1. Good news for homebuyers: RERA applicable on ongoing projects; how it will benefit property purchasers

Good news for homebuyers: RERA applicable on ongoing projects; how it will benefit property purchasers

The Bombay High Court has upheld the constitutional validity of RERA and its applicability to ongoing projects across states.

By: | Published: December 7, 2017 4:36 PM
Bombay High Court ruling on RERA, HC upholds constitutional validity of RERA, rera applicable to ongoing projects,  near-completion projects , Good news for homebuyers This ruling will further expedite the completion of projects as developers may want to complete the near-completion projects to avoid the hassle of all the regulatory process.

Good news for homebuyers! The Bombay High Court has upheld the constitutional validity of RERA and its applicability to ongoing projects across states. Thus, industry experts say, this ruling will further expedite the completion of projects as developers may want to complete the near-completion projects to avoid the hassle of all the regulatory process.

It may be noted that under the provisions of the Real Estate (Regulation and Development) Act, builders are not only required to register their new projects with RERA, but also have to disclose the original sanctioned plans and changes made in an ongoing project at the later stage as well as duration of the time within which they will complete the project. This provision, along with some others, was challenged in various courts by some builders. However, the court upheld the constitutional validity of this provision and its applicability to ongoing projects as well.

Commenting on this judgement, Surabhi Arora, Senior Associate Director, Research, Colliers International India, says that according to the Act, the promoter of an ongoing real estate project, in which all buildings as per sanctioned plan have not received occupancy or completion certificate, is required to submit application for registration for each such phase of the project, within a period of three months from the date of commencement of section. However, many state governments tried to dilute this provision.

Keeping this in view, “the judgement to further include ongoing projects under the purview of RERA is a welcome move, but it also provides flexibility to RERA authorities to grant more time in exceptional cases to a builder to complete a project. Although it is a good news for builders, it may sometimes result in dilution of the law.”

The applicability of RERA on ongoing projects will further expedite the completion of projects as developers may want to complete the near-completion projects to avoid the hassle of all the regulatory process. However, problem will remain for the projects where the developer has no money to complete them. The options available in case of revocation of license are the development of the remaining project by buyers’ associations; bidding out completion of the remaining project to a competent agency (private or government) in lieu of remaining payment; or completion of the project by a competent government authority.

“The provisions, however, do not specify the authority who will undertake the remaining construction in case of developers’ inability to complete the projects. Also, it is not known what recourse is available to the buyer if this authority is unable to or not capable of building as per the agreed specifications of the project (especially within the promised price). It is also silent on the rights of banks, NBFCs or private equity funds that may have funded the project,” Arora says.

Amit Wadhwani, Director, Sai Estate Consultants, says that the Bombay HC Bench has allowed significant leeway for developers and permitted the state-level RERA authority and the Appellate Tribunal to consider delays on a case-to-case basis in ‘exceptional and compelling circumstances’. Developers have challenged the provision of natural disasters and asked the court to give leeway under such situations.

“The pending cases of delays due to RERA must be resolved to understand the limitations. If a real estate developer is following the best practices, RERA can work in their favour. RERA is supposed to instill cheer and not to be feared within the developer community. Hence, it is a positive move. However, it can lead to ambiguity as the HC ruling says it may differ on a case-to-case basis,” he says.

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