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The Indian real estate sector has historically faced challenges related to transparency, accountability, and consumer trust. To address these issues, the government introduced the Real Estate (Regulation and Development) Act, 2016 (RERA), aiming to regulate the sector, safeguard buyer interests, and instill greater discipline among stakeholders.
This article focuses on the functions and duties of promoters under RERA, highlighting how the Act enforces legal obligations, improves project transparency, and builds trust between developers and homebuyers.
RERA covers promoters, real estate agents, and homebuyers. It requires registration of any real estate developments larger than 500 square meters or 8 units. Registration is essential even for incomplete or ongoing projects.
However, according to MahaRERA’s Circular No. 25A/2023 dated January 9, 2023:
Projects less than 500 square meters or with 8 or fewer units are exempt from mandatory registration.
This is true even if the number of units exceeds eight but the area falls below the threshold, or vice versa.
Project registration and public publication of information are required.
70% of funds received from buyers must be held in a separate bank account.
Promoters must follow approved plans, correct deficiencies, and assure timely possession.
The Act encourages trust and transparency between promoters and buyers.
Section 2(zk) defines a promoter as somebody in charge of constructing or developing a real estate project. This includes:
Property sellers include builders, developers, and individuals.
Public agencies or cooperative housing associations construct for others.
Entities that act on behalf of landowners.
If construction and sales are carried out by distinct entities, both are jointly accountable under RERA.
Before starting a project, promoters must register it with RERA. They must provide project plans, land ownership information, estimated costs, and a completion timeline.
Promoters cannot accept more than 10% of the property’s value as an advance without a registered sale agreement being made with the buyer, which details construction, payment schedules, and other duties.
If false marketing or brochures cause a buyer to lose money, the promoter must refund the amount plus interest and compensation.
Promoters must obtain the necessary completion or occupancy certificates and distribute them to individual buyers or their associations.
Maintain an updated webpage that includes registration information, booking progress, approvals, and quarterly updates.
Include RERA’s registration number and website in all advertisements.
Provide buyers with layout plans, technical specifications, and phased building deadlines.
Complete contractual obligations until handover, including repairing any structural defects for up to five years.
Provide basic services until the Buyers’ Association takes over.
Assist in forming buyer associations within three months of the majority bookings.
Ensure that no mortgage is placed on a property following registration in the buyer’s name.
Pay any applicable taxes, debts, and utility bills before delivery.
Promoters may only cancel allotments in accordance with the terms of the agreement, and buyers have the right to contact the authority if cancellations are unfair.
Promoters must utilise quality materials, abide by local laws, and adhere to approved building plans. Buyers must approve significant plan revisions with a two-thirds majority.
If structural or service-related deficiencies appear within five years of possession, the promoter must correct them within 30 days at no extra charge. Failure to do so qualifies the buyer for compensation.
If a promoter:
Fails to deliver possession on time.
The project is left incomplete owing to cancellation or corporate closure.
They must repay all payments, including interest.
If the buyer remains invested, the promoter is required to pay monthly interest for the delay and compensate for any legal or land title issues.
Promoters must get all essential permits before beginning development, including environmental clearances, building permissions, and land title verification.
RERA imposes stiff sanctions.
Non-registration may result in a fine of up to 10% of the project cost and/or three years’ imprisonment.
False information may result in a 5% fine.
Repeated violations may result in licence cancellation and harsher penalties.
RERA has developed a strong legislative framework that promotes responsibility, increases buyer protection, and raises the quality and dependability of real estate developers. To succeed in this regulated environment, promoters must assure project registration, on-time completion, full disclosure, and compliance with legal obligations.
Given the legal complexities involved, seeking competent legal advice is strongly advised. For legal advice, Adv. Abdul Mulla can be reached at www.asmlegalservices or www.lifeandlaw.in.
Adv. Abdul Mulla (Mob. No. 937 007 2022) is a seasoned legal professional with over 18 years of experience in advocacy, specializing in diverse areas of law, including Real Estate and Property Law, Matrimonial and Divorce Matters, Litigation and Dispute Resolution, and Will and Succession Planning. read more….
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