Action to be taken against the builder for delay in possession
To hold possession of the property, in which hard-earned money is invested, is a concern of prime importance for the investor. In most cases, an investor is left cheated with fake prompts and delay in possession due to limited penal provisions and rules placed for such acts.
Due to limitations in redressal policies, numerous bogus investment projects in the real estate market are flourishing. To restrict such investment proposals and bring regulatory standards in the real estate sector, some crucial provisions have been added in the Real Estate Regulatory Act, 2016 (also known as the “RERA Act”).
In this post, you will get to know all about the key provisions in the RERA, 2016 for penal implications on builders and related parties for delayed possession of the property to investors and the improved settlement procedures with builders in the RERA Act, 2016.
About RERA Act, 2016
The Real Estate Regulatory Authority (RERA) Act, 2016 was in effect from 1st May 2016 for regulation and promotion of the real estate sector. . The act aims at building transparency and protecting consumer rights with assured accountability of builders in real estate transactions.
Following are the key provisions which need be adhered or can impose the penalty on builder:
- Compulsory Registration of Project
Other than projects equipped in space of equal to 500 sq. meter or below and those with less than 8 apartments, all other projects have to be compulsorily registered by the builders with the Regulatory Authority (“RA”).
In case of failure in registration, the person concerned (the builder or promoter of the project) shall be punished with imprisonment for up to 3 (three years) or might be penalized with up to 10% of the project value.
For structural defects or changes not specified in the project documents, the person responsible shall be imprisoned for up to 5 years and safeguarding the interest of the buyer, the buyer will be exempted for making any payment for rectification of such defects. The sole responsibility will ultimately be of the contracting builder to get the repairs and defects corrected.
- Publishing and Completion of Project
On registration of the project with the Regulatory Authority (RA), the builder is required to publish details of the project on the official web portal of RERA till the time of expiry of the registration period as granted by RERA.
In case of non-completion of the project within the specified period mention in the sale agreement (after due extension), the builder will be charged with an Interest-based fine of 10%, which will be charged in a similar way a penalty is charged by the builder from the investors for the delay in payments.
- Submission of Affidavit
Buyer’s consent to invest in a project has been also protected by RERA by issuing guidelines for submission of a written affidavit by the builder including all details of the project, time of completion and handover to the investor. In case of default or delay in possession from the specified date (after applied extension), the buyer receives a right to claim the refund of the amount paid along with interest from the builder.
The buyer also receives an entitlement for penal interest from the builder even if he doesn’t want to claim back the invested amount.
- Necessary Disclosures in the Sale Agreement
Promoters/Builders of the project will now be required to mandatory furnish the following particulars in the Sale Agreement to protect investor rights:
- Expected Date of Possession by the Investor
- Penal rate of Interest to be charged in case of default.
For pre-delivery, before the actual possession date, the delivery decision has been left on to the builders, also providing sufficient time to investors to opt-out of the project if required.
For disclosure of wrong information, the promoter/builder shall be fined with an amount equal to 5% of the project.
- Affidavit disclosing’ Title of Land’ & ‘Encumbrances’.
The promoter/builder of the project is also required to provide a separate affidavit to the investor specifying for the free title of the land or for disclosure of any legal dispute or encumbrances on the land on which construction is to be done or which the investor intended to buy.
- Maintenance of Separate Account
About 70% of the amount realized from the investor has to be kept in a separate account maintained in a scheduled bank to cover the cost of construction or purchase of land required for construction. The account shall have to be audited by a Chartered Accountant (CA) in every 6 months. This will restrict the builders from the undisclosed diversion of funds.
- Penalties for Estate Agents and Allottees
For undisclosed, intentional concealment of facts or any failure of compliance of RERA Rules, any related party being the Real Estate Agents or the Allottees of the property shall be charged with a penalty of up to an amount equal to 5% of the cost of project or imprisonment for up to a year.
Rights of the Investor
- For delay in possession within the time period stated in the sale agreement, the buyer can revoke the contract and can withdraw from the project.
- In case the registration of the builder/promoter gets canceled, the investor will still be entitled to receive a refund of the whole amount paid along with interest.
- For a grant of compensation, the investor can approach the Regulatory Authority (“RA”) and can receive assistance from adjudicating officers appointed by the state government by filing a complaint against the promoter or builder.
The above rules placed through RERA Act, 2016 will keep a strict vigil on all estate entities intentionally attempting for delays in possession of properties. All those indulged in doing unfair practices with investors now will not be left un-penalized with the new RERA provisions.
Need advisory on SEBI/RBI Compliances?
For further inquiries email us at info@cs-india.com
Also Read: How to Start your Startup in Testing Phase