The Real Estate (Regulation and Development Bill), 2013 (hereafter “the Bill”) has been introduced in the upper house on August 14, 2013. The Bill has been enacted under entries 6, 7 and 46 of Constitution of India. The Bill is aimed at establishing a regulatory regime for transactions concerning the sale of real estate units by real estate developers and their agents. The Bill does not provide for regulation of construction by developers, which is within the domain of States and Urban Level Bodies such as Union Territories.  Like the spheres of telecom and electricity, the Bill seeks to create a unitary, regulatory and disputes resolution mechanism. The field has hitherto been unregulated. Buyers had to approach civil courts and consumer forums for redress of grievances. A few entrepreneurs formed buyers association and approached the Competition Commission as well. The norms and best practices for purchase and allotments of plots were hitherto left uncodified. For the first time a normative system has been laid down to ensure objectivity, transparency, predictability and certainty in real estate transactions. With the Bill in place, courts/tribunals will be in a better position to dispense justice. Some of the salient features of the Bill include the following:

1. The scope of the Bill is restricted to residential plots and apartments.

2. Under the Bill, a real estate developer has to register its project with a real estate regulatory authority established there-under.

3. The Bill mandates certain disclosures by the promoter. The disclosures concern vital matters concerning the project viz., the lay out plan of the proposed project, the plan of development works to be executed in the project, proposed completion time for the project, number and carpet area of apartments proposed to be sold in the project, names of real estate agents engaged by promoter, a declaration that the promoter has lawful title to the land and the same is free of encumbrances, the names of contractors, architects, etc.

4. The developer is required to upload the above details on the website of the real estate regulatory authority.

5. If a buyer suffers any injury due to falsity of above details, norms for determination of compensation have been specified in the Bill.

6. The Bill penalizes developers and real agents for sale of plots or apartments without registration. If as a result of invalidation of registration of developer, a project is left unfinished the Bill has provisions for involving other agencies and getting the project completed.

7. Seventy percent of the funds realized from allottees are to be deposited by developer into separate account in scheduled bank.

8. The Bill makes giving misleading advertisements a penal offence and visits the same with penalty, the quantum of which is linked to the cost of the project.

However, the Bill has certain short comings as well.  The Bill does not address the concerns of developers for streamlining the large number of regulatory agencies, from which they have to seek approvals. The Bill could have replaced multiple agencies with a single window clearing mechanism.

Some of the regulatory agencies tend to indulge in extortionate corruption and harass developers. The end result of this is escalation in project cost. The consumer ends up paying for official avarice as ultimately the developer is bound to bill the cost of the project (including the extortionate bribes paid to officials) to the customers. This malady has been left for redress to the general law against prevention of corruption, which is beyond the reach of the common man as direct nexus between the customer and the concerned officials is well neigh impossible to establish.

Moreover, the Bill does not have an adjudicating officer from the judicial side. This will constrain the detached approach and outlook required for dispute resolution. Adjudication is a specialized skill requiring training in shifting facts and evidence and discerning the truth. A non-judicial adjudicator appointed for the purpose would lack in the required skill set leading to more expenses by litigants on appeals. Tribunalization of justice is not a good alternative to the court system, which should be institutionally strengthened instead of diluting adjudicatory standards by appointing untrained and unsuitable persons as judges.

Lastly, under the Bill the buyer may have to face penalty of upto 10% of the cost of the plot or flat, if the allottee does not obey directions of the regulator. This is unfair because all that an allottee has to do is to execute certain agreements and make timely payments. The responsibility for delivery of project is within the developer’s scope. The proposed penalty is in addition to the 10% earnest money which may be forfeited by the developer in case the allottee fails to make timely payments. Thus, the total penalty exposure of the allottee may go upto 20%, which is unfair and harsh upon prospective allottees.

@ Rakesh Matwa, Advocate

Registration of documents creating or extinguishing rights in immovable property are given great importance so much that every inch of Indian territory from North to South and East to West falls under the office of a Sub-Registrar appointed by the respective State Government/Union Territory for the purpose of registering documents. The offices of sub-registrars are also being increasingly digitized and made people friendly. A very practical question that people often face is what will be the consequence if a document, say a lease deed, compulsorily registrable, is not registered by the executants. The following rough and ready rules of thumb provide instant guidance on the topical issue.

1. The Registration Act, 1908 mandates that every lease deed of the duration of more than one year is compulsorily registrable.

2. If the lease is not so registered, it will not affect the immovable property comprised in the deed nor will it be accepted as evidence of any transaction affecting leased property. This means that the lease deed would be void in the eyes of law and no court would uphold the rights of the landlord or tenant on the unregistered lease deed.

3. However, this does not mean that the lease is useless in a court of law for all purposes.  It can be used as evidence for a collateral purpose. For instance, if a tenant under an unregistered lease takes a defence that the landlord’s suit is not maintainable because the lease is not registered, the court may look into the terms of the unregistered lease to determine the nature of the tenant’s possession. From the terms of the unregistered lease, the court may conclude that the relation of landlord and tenant indeed subsisted between the parties. In such a case the tenancy would be from month to month, terminable by a written notice of 15 days in case of residential lease and six months in case of a commercial lease. Similarly there is no bar to the unregistered lease being allowed as evidence for any purpose other than to show the existence of a lease.

@ Rakesh Matwa, Advocate