CHAPTER 2 : LEGISLATIVE HISTORY TO THE ACT

The real estate sector in India assumed greater prominence with the liberalisation of the
economy, as the consequent increase in business opportunities and labour migration led to rising
demand for commercial and housing space. At present, the real estate and construction sectors
are playing a crucial role in the overall development of India’s core infrastructure. The real estate
industry’s growth is linked to developments in the retail, hospitality and entertainment (hotels,
resorts, cinema theatres) industries, economic services (hospitals, schools) and information
technology (IT)- enabled services (like call centres) etc and vice versa.

The Indian real estate sector has traditionally been dominated by a number of small regional
players with relatively low levels of expertise and/or financial resources. Historically, the sector
has not benefited from institutional capital; instead, it has traditionally tapped high net-worth
individuals and other informal sources of financing, which has led to low levels of transparency.
This scenario underwent a change with in line with the sector’s growth, and as of today, the real
estate industry’s dynamics reflect consumers’ expectations of higher quality with India’s
increasing integration with the global economy.

REASONS FOR GROWTH OF REAL ESTATE SECTOR:-

1. Continuous growth in population

2. Migration towards urban areas

3. Ample job opportunities in service sectors

4. Growing income levels

5. Rise in nuclear families

6. Easy availability of finance

Demand for houses increased considerably whilst supply of houses could not keep pace with
demand thereby leading to a steep rise in residential capital values especially in urban areas.

Broadly, residential real estate industry can be divided into four growth phases, as can be seen in
the chart below:
 •2001-2005
PHASE - 1 •Initial growth phase, with offtake and increase in prices

•2006-2008
PHASE - 2 •High growth phase, with higher demand and prices by many folds

•2009 - 2010
PHASE - 3 •substantial slowdown due to dented affordability and economic enviornment

•2010 - 2014
•Consolidation phase, with demand, supply and prices gradually moving up in line with
PHASE- 4 improvment in economic enviornment

•2014 - 2017
•Stagnent phase, with a comprativly stagnent growth in the sector, in respect of demand with
PHASE - 5 slight fall in price

REASONS OF DEVELOPMENT OF RERA;-

As depicted in the above table there observed was high growth in development of real estate
sector and when sudden/many fold increase takes place in any sector of the economy
management is the issue which arises very soon in the economy. there were various malpractices
going on in the economy during the period from builders and as a result in 3 rd and 4th phase of
the sectors many practices by builders were recognized by the government including delayed
delivery of possession and breach of contracts to earn undue profit and unjust benefits out of
buyers. Such unethical practices were demotivating buyers and investors in the economy.
moreover, there was delayed remedy in civil and criminal cases and cases extended for 3-4 years.
Which urged the government to Regulate the Real Estate sector and this led to emergence of
Real Estate Regulation Act 2016.

Now, before moving further, let us have glimpse of real estate sector and laws in other counties.
Real Estate Regulation Act, 2016 (RERA) is a revolutionary change in the history of Real estate
laws in India. Like RERA various countries have similar legislation on Real estate1.

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 1. United States of America
In US real estate is regulated by numerous levels of bodies there is no single body to
regulate but a series of bodies that regulate different ownership and usage aspects. To
safeguard the interest of the buyers the US department of housing and urban development
(HUD) has rules under the real estate settlement procedures act to protect consumer
interests pertaining to residential properties. In 2006, there were about 2.5 million
licensed brokers in the United States. All 50 states of the country and the District of
Columbia require real estate brokers and salespersons to be licensed. All state licensure
laws include requirements and proscriptions concerning the business practices of
licensees. Requirements in most states include disclosure of important information about
price, services, and representation2.

If a buyer enters a contract with the developer, and the developer does not deliver on the
terms agreed upon in the contract, the developer can be taken to court for breach of
contract. In the US, there are state real estate licensing laws and a code of ethics in place.
US laws on Real estate and RERA have much similarities as laws in both these countries
are for the protection of the buyers as Housing and Urban Department has rules which are
for the protection of the interest of the buyers while RERA emerged only for protecting
the interest of the buyers. Even in RERA there is regulatory body while in US there is
series of bodies which regulate to protect the interest of the buyers. Even under RERA all
real estate advisors will now have to register themselves with state regulatory bodies, and
will be held responsible for all their dealings.

2. United Kingdom
In United Kingdom there is an absence of a regulatory body to monitor the real estate
sector. The Financial Services Authority (FSA), which is now part of the Bank of
England, regulates almost all the investments in real estates. The Property

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 Misdescriptions Act of 1991 prohibits the making of false or misleading statements on
property matters in the course of estate agency business and the property development
business. While RERA is also protecting the interest of the buyers from false and
misleading statements of the developers as buyers get misleading details and delivery
date under RERA buyers get protection.

3. China
In China regulation for real estate were introduced in 2010, which is more stringent and
specific than it has historically been to control the market. The State Department of Real
Estate “New State 10”, a regulation which enforces an accountability system for the local
government to stabilize local real estate prices. This is aimed at promoting the
construction of affordable housing to promote social development and enforce stability
and accountability. On this basis, local governments have introduced their own control
rules in Beijing, Shanghai, Guangzhou and Shenzhen. The sales agreement contract
specifies the area of the property being sold. In case of the sale of residential property, a
minor differential (generally in the range of 2-3%) in the area is permissible. In case this
is not followed, the buyer can legally get a refund from the developer. The mortgage
contract is a legal document and provides legal protection to the bank (lender) and the
buyer (borrower). The sales agreement specifies the terms and conditions for sale and
determines the legal rights of both the buyer and the seller. RERA has much similarity to
China real estate laws as both the countries laws objective is to promote construction and
protect the interest of the buyers.

4. Germany
In principle, no regulatory authority exists. According to the German Civil Code, the
seller is generally liable to the buyer for damage compensation, if the delivered property
deviates from the description in a guaranty or in a brochure. The seller is generally also
liable for damage compensation in case of delayed deliverables. In German law there is
no specific regulatory authority but the German civil code protects the buyers from false
statement and deviates from the compensation as according to German law buyer gets
 compensation. While RERA act is much similar to German Law as German law is to
protect the buyer and pay damages as in India RERA was implemented for protection of
the buyers and get delivery deliverables on time and get compensation for damages.

5. United Arab Emirates

In UAE Government is considering the establishment of a federal real estate regulatory
authority. Currently, the government does not have a body to supervise the sector,
although emirates such as Dubai and Ajman have their own real estate regulatory
authorities — Real Estate Regulatory Authority (RERA) in Dubai and Ajman Real Estate
Regulatory Authority (ARRA) in Ajman. The creation of Dubai’s Real Estate Regulatory
Authority (“RERA”) in 2007, is playing increasingly public and crucial role in
developing and supervising Dubai’s real estate regulatory framework and development.
Ajman Real Estate Regulatory Authority (“ARRA”) was established in 2008 to regulate
real estate developments in Ajman3. It is much similar to RERA as under RERA all states
in India have to establish real estate regulatory authority like in Dubai and Ajman the
regulatory authority was established.

Journey of RERA

Real estate act has come into effect after nine years of wait. It travelled through a long complex
journey of analysis and changes. For the very first time in May, 2008 Ministry of HUPA
(Ministry of Housing and Urban Poverty Alleviation) conceptualized the idea of regulating Real
Estate Sector, from there In June 2013 Union Cabinet approved The Real Estate Bill, 2013 and
with several changes in the due course of approvals for making of a law many provisions were
added in the bill. On 25th march 2016 President of INDIA gave its assent to the bill and it came
into force from 1st May, 2017 and the new era begins for the development of the real estate
sector in atmosphere of investor confidence.

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MAY 20084; -
Ministry of HUPA (ministry of housing and urban poverty alleviation) prepared the concept
paper on regulation of real estate sector and a model law for legislation by States/UTs. As, the
HUPA (Ministry of Housing & Urban Poverty Alleviation) set up a High Powered Committee in
May 2008 for rejuvenation of HUDCO with a view to strengthen its financial position and
expansion of activities for better services to the poor and weaker sections of the society.

20115; -
Conference of ministers of housing in 2011 suggests a central law for the regulation of real estate
sector. As while consulting by the Central Government, it was decided to enact a central law for
real estate sector. This was endorsed by Competition Commission of India, Tariff Commission
and Ministry of Consumer Affairs. Ministry of Law & Justice suggested a central legislation for
real estate under specified entries of Concurrent List of the Constitution for regulation of
contracts and transfer of property. The Real Estate bill was passed to establish the Real Estate
Regulatory Authority for regulation and planned development in the real estate sector and to
ensure sale of immovable properties in an efficient manner and to protect the interest of
consumers in the real estate sector and establish an Appellate Tribunal to adjudicate disputes and
hear appeals from the decisions or orders of the Authority and for matters connected therewith or
incidental thereto. This was enacted by parliament in the Sixty-second Year of the Republic of
India and was named as THE REAL ESTATE (REGULATION & DEVELOPMENT) BILL,
2011.

JULY 20116; -
During subsequent consultations by the Central Government, it was decided to enact a central
law for real estate sector. This was endorsed by Competition Commission of India, Tariff
Commission and Ministry of Consumer Affairs. Ministry of Law & Justice suggested a central
legislation for real estate under specified entries of Concurrent List of the Constitution for
regulation of contracts and transfer of property.

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JUNE 20137; -
The union cabinet of India on 4 June 2013 approved the real estate ( Regulations and
Devleopment) Bill 2013 to set up a regulator for the real eseate sector in the country. This was
done with the objective of protecting home buyers from dishonest builders. The bill seeks to
make it mandatory for developers to launch projects only after acquiring all the statutory
clearances from relevant authorities. The commercial real estate is not covered under the purview
of the proposed bill. However, it will apply to residential buildings. The bill has a provision for
mandatory public disclosure of all project details such as lay out plan, land status and credentials
of promoters etc. An adjudicating officer in the state will be appointed by the authority for fast
tracking settlement of disputes. There will be Real Estate Appellate Tribunal as per the bill. It
will hear appeals from orders, decisions or directions of regulator and adjudicating officer.

AUGUST 20138; -
The Real Estate (Regulation and Development) Bill, 2013, as approved by the Union
Cabinet in its meeting on 4th June 2013, was introduced in the Rajya Sabha .The Bill
has been piloted by Dr. (Ms) Girija Vyas, Minister of Housing and Urban
Poverty Alleviation .Soon after its introduction, the Bill was referred to the
Parliamentary Standing Committee on Urban Development for review and making
suggestions.

The Bill provides uniform regulatory environment, to protect consumer interests, help
speedy adjudication of disputes and ensure orderly growth of the real estate sector and
has been much awaited by all aspiring home buyers.

The Bill has been prepared by the Government after extensive consultations with States, experts
and stakeholders. The Bill has been supported by the States along with Ministry of Consumer
Affairs, the Competition Commission and Tariff Commission among others. The Bill was
proposed under Entries 6, 7 and 46 of the Concurrent List of the Constitution of India, which
deals with Transfer of Property, Registration of Deeds and Documents, and Contracts.

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7TH APRIL 20159; -
The Union cabinet was chaired by Prime Minster, Shri Narendra Modi, on 7 april 2015 gave its
approval to amendments to the Real Estate Bill, 2013 pending in the Rajya Sabha, and approved
amendments proposed in the Bill. These measures are expected to boost domestic and foreign
investment in the sector and help achieve the objective of the Government of India to provide
‘Housing for All by 2022’, through enhanced private participation.

The Bill aims at restoring confidence of the general public in the real estate sector; by instituting
transparency and accountability in real estate and housing transactions.

The major changes bill after the amendments like; applicability of bill, establishment of real estate
regulatory authority, registration of real estate projects and registrations of real estate agents,
mandatory public disclosure of all projects details, functions and duties of promoter, compulsory
deposit, adherence to declared plans and so on.

 Initially applicability of the bill was applicable for residential real estate now it was
proposed to cover both residential and commercial real estate.
 Establishment of real estate regulatory authority by the appropriate government for
oversight of real estate transactions, to appoint one or more adjudicating officers to settle
disputes and impose compensation and interest.
 It is mandatory for Registration of real estate projects and registrations of real estate agents
who sell any plots, apartment or building, with real estate regulatory authority.
 For all registered projects it is mandatory to disclose norms such as details of promoters,
project, layout plan, plan of development works, land status etc.
 It is the duty of promoter to disclose of all relevant information of projects, Obligations
regarding veracity of the advertisement for sale or prospectus, Refund money in cases of
default etc.
 It is compulsory to deposit 50 percent of the amounts realized for the real estate project
from the allottees in a separate account in a scheduled bank within a period of fifteen
days to cover the cost of construction to be used for that purpose.
 To bar the promoter from altering the plans, structural designs and specifications of the
plot, apartment or building without the consent of two-third allottees after disclosure,
minor additions or alterations permissible due to architectural and structural reasons.
 It is function of real estate agent to sell the properties registered with the authority,
Maintain books of accounts, records and documents, not to involve in any unfair trade
practices.
 It is right & duty of the allottee to obtain stage-wise time schedule of project, claim
possession as per promoter declaration, refund with interest and compensation for default
by the promoter, allottees to make payments and fulfill responsibilities as per agreement.

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  Functions of real estate regulatory authority is to act as the nodal agency to co-ordinate
efforts regarding development of the real estate sector and render necessary advice to the
appropriate Government to ensure the growth and promotion of a transparent, efficient
and competitive real estate sector.

JULY 201510; -
The Rajya Sabha Select Committee examined the amendments to the Real Estate (Regulation
and Development) Bill, 2013 submitted its report on July 30, 2015. The Select Committee was
established to examine the Bill with the proposed amendments, the key observation and
recommendations of the Select Committee include applicability of the bill, use of funds collected
from buyers, carpet area, promoter, completion certificate, term of office of regulatory
authority,etc. The amendments of applicability of the bill proposed to require the registrations for
residentials, commercial and industrial projects, the Committee recommends that the area of land
and the number of flats to be exempted from registration should be reduced. The 2013 bill
required that 70% of the amount collected from buyers must be used only for construction
purposes.the amendments proposed to reduce this limit to 50% or higher. The 2013 Bill defined
carpet area as the net usable floor area of an apartment, excluding the area covered by the walls.
The amendments defined net usable floor area as the rentable area as defined by the National
Building Code, 2005. e. The proposed amendments added that a person, who holds in his name,
two or more apartments or plots, in the same project, and puts them for resale can also be a
promoter. The 2013 Bill defines completion certificate as a certificate issued by the competent
authority permitting occupation of any building. The 2015 amendments propose to include
occupation certificate in the definition. The 2013 Bill, the Chairperson and members of the
regulatory authority shall hold office for a five year term, or until they attain the age of 65 years,
whichever is earlier. The amendments propose that the Chairperson and members shall hold
office for a three year term, or until they attain the age of 65 years, whichever is earlier, and shall
be eligible for attainment. The amendments proposed that any term used but not defined in the
Bill will have the same meaning as defined in the National Building Code, 2005 or the municipal
laws.

10TH MARCH 201611; -

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 Rajya Sabha approved the Real Estate (Regulation and Development) Bill, 2016 that seeks to
protect the interests of the large number of aspiring house buyers. The Bill seeks to put in place
an effective regulatory mechanism for orderly growth of the sector which is the second largest
employer after agriculture. Shri Naidu further said that consumer has become the king in telecom
sector further to introduction of a regulator. While there are only a few operators in telecom
sector, a total of 76,044 companies are involved in real estate sector including 17,431 in Delhi,
17,010 in West Bengal, 11,160 in Maharashtra, 7,136 in Uttar Pradesh, 3,054 in Rajasthan, 3,004
in Tamil Nadu, 2,261 in Karnataka, 2,211 in Telangana, 2,121 in Haryana, 1,956 in Madhya
Pradesh, 1,270 in Kerala, 1,202 in Punjab and 1,006 in Odisha. Stating that real estate sector
contributes about 9% GDP, the Minister informed the House that between 2011 and 2015, new
projects in the range of 2,349 to 4,488 were launched every year amounting to a total of 17,526
projects with investment value of Rs.13.70 lakh cr in 27 cities including 15 state capitals.
According to industry information, about 10 lakh buyers invest every year to own a house of
their own.The Minister further said that the Real Estate Bill,2016 enables the people meet their
genuine aspirations of owning a house including those of urban poor by giving a fillip to
affordable housing initiative under which the Government intends to enable construction of 2
crore by the year 2022 under Prime Minister’s Awas Yojana (Urban).

15TH MARCH 201612; -

Lok Sabha approved the Real Estate (Regulation and Development) Bill, 2016. The Bill pending
in Lok Sabha moved after it got passed in Rajya Sabha on March 6, Minister of Housing &
Urban Poverty Alleviation Shri M. Venkaiah Naidu clarified the position on the issues such as
how the Bill will be applicable to existing projects; the Rules on setting aside 70% of customer
advances in an escrow account; compulsory approvals prior to project launches, and payment of
similar interest rate to customers as charged from them for delays will impact launches and
increase compliance costs. Further the minister clarified some issues like it is required to deposit
70% of collections, the deposit of 70% is for both construction cost and land cost, and if the land
cost has already been incurred the promoter can withdraw to that extent, requirement to be met
for such withdrawals is provided in the act, this provision has only been provided to ensure that
project funds are not diverted and projects are completed on time. Upon passage of this Bill
existing/ongoing projects would not come to a standstill, as is being made out by some
respondents from the industry, the Bill does not provide that the existing projects should stop all
operations until complied with the provisions of the Bill, the Bill only provides that upon the
formation of the Regulatory Authorities all promoters of existing projects, coming within the
ambit of the Bill, would need to register and provide and upload all project details on the website
of the Authority, a window of 3 months from the date of commencement of the said
clause/section has been given to the promoters for registration, the developers need to to specify
the project details of such apartments so that prospective buyers will make informed choices,

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project status is known to all and to ensure that the projects are completed on time. Regarding the
provision of imprisonment for any violations of the orders of the regulatory authorities or the
Appellate Tribunal, it is certainly not a first option but only the last option, There are many
regulatory laws in the country with imprisonment provisions under which 3 to 10 years of
imprisonment is provided for, under Securities Act, Insurance Act and Pension Fund Act, 10
years of imprisonment is provided. Food security Act has 7 years provision while it is 5 years
under Electricity Act and Reserve Bank of India Act, There can’t be a consumer without a
developer and vice versa, keeping in mind the importance of developers for mobilization of land
and resources for housing projects, the last option of imprisonment has been kept at 3 years. Shri
Naidu has said that with a target is to ensure that all required approvals are given in about a
month’s time, he held 7 high level meetings with the Ministers of Environment, Forests and
Climate Change, Civil Aviation, Defence, Consumer Affairs, and Culture for streamlining such
approvals. All these ministries as a result have taken significant measures to ensure online and
timely approvals. Single window approval system is being developed to standardize and settle
timelines for approvals and use of IT & GIS for automation of such systems, setting up nodal
agency & empowered committees.

25TH MARCH 201613

The Real Estate (Regulation and Development) Act, 2016 (RERA) received Presidential assent on
March 25, 2016 and intends to bring transparency and safety in the market for consumers of
residential and commercial projects by introducing a sectoral regulatory mechanism. The
provisions of RERA are in addition to the requirement under other laws and Section 89
specifically gives it an overriding effect in case of any inconsistency. The real estate projects are
currently regulated by state governments under their respective state town and country
planning or apartment ownership legislations and a majority of RERA provisions have been in
force since May 1, 2016. It is important to note, that, Entry 18 of List II of the Seventh Schedule
of the Constitution of India gives the states the right to legislate over inter alia, land, rights in or
over land and colonisation.

1st May 2016; -

Ministry of Housing and Urban Poverty Alleviation issued a notification wide dated 26th April
2016 notifying under power conferred by sub-section (3) of Section 1 of Real estate (Regulation

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and development) act 2016(16 of 2016), The Central Government enforced the Act from 1st May
2016.14

Namely:-

1. Section 2

2. Section 20 to 39

3. Section 41 to 58

4. Section 71 to 78

5. Section 81 to 92

Above mentioned sections, came into force from 1st May, 2016 in India. It was a start of new era
with expectation of positive growth in Real Estate Sector in India. It will lead to increased trust
of buyers on promoter/builder in new building project, which will ultimately boost number of
buyers and investors in the sector.

1ST May 201715; -

Minister of Housing & Urban Poverty Alleviation Shri M.Venkaiah Naidu said that Real Estate
Act coming into force after a nine year wait marks the beginning of a new era making buyer the
King while developers benefit from the confidence of the King in the regulated environment.
Prime Minister Shri Narendra Modi’s personal interest in the matter made the Act a reality now.
The Act ushers in the much desired accountability, transparency and efficiency in the sector with
the Act defining the rights and obligations of both the buyers and developers. This important
legislation gained momentum under this Government and could see the light finally. Ministry of
Housing & Urban Poverty Alleviation has formulated and circulated Model Real Estate
Regulations for adoption by the Regulatory Authorities in the States/UTs. Under these
Regulations, developers are required to display sanctioned plans and layout plans of at least 3
feet X 2 feet size at all marketing offices, other offices where properties are sold, all branch
offices and head office of the promoters in addition to the site of project. Major provisions of the
Act, besides mandatory registration of projects and Real Estate Agents include depositing 70%
of the funds collected from buyers in a separate bank account in case of new projects and 70% of

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unused funds in case of ongoing projects, projects with plot size of minimum 500 sq.mt or 8
apartments shall be registered with Regulatory Authorities, both developers and buyers to pay
the same penal interest of SBI’s Marginal Cost of Lending Rate plus 2% in case of delays,
liability of developers for structural defects for five years, imprisonment of up to three years for
developers and up to one year in case of agents and buyers for violation of orders of Appellate
Tribunals and Regulatory Authorities.