Crazy About Laws

Every business person and professional in India going crazy about migration and new registration of all Indirect Taxes to GST. Do not worry, we are not going to pick up any topic about GST which you hear from everywhere for this month’s article. Instead we will be adding GST Notifications section under NewBites. In this article, we will be discussing about the Real Estate Regulation & Development Act (RERA), 2016 where the property owners, promoters and real estate agents are going crazy since its inception. We are discussing in detail about the contribution of CA, CS, CMA in RERA Act. Along with the article, our Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST follows.

Saranya Deivasigamani,
CEO

RERA, 2016

The Real Estate Regulation & Development Act (RERA), 2016 is a defining moment in the Indian real estate sector which was passed by parliament last year and the Union Ministry of Housing and Urban Poverty Alleviation had given time till May 1, 2017, to formulate and notify rules for the functioning of the regulator. To regulate the real estate sector, the government has come up with the idea of Real Estate Regulatory Authority (RERA) Bill which is expected to help buyers. Although RERA is a central law, its implementation will depend on state governments, as real estate is a state subject. Under RERA, each state will have to setup regulatory bodies as appellate tribunals to solve the disputes between buyer and builder within 120 days. RERA is supposed to protect the interest of the homebuyer and ensure timely delivery of projects. RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders. It will bring in a systematic approach and enhance transparency, which will aid growth of the sector. To the buyers, it safeguards their interests: brings transparency, ensures accountability and timely completion of projects. From an industry perspective, it will increase credibility in the long term, leading to higher domestic and foreign investments.

Within 1 year of notification of act, appropriate Govt. to create RERA and HRAAT to dispose all cases and transfer to RERA max by 6 months. After the establishment of the Regulatory Authority, all applications, complaints or cases pending with the Regulatory Authority designated, shall stand transferred. Authority is to consist of a Chairperson and not less than two whole time members, appointed by the Government.

According to RERA, each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator. Under the Real Estate (Regulation and Development) Act all developers with ongoing projects must apply to the regulatory authority to register them, within a specified period. Once registered, they must upload project details on the RERA website and provide updates on construction progress as well as commencement, occupation and other certificates required before flats are handed over to buyers.

Promoter to maintain escrow account for each project separately with 70% of money from investors and buyers be deposited. The escrow money can only be used for the construction of the project and the cost borne towards the land. RERA requires builders to submit the original approved plans for their ongoing projects and the alterations that they made later. They also have to furnish details of revenue collected from allottees, how the funds were utilised, and the timeline for construction, completion, and delivery that will need to be certified by an Engineer/Architect/Practicing Chartered Accountant. The buyer has to make the required payments as per the agreement signed with the promoter. If there is a delay in payment, then the buyer will be liable to pay interest for the delayed period.

PURPOSE OF THE ACT

To establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector.
To ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in an efficient and transparent manner.
To protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal.
To establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto.

SCOPE OF THE ACT

The Act applies to all apartments, plots and buildings whether residential or commercial. The Real Estate Project as defined in the Act, states that it shall include:

Development of buildings;
Development of buildings consisting of apartments;
Converting existing buildings or part thereof into apartments (e.g.:- converting a bungalow or hotel into apartment);
Development of land into plots or apartments for the purpose of selling all or some of the said apartments or plots or buildings.

Thus, it is pertinent to note that the Act is wide enough to cover within its scope development of land for buildings, apartments as well as plots. Further, the Act covers not only residential projects but also commercial projects.

ENCLOSURES WITH APPLICATION FOR REGISTRATION

All real estate projects are required to be registered by the Promoter with RERA. Undertaking Marketing/sale with respect to a real estate project will not be permissible for promoters till necessary registration has been obtained under RERA.

UNDER THE DRAFT RULES:

Pan card
Audited Balance Sheet of preceding Financial year
Income tax return of preceding 3 years
Number of open parking areas
Development Agreement/ Collaboration
Agreement/ Joint Development Agreement

Application will be rejected only after giving opportunity of hearing. The Registration, if granted, will be valid UNTIL THE PERIOD OF COMPLETION of the project as committed by the promoter to the Regulatory Authority. This period shall be extended by the RERA is delay is attributable.

PENALTIES

If a promoter fails to register the property, he has to pay up to 10% of the estimated cost of the project as a penalty.
Failure to register the property despite orders issued by RERA will attract imprisonment up to 3 years and or an additional fine of 10% of the estimated cost of the project.
If a promoter violates any other provision he has to pay up to 5% of the estimated cost of the project.
Real estate agents have to pay a fine of 10,000 for each day for the violation of provisions of the act.

EXEMPTIONS FROM REGISTRATION

Area of proposed land to be developed does not exceed 500 sq. mts. or no. of apartments does not exceed 8 inclusive of all phases.Where the promoter has received completion certificate for a real estate project prior to commencement of this Act.

In case of renovation or repair or re-development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building, as the case may be.

RIGHT TO LEGAL REPRESENTATION

Before the RERA, Adjudicating Authority and Appellate Tribunal the Applicant or Appellant may either appear in person or authorize one or more Chartered Accountants or Company Secretaries or Cost Accountants or legal practitioners to present his or its case.

ROLE OF CHARTERED ACCOUNTANT

Amounts from the separate account maintained for deposit of amounts received from allottees shall be withdrawn by the promoter after it is certified by an engineer, an architect and chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.

The promoter shall get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such CA. During the audit it shall be verified that the amounts collected for a particular project have been utilized for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project.

Chartered Accountants can be appointed as legal representative before the Appellate Tribunal or the Regulatory Authority

Can be appointed as member of Central Advisory Council, Chairperson or member of RERA, Technical Member of Real Estate Appellate Tribunal

SECONDARY ROLE OF CHARTERED ACCOUNTANT

Application for Registration of real estate project

Application shall be made in prescribed form with the prescribed fee and shall include details of promoters, projects launched in past five years, approval letters/certificates to commence project, lay out plan, allotment letter, agreement for sale proforma, garage, and declaration to legal title etc.

Registration of real estate agents — No real estate agent shall be able to facilitate the sale or purchase in a real estate project registered without obtaining registration under new Act.

The registration shall be given by the Authority for the entire State/ Union Territory.

ROLE OF COMPANY SECRETARY AS A LEGAL REPRESENTATIVE CLAUSE 48 – Role of Company Secretary in Ensuring Environmental Compliances NOCs from Central and State Governments

Environment Impact Assessment (EIA) Notification S.O. 1533 (2006)- It is intended to ensure that all new projects are given EC after the suitability of a site and environment impact has been duly assessed.

Section 3 of the Environment (Protection) Act, 1986

Water (Prevention & control of pollution) Act, 1974 and Air (Prevention & control of Pollution) Act, 1981- All the covered industries in above act are required to obtain consent to establish for establishment of any new unit or before carrying out expansion/modernization of any existing unit. These units after establishment are required to obtain consent to operate before commencing commercial production.

Forest Conservation Act, 1980- Under the provisions of this Act, prior approval of the Central Government is essential for diversion of forest lands for the non-forestry purposes.

Central Coastal Zone Authority- The development or construction activities in different categories of CRZ area are regulated by the concerned authorities at the State/Union Territory level.

RERA is a huge step forward and lot of expectation will be there for the state RA to frame the rules according to the Act and not dilute them in builder’s favour.

Legal Term

Encroach

v. to build a structure which is in whole or in part across the property line of another’s real property.

MCA Updates

SPICE Forms, GNL-3, INC-22, 23AC has been amended.
PAN and TAN fee shall be revised from to INR 110 and INR 65 due to implementation of GST w.e.f 1st July 2017.
DIR-5 has been notified.
Ministry invites comments regarding notice on Companies (SDD) Rules, 2014 on layers of subsidiaries.

SEBI Updates

Regulations amended: SEBI (Stock Brokers and Sub-brokers); SEBI (Issue and Listing of Debt Securities); SEBI (Employees’ Service); SEBI (Debenture Trustees); and Securities Contract.

RBI Updates

FEMA regulations to remove the words “ Exchange Control copies of the shipping bills” from Regulation 6 sub-regulation (C).

Income Tax Updates

Details of Particulars of Associate & Parent Companies has been modified.
PAN Application has been modified.

GST Updates

Register/Update DSC;
Application for New Registration, Filing Clarification, Enrolment for GSTP, to opt for Composition scheme, New Registration (ISD).