The Real estate sector is an important part of our economy contributing at present at least 8 % of the countries GDP. It is one of the largest employers of manpower both skilled and unskilled in the country. The unskilled sector of our labour force is surviving only because of our real estate business. This segment employs nearly 40 million unskilled workers.
Despite being such an important part of the Indian Economy and contributing largely to it the real estate business sector was hugely unorganised. Then in 2016 almost seventy years after Independence the Government passed an act to regulate the activities of the real estate sector and passed the Real Estate Regulation Act ( RERA) which then became law and active from 1st of May 2016.
One of the main features of the RERA was that it required the real estate “Promoters” of developers ( in this case the builders) to register any property which they are going to build or develop with the Real Estate Regulatory Authority in advance failing which they will not be allowed to advertise, market , book or offer for sale any project which has not been registered with the competent authority.
Now Immediately it was contested in the Mumbai High court by a group of plot owners and real estate developers saying that land is a state subject and not under the purview of the central government. However the Mumbai High court ruled that the act was constitutional as its aim was to develop the real estate sector and particularly the uncompleted projects to protect the interests of the investors.
The RERA has defined the Promoter as
1. The Builder.
2. The Developer
3. The Society
4. The development authority
5. The holder of the Power of Attorney from the owner of the land on which the building is constructed or being developed.
A Real estate project has been defined as development of a building or conversion of an existing building or part thereof into flats or apartments for the purpose of selling. It is to include all the common areas, developmental works, improvements or construction of structures there on. The act excludes from registration any such area of land which does not exceed 500 sq. meters or in which the total number of flats is 8. It also excludes projects where the completion certificate has been received prior to the implementation of RERA. It also excludes any such project which is just for repairs or maintainence purposes and is not intended to include marketing of the project.
In case of non compliance or non registration it sets a penalty of 10 percent of the total cost of the project and a fine equal also to a 10% cost of the total cost of the project.
The banks have been advised to lend money only for such projects which have been registered with the authority and not to those projects which have not been registered as they wil involve high risk factors in case of the non completion of the projects due to actions taken by the authority in non compliance of the legal obligtions.