The Real Estate (regulation and development) Act 2016, which came into force on May 1, is a welfare legislation, in the sense that it is aimed at making builders, agents and buyers more responsible and thereby cleansing the system.
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This was part of a talk delivered by Advocate Sudip Mullick, who is a partner with Khaitan & Co. in Mumbai, which is one of India’s oldest law firm. The talk was a part of an interactive session organised by Goa Chamber of Commerce and Industry (GCCI) and CREDAI’s Goa chapter between Advocate Mullick and builders & agents of Goa.
The builders will have to adhere to a number of regulations now; for instance, they can sell real-estate only by carpet area not by built-up area, they will have to deposit 70% of the amount realised from the allottees in a separate account with a bank and they can’t transfer or assign their majority rights and liabilities in respect of a project to a third party without obtaining prior consent from two-thirds of the allottees.
Similarly, the agents will also have to follow a set of new rules, which are aimed at making the sector more transparent. For example, the agents will have to register under the act or face penalties.
Advocate Mullick said, “The agents should be very careful so that they strictly follow what the builder tells them. I’d urge the agents not to get into oral agreements. Supposing, they give an oral commitment that a project will have a gym or a pool and later builder doesn’t provide it, then the agents can be dragged to courts”
The buyers will have to be watchful too as there are provisions within the new act in which they can be penalised or even imprisoned. For example, Section 68 of the Act reads “if an allottee fails to comply with orders of the appellate tribunal, then he shall be punishable with imprisonment upto one year or with fine for every day during which such default continues.”
There are some grey areas in the act as well. The new act is applicable to new as well as existing projects. In such a case, what should a builder do with the money he has already received from allottes of an existing project? Should 70% of that too go to a separate account?
Adv Mullick said, “There is a provision in the Act that central govt can look into certain parts of the act, which can’t be implemented.” This means that the central govt may consider amending the act to make it more practical given the business conditions in India.
