Saturday, 29 April 2017
Maharashtra RERA Framework
*Maharashtra in sync: No major deviations with the central Act*
_Real Estate (Regulation and Development) Act, 2017_
Maharashtra has notified its real estate rules – called the Maharashtra Real Estate (Regulation and Development) Rules, 2017 – governing registration of real estate projects, agents, rates of interest, and disclosures on developer websites. This follows the passage of the Real Estate (Regulation and Development) Act, or RERA, in the Rajya Sabha in March 2016. The Act was notified on May 1, 2016, and will come into effect nationwide from May 1, 2017.
While the draft Maharashtra RERA rules (issued in December 2016) had relaxed a few clauses of the central RERA, the final notification is quite in line with the central Act. The state had modified some of the draft clauses based on over 600 suggestions and objections received during the past few months. It launched the RERA website last week (maharera.mahaonline.gov.in). But the state hasn’t yet appointed a full-time real estate regulator. It had appointed an interim regulator in December 2016.
_Maharashtra RERA framework_
1. Compulsory registration of all ongoing and upcoming real estate projects; Existing under-construction projects where completion certificates are not received will be covered under the Act
2. Developers to disclose project related details, including: project plan, layout, and government approvals related information to the customers such as sanctioned FSI, number of buildings and wings, number of floors in each building etc.
3. Buyers to pay only for the carpet area
4. Consent of two-third allottees to be taken for any major addition or alteration
1. Delivery of the project to be on time, as mentioned in the agreement
2. Any structural defect, or any other obligations of the promoter as per the agreement for sale, brought to notice of promoter within five years from possession to be rectified free of cost
3. No false statements or exaggerated commitments to be given in advertisements
4. Buyers have to comply with payment schedule mentioned in model sale agreement (which mandates them to pay upto 30% of total consideration on execution of agreement, and additional upto 15% of total consideration on completion of plinth work; remaining payment to be as per clauses mentioned in the model sale agreement)
1. 70% of the money received from buyers, for a particular project, to be transferred to an escrow account
2. Withdrawals to be in proportion with the completion of the project and it needs to be certified by engineer, architect and practicing chartered accountant
1. Developers have to register their projects with RERA before advertising or marketing
2. Brokers/ agents are to be registered with RERA
3. Project details to be updated quarterly on RERA website
4. Project accounts to be audited annually by a CA
1. In case of delay, developers have to pay interest to home buyers at State Bank of India's highest marginal cost of lending rate plus two per cent
2. Developer may terminate the agreement in case of three payment defaults by buyers (by giving 15 days' notice)
3. Monetary fines/ penalties for not registering the projects and continuous default/ non-compliance with any provision of the Act/ non-compliance with the order of Appellate Tribunal (does not mention imprisonment penalties to developers)
1. The complaint at the initial stage will be handled by the Authority, with further appeal resting with the RERA Appellate Tribunal. A second appeal is also allowed to be filed before a High Court.
*CRISIL Research’s impact assessment:*
Ongoing projects have been given three months (up to July 2017) to comply with RERA regulations. The period, therefore, is likely to witness subdued activity in terms of launches as developers prepare to comply with the new norms.
1. Effective implementation of RERA will improve transparency and timely delivery
2. The act does not permit developers to launch projects before registering it with RERA authority. This will be a major shift to practices followed currently by developers wherein they manage to sell part of the project through soft-launch/ pre-launch activities
3. RERA is also expected to put an end to fund diversion, and transform the realty sector into a more organised and trustworthy one, re-instilling confidence of the end-users
4. Developers executing large township projects will prefer dividing each project into different phases and will register each phase separately- this will help them plan subsequent phases as per market demand without altering plans of the entire township
5. During the transition, small developers may need help from project management consultancies on RERA procedures, documentation and quarterly disclosures. This, along with the registration and approval costs, are expected to increase the compliance cost for realtors. However, the impact on overall project cost will be marginal
Considering that many states are yet to notify the rules, CRISIL Research expects a positive impact (on the real estate sector at all-India level) to be visible only towards the end of 2017.
Ashish H.K. Jha
*Courtesy Ashish H K Jha @ CRISIL @ One Source*