(An Article on Real Estate (Regulation & Development) Act, 2016 (RERA) detailing ongoing projects, dilution debate, key outcomes)
The much awaited Real Estate (Regulation & Development) Act, 2016I,e RERA has become much deliberated & debated law as well. The success of the RERA depends as much on State Governmentsas on various stake holders, while one may debate on many aspects of the RERA, one pricking and key issues that has become a bone of contention is the definition that various States have been assigning to 'Ongoing Projects'.
In terms of proviso to Section 3(1) of#RERA, such projects wherein the completion certificate has not been issued till the date of commencement of the Act (i.e May1st,2017), would be requiring registration with the Real Estate Regulatory Authority of the concerned State. Once a project falls within the ambit, the Promoter of the project wasduty bound to apply for registration of the project with State Regulatory Authority within three months of the above referred date. This would compel him to host a whole gamut of information about the Project such as track record of promoter, land status including any outstanding payments towards land, encumbrances on land / project, current status of project, proposed original time schedule of completion, delay if any, new time lines etc. Apart from this there is stringent mechanism on utilization of customer receipts, promoter has to set aside seventy percent of customer collections in a separate account and can only withdraw therefrom in proportion to the percentage of completion of the project. Though, land and construction costs could be considered for assessing the percentage of completion of the projects, it is no small task for currently cash strapped developer to manage the cashflows.
Legislative intent has been to bring in large no of stuck projects in the ambit of RERA. If one tracks the course of RERA there has been much activism from the customers in regard to this law. Sometime, during the course, RERA was contemplated to be introduced for new projects, however, ongoing projects were introduced with the primary aim to protect the interest of buyers even in the current stuck projects.In order to understand the debate one has to principally look at the definition of Ongoing Projects vs Central law., in few key markets.
|CENTRAL LAW i.e RERA||UTTAR PRADESH||HARYANA||MAHARASHTRA||KARNATAKA||TELANGANA|
|No separate definition, Proviso to Section 3(1) refers to projects which are ongoing wherein in Completion Certificates is not issued as on May 1st, 2017 need to apply for registration. Even, Rules framed by Central Ministry (HUPA) as applicable to UTs are framed in the similar lines.||Rule 2 (h) of UP RERA Rules provide that projects which fulfil any of the following conditions as on 27/10/16., will not be considered as ongoing:
1.Where services have been handed over to local authority for maintenance
2.Where common areas & facilities have been handed over to RWA for maintenance
3.Where all development works have been completed and sale /lease deed of 60% ofthe project has been executed.
4.Where all development works have been completed &application has been filed with the competent authority for issue of CC.
|Rule 2(o)of HRERA define an "on going project" and excludes (i) any project for which after completion of development works, an application for CC or Occupancy Cetifiacte is made to the Competent Authority on or before publication of these rules i.e 28/7/17;(ii) that part of any project for which part completion/completion, occupation certificate or part thereof has been granted on or before publication of these rules.||Rule 4 of Maha RERA Rules provide that ‘an ongoing real estate project, in which all buildings as per sanctioned plan have not receivedoccupancy certificate or completion certificate’ need to apply for registration.||Explanation to Rule 4 of Karnataka RERA Rules: "Ongoing project" excludes such projects which fulfil any of the following criteria as on i.e 10/7/17, namely:- (i) in respect of layouts where the streets and civic amenities sites and other services have been handed over to the Local Authority and Planning Authority for maintenance; (ii) in respect of apartments where common areas and facilities have been handed over to the RWA. (iii) where all development works have been completed and certified by the competent agency and sale/lease deeds of sixty percentof the apartments/houses/plots have been registered and executed;(iv)application has been filed withthe competent authority for issue of completion/part completion/certificate /occupation /part certificate; (v)where Partial occupancy certificate is obtained to the extent of the portion for which the partial Occupancy Certificate is obtained.||Rule 2(j) of TRERA "Ongoing Project" excludes such Projectsfor which building permissions were approved prior to 01.01.2017 by the Competent Authorities viz., UDAs / DTCP / Municipal Corporations / Municipalities / Nagar Panchayats / TSIIC as the case may be.|
If one observes carefully almost all the States have excluded projects which have obtained ‘Occupancy Certificate’apart from those which have completion certificate from the definition of ongoing projects. Most of the States have even excluded project which have part completion or part occupancy or even applied for cases.,from being an ongoing project. Certainly, Telangana may has gone little too far in interpretation.
In short if one tries to understand what primarily is the difference between a ‘Completion Certificate’ and ‘Occupancy Certificate’,Completion Certificate contemplates that the real estate project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority under the local laws., while a Occupancy Certificate’ contemplates permitting occupation of any building, as provided under local laws, which has provision for civic infrastructure such as water, sanitation and electricity. Each State may have procedures which could be unique to each such state., in issuing each of the said certificates. While ‘’Completion Certificate refers to completion of entire real estate project, ‘Occupancy Certificate’ is more specific and may pertain to a building within the project. Apart from the above Part Completion and Part Occupancy is further breaking down of the project into smaller pieces in respect of completion or occupancy or issued in respect of part of the project , by competent authority subject to fulfilment of various conditions by the developer/promoter within a certain timeline. The issuance of such part completion /occupancy only concludes part conclusion of developer obligations in respect of real estate project. Whereas ‘completion certificate’ of real estate project entails conclusion of entire set of obligations of the developer/promoter in respect of the project including in respect of complete infrastructure, facilities, community sites etc.
Invariably, procuring the #part completion /occupation is usually the course in the industry. A completion certificate of the entire real estate project especially in case of large real estate developments is a long drawn process and therefore developers fulfilling the obligation along the development of the project procure part completions/occupation and offer possession to the buyers. Irrespective of position of law, the reality is that there are large number of projects, may be even completed years ago, across the country wherein completion has not been issued or obtained. One may debate over it, but developer would stand to say that he has fulfilled his obligation long and the completion certificate is stuck in red tape or buyermay complain that developer has not fully concluded on his obligations or authorities stay oblivious. the system which has been in place over the years takes the blame. There is strong argument from both sides, while developers feelthat they are double changed inspite of giving possessions they are bought into regulatory ambit, customers are able to highlight cases where the completion/occupation is managed and the project may not be habitable. The need is to draw a line and bring in such projects which have been stuck and buyers are suffering across the country under the ambit rather than leaving it to the States., to create an utter confusion . It may be an exercise of an Expert Panel involving all stakeholders within a defined time frame to come up with a formula, for implementation across country.
Certain Sates have been realistic in drafting their Rules while some have gone well beyond the mandate. RERA as it stands today provides for completion certificate , while States are adopting various positions on ongoing projects , one has to see to what extent such positions would stand test of law. Rules being subordinate can not go beyond the law itself, this is a well established position. RERA is a powerful law if implemented properly and pragmatically, however, currently the way it is being handled by various States., it is in danger of being a failed law.
Real Estate Industry is going through a real change whether be it from regulatory perspective or from consumer preferences or simply the way business is going to beconducted in coming years
‘Change’ always has its challenges !
Mr.Venket Rao, Founder & Chief Executive of Intygrat Business Advisory (P) Ltd has over two decades of rich experience in the areas of management, finance, regulatory compliances, secretarial & legal. Over the years, Mr.Rao occupied senior management positions in industry and spent over a decade in Real Estate Industry and is widely popular in real estate circles. He is a Graduate in Arts (English Hons ) from Madras University, Chennai, Associate Company Secretary from ICSI,New Delhi, holds Post Graduate Diploma in International Business from Indian Institute of Foreign Trade (IIFT) and Licentiate of Insurance from Insurance Institute of India, Pune. He has served as Member of the Managing Committee of PHD Chamber of Commerce & Industry and as Director with Delhi Stock Exchange. He was on various committees of PHD Chambers & Delhi Stock Exchange .He has been on various panel discussions on Real Estate & Capital Markets.He is currently member of Capital Markets Committee of PHD Chambers.
The views and opinions expressed in this article are of the author and do not necessarily reflect the official policy or position of any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author– and, since we are critically-thinking human beings, these views are al-ways subject to change, revision, and rethinking at any time.
Intygrat Business Advisory (P)Ltd.
(CI No. U74900DL2011PTC216088)
Corp. Off.: 2 nd Floor, Building No. 13
Community Centre, East of Kailash
New Delhi – 110065
Ph.:+91 9599002354, +91-11-40514977
Copyright © 2018 All Rights Reserved. Hosted and Powered by Jeewan Garg