartments or plots, as the case may be, booked by him or booked in the name of his family, or in the case of other persons such as companies or firms or any association of individuals, etc., by whatever name called, booked in its name or booked in the name of its associated entities or related enterprises, shall be considered as one allottee only.

So, Section. 14(2) of the Act stipulates that the promoter shall not make any additions or alterations to the sanctioned plans, layout plans, specifications and the nature of the fixtures, fittings and amenities described therein in respect of the apartment, plot or building, as the case may be, without the previous consent of the person, however the promoter make minor additions or alterations as required by allottee or for architectural or structural reasons duly recommended and verified by the an authorised Architect or Engineer after proper declaration and intimation to the allottee/s.

Section. 14(2) indirectly states that in case of major additions or alterations in specifications of the real estate project, the promoter will have to mandatorily take two-third written consent from the allottee/s of the real estate project.

Prior to obtaining the written consent, the promoter has to reveal such modifications to the allottee/s of the project and thereafter obtain the consent.

It is advised that the promoter discloses the proposed modifications and change in specifications of the project to the allottee/s and ask them to give consent by signing the said communication or the consent can be obtained through email with the same procedure.

PROCEDURE TO UPLOAD THE MODIFIED PLAN SANCTION AND OTHER NECESSARY COMPLIANCES TO BE CARRIED BY PROMOTER

After obtaining the modified plan sanction, the promoter shall immediately inform the Real Estate Regulatory Authority and obtain sanction from the Real Estate Regulatory Authority to upload the modified plan sanction and update the information of the project in the project account on the website and has to make available such modified plan sanction to all the allottee/s of the project.

Further, it is advised that the promoter shall make available the modified plan sanction along with such specifications in the advertisement, prospectus, brochure, website etc of the real estate project and shall immediately withdraw the earlier sanctioned plan from all such advertisement, prospectus, brochure, website etc after applying for modification of such sanctioned plan.

JUDICIAL PRONOUNCEMENT

In Ferani Hotels Pvt Ltd v. State Information Commissioner Greater Mumbai & Ors, Civil Appeal Nos. 9064 – 9065 of 2018, Supreme Court on 27th September, 2018 ruled that developers has to display the sanction / layout plans at the site and also ruled that this aspect should be given appropriate publicity as part of enforcement of The Real Estate (Regulation and Development) Act, 2016. The direction is made with respect to Section. 11(3)(a) of The Real Estate (Regulation and Development) Act, 2016t to be fully complied with.

(Source: The full judgment is available at https://www.sci.gov.in/supremecourt/2015/38196/38196_2015_Judgement_27-Sep-2018.pdf,last visited on 19th of April, 2019 at 06:12 pm.)

DISCLAIMERS

This post underlines the information as per the applicable provisions of the Real Estate (Regulation and Development) Act, 2016; and

We recommend the Promoters to seek the assistance of the Professionals involved in the real estate practice in case of any queries, clarifications with respect to advertisement of the real estate project.

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