RERA upheld: What it means for home buyers and the industry


We look at what the Bombay High Court’s ruling, upholding the constitutional validity of the Real Estate (Regulation and Development) Act, means for the Act and its rules in other states, as well as its impact on home buyers

The Bombay High Court, recently, upheld the constitutional validity of the Real Estate (Regulation and Development) Act (RERA) and made it applicable to unfinished projects as well, in a ruling that may have implications on real estate markets across the country.

The high court ruling finds that the RERA will only apply to a particular project, after that project is registered under the RERA (the consequences for breach of the RERA obligations are prospective in operation) and, in that sense, the application of the RERA is prospective in nature, says Ameet Hariani, managing partner, Hariani & Co. “A large number of projects across India are currently in limbo because of delayed completion. Also, numerous allottees have not been given possession of their flats despite having invested large amount of monies to purchase them. As the RERA and high court ruling further holds that ongoing projects are included within the ambit of the RERA, these stalled projects will now see the light of day and the affected allottees will be able to enforce their rights, in respect of these projects under the RERA,” Hariani explains.

 

Bombay HC’s RERA verdict: How it affects other states

According to experts, the Bombay High Court ruling, unless it is appealed before and decided differently by the Supreme Court, will be binding in Maharashtra and have persuasive value in all other states. “To the extent that different states have notified rules under the RERA that purportedly dilute the provisions of the Act, the validity of such alleged dilutions will have to be considered separately and tested before the appropriate court. Rules framed under any act, are always subservient to the act. In the Bombay High Court ruling upholding the validity of the RERA, in one of the writ petitions, the validity of certain Maharashtra RERA rules were also challenged. However, during the course of arguments, no submissions were advanced, regarding the challenges to the rules. Therefore, the high court has not dealt with the challenge to the rules framed under the RERA, by the state of Maharashtra,” Hariani adds.

See also: What is RERA and how will it impact the real estate industry and home buyers?

 

What the Bombay HC verdict on RERA means for home buyers

According to legal experts, the Bombay High Court ruling will definitely strengthen the morale of home buyers. Since ongoing projects are within the ambit of the RERA, buyers who have invested their hard-earned money, will benefit. Promoters can now provide revised timelines for completion of ongoing projects, meaning that the projects are more likely to be completed.

“The provisions regarding the deposit of 70 per cent of the sale proceeds into an escrow account, payment of compensation to home buyers, revocation of the registration of projects and other punitive and compensatory provisions of the RERA, have been upheld. This will provide confidence and assurance to the home buyers. The major obstacles for builders, would be the raising of capital and the fact they would have no room for delays, once they have made the requisite declarations during the time of registration of the project (except for delays caused due to compelling factors beyond their control),” points out Nishit Dhruva, managing partner, MDP & Partners.

“Moreover, the Bombay High Court ruling that the Adjudicating Authority will have to examine these compelling factors on a case-to-case basis, will encourage developers to ensure timely delivery of projects, thereby, instilling confidence in flat purchasers,” adds Dhruva.

Another opportunity is that the regulatory nature of RERA will bring about some much needed organisation and discipline, in the dealings in the real estate market. Also, the observation that payment of interest by a developer is compensatory and not penal in nature, further safeguards the interest of flat purchasers and may dissuade developers from committing defaults and delays in projects.

 

“The increased consumer confidence, likely to be created by the Bombay High Court ruling, could be a boon for the Indian realty market. The applicability of the RERA to ongoing projects, could reduce litigation in other, more time-consuming and non-specialised courts and tribunals” – Ameet Hariani, managing partner, Hariani & Co.

 

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