The Supreme Court of India recently interpreted that the Real Estate (Regulation and Development) Act, 2016 (RERA) is retroactive. The judgment aims at protecting homebuyers and accelerating the resolution process. State governments are now challenged with the task of ensuring their regulations do not dilute the intent of the law.
Retroactive Implementation of RERA, 2016
The Supreme Court affirmed the retroactive application of RERA 2016. It stipulated that the Act’s provisions apply to projects that were ongoing and did not have completion certificates at the time of the Act’s enactment. Under the Act, it was mandatory to register real estate projects. The promoters, for projects that were ongoing on the date of commencement of the Act and for which the completion certificate had not been issued, must apply for project registration with the authority. This interpretation implies that states like Uttar Pradesh, Haryana, Punjab, Karnataka, Telangana, and Tamil Nadu may need to amend their rules to align with the ruling.
Recovery of Invested Amount
The Supreme Court also outlined that the amount invested by the allottees, plus interest as calculated by the regulatory authority or the adjudicating officer, can be recovered as land revenue arrears from the builders. This is contrary to the builders’ contention that only the interest or penalty as arrears of land should be recoverable.
Penalty for Developers
Developers are required to deposit at least 30% of the penalty ordered by the regulator or the full amount before they challenge any RERA order. This step is expected to ensure that only genuine appeals are filed and homebuyers’ interests are protected.
Real Estate Regulation and Development Act, 2016
RERA came into existence in 2016, after being under discussion since 2013. With more than 77% of the total assets of an average Indian household held in real estate, RERA was introduced to establish a fast-track dispute resolution mechanism, reduce frauds and delays, and ensure greater accountability towards consumers.
Major Provisions of the RERA Act
The Act mandates state governments to establish Real Estate Regulatory Authorities (RERAs) to register and maintain a database of real estate projects. It also requires the establishment of Real Estate Appellate Tribunals for appeal against decisions of RERAs. Other key features include mandatory registration of all projects with a plot size of minimum 500 sq.mt or eight apartments, depositing 70% of the funds collected from buyers in a separate escrow bank account for construction of that project only, and liability on developers to repair structural defects for five years.
RERA Implementation across India
34 states/Union Territories have notified rules under RERA. West Bengal enacted its own legislation, the West Bengal Housing Industry Regulation Act, 2017 (HIRA), instead of notifying rules under RERA. 30 States/UTs have established Real Estate Regulatory Authorities, and 26 have set up Real Estate Appellate Tribunals. The implementation of RERA in Nagaland is currently underway.
