Real Estate Regulatory Authority is the established regulatory body that has been encompasses and tightens the adherence to rules and regulations set for Indian Housing Market. This was brought in to bring in transparency and assurance to both the sides of the business and help in better operations.

The RERA body isn’t just an embodied structure, but its compliance is reiterated every now and then. Suspension of the same has been known to be a terror amongst the developers. Let us deep dive into the non-adherence protocol for the same.

1.     1. What happens when RERA suspends registrations of projects?

RERA being the central authority for the real estate related concerns, holds the authority to regulate the relevant guidelines and penalise in case of any breach. The regulation penalty ranges between 5-10% of the entire project cost on the developers and in a few cases, 3 years imprisonment. However, in extreme anomalies like fraudulence/misrepresentation/breach of terms, RERA holds the authority to suspend the project registration. The revocation of project is implemented under Section 7.

Under this revocation period, the developer is prohibited from selling/marketing/advertising their product or any information relating to the product till the revocation is lifted.

In case of revocation/suspension, the name of the promoter is put up in the list of defaulters. There is a ban put on promoter to use any digital platform for marketing. Under Sub Section 2 Sub Clause D of Clause 1, the Escrow account that collects around 70% of the amount collected from buyers is to be frozen until the revocation is lifted.

The RERA is required to inform the PAN India authorities of RERA about the suspension. In case of permanent suspension, RERA carries out the remaining development work.

2.     2.  How does such suspension affect homebuyers?

There is a substantial delay in the timeline which definitely impacts the buyers plans of moving in. However, RERA was established to put forth and guard the interest of buyers, thus, the decision is taken considering the safe interest of the consumers.

The deregistration intensity and the circumstance behind it is the main factor of deciding the compensation or way ahead for the buyers.

In case of momentary suspension of projects, which implies a delay in delivery, relevant and equal compensation is guided to the buyers. The developer is mandated to do so until its process of re-registration is completed.

In case of extreme malpractices, which results in cancellation of project, further development of the project is handed over to the authorities to develop the project further.

In no scenarios, a sweeping statement is passed without taking the interest of the buyers into consideration

3.     3. How are the homebuyers generally safeguarded in case of such situations?

As stated earlier, the safeguard of homebuyers depends on the intensity of the reason of revocation.

However, in any case, the homebuyers are the primary consideration while taking such steps. Their interest, money, and involvement are the prime focus.

In case of temporary suspension, the developers are mandated to pay compensation equivalent to the delay; in case of grievous suspension which eventually results in elongated or permanent suspension, the development of the project is handed over to another entity

 

 

4.      4. On what grounds does RERA suspend registrations?

Section 7 of the RERA Act deals with the provisions related to revocation of registration by RERA. The subsection 1 states that RERA has the authority to cancel the registration of any project in case of receiving a specified number of recurring complaints against the promoter or project from the buyers or on the recommendation of some other authority (any development authority) or by itself on the basis of following four decided grounds:

·       Promoter does not adhere by the RERA Act, 2016 or the rules or regulations made under it.

·       Promoter violates the terms and conditions based on which it was given approval by the competent authority.

·       Promoter has involved itself into any kind of unfair practices. The section also specifies the meaning of unfair practices. “Unfair practice” is a practice where the builder/promoter for promoting the any project adopts any unfair method for e.g., making false representation about the standard of services or representation about an approval or affiliation that the project does not have or false and misleading representations about the property in any advertisement, prospectus or newspaper.

·       Promoter indulges in any fraudulent practice.

Sub section 2 of Section 7 of RERA Act makes it mandatory for RERA to issue 30 days show cause notice to the builder before cancelling the registration of the project. The power to cancel the registration under Section 7 is a discretionary power and it is the choice of RERA to not cancel the registration of the project in the interest of allottees.

Under sub section 3 whereby RERA after imposing certain terms and conditions can permit the project to remain in force. These terms and conditions so imposed by RERA shall be binding on the builder.

5.     5. What measures do the developers need to take to revoke such suspensions?

The suspension comes into play due to the breach of the RERA compliance. Thus, to revoke or get this lifted, the required actions are expected from the developer which broadly includes adherence to promised timelines, revocation of any false/misleading information circulated of resurrection of any malpractices. Relevant compensation to homebuyers is to be directed by developers; it is a mandate 

1.     6. What is Defect Liability Cover (DLC)?

After RERA was established, there is a strict regulation is the delivery of the projects. Real Estate being a highly dynamic market, the level of unorganised activities was in more numbers. DLC is a stipulated time period allotted to developers to check, identify and further correct any defect/impairment in the delivery condition of the project after the construction is complete. Ideally, 10-12 months are given to identify and rectify such errors.

2.      7. Why is it necessary to have a DLC? How do developers benefit from it?

A defects liability period gives both principals and contractors a degree of certainty as to the process that will be followed for making good any defects which may not be apparent at the date of practical completion. In addition, a defects liability period can also be useful in providing a means of making good any defects that are apparent at the time of practical completion but which either do not need to be rectified prior to practical completion or perhaps cannot be easily rectified due to the presence of other contractors and trades still working on the build.

Wherever possible, it also makes practical sense to have the contractor who carried out the original work return to fix any defect as this contractor will be familiar with the site and the work in question. This is likely the most cost-effective approach to any rectification work. Also, a contractor may prefer to be the sole party authorised to carry out any rectification work within a given period as the quality of the work and any subsequent repairs will potentially affect a contractor’s reputation.

 

3.     8. How is DLC useful to the homebuyers?

It is an augmented protection to buyers over and above the assurance of the RERA. The quality check and any necessary actions taken to rectify any issues cropping up after completion is an added advantage. Plus, while buying, this period is already considered in the delivery timeline which prepares the consumers for the same.

A home warranty makes it mandatory for developers to rectify any structural defects even after the property ownership has been transferred, thereby safeguarding the interests of buyers. This provision aligns with international property market practices and is expected to boost consumer confidence in the Indian real estate market.