Real estate sector has been one of the largest contributor towards the country’s economic growth, yet, until a few years back it was highly risky and unregulated. The Government of India has brought about several reforms to regulate the realty sector. One major reform and the most celebrated was the enactment of ‘The Real Estate (Regulation and Development) Act, 2016’ (the ‘RERA‘) with the intent to protect the interest of buyers and boost investor confidence. RERA regulates residential apartments, commercial building and plots developed for sale, right from the registration of real estate project to handing over of the possession to the buyer within the agreed time frame.
With the enactment of RERA, the Real Estate Regulatory Authority (the ‘Authority‘) set up under RERA is known to have taken a bold stance against the promoters/developers of under-construction projects more specifically where a delay in handing over of the possession has occurred, resulting into breach of the Builder-Buyer Agreement. There have been several instances where the Authority has ordered the defaulting promoter/developer to refund the entire amount to buyers along with an interest at applicable rate. However, these orders remain to be in non-compliance at the end of the promoter/developer and its enforcement still remains to be a challenge. There have been several occasions where the judgement debtor promoter/developer has been in contempt of orders passed by the Authority under RERA. The general trend of punishment for contempt in India is a written apology or at times even a fine worth Rupee one. In the given scenario, the question remains as to how does RERA protect the interest of buyers?
Keeping in mind the general trend followed by the promoter/developer across India, the provisions in RERA, provide for remedies against the promoter/developer for non-compliance of its orders i.e. filing an execution of order before the Authority under RERA (Section 40 of RERA).
The remedy for execution has not only given much more teeth to the Authority to nab those who do not abide by the decision of the Authority but have also set a precedent for such defaulting promoter/developer. The Authority, exercising its powers of execution remedy provided under Section 40 of RERA has reversed the general notion and imposed hefty penalties under Section 63 of RERA on the promoter/developer who is in contempt of orders passed by the Authority under RERA. Additionally, in the event of continuous default, the promoter is liable to a penalty for everyday during which such default continues which may cumulatively extend up to 5 per cent of the estimated cost of the real estate project. This fact can be observed in few orders passed under RERA which are discussed as below:
- The Uttar Pradesh Authority (“UPRERA”) has been in limelight for its robust move against a group of 11 well-known promoters/developers whereby the Authority has imposed a cumulative penalty of INR 2.5 crore exercising its powers under section 63 of RERA, as a consequence of non-compliance of its orders of refund and compensation. The order has not only imposed penalty but has also stated that such penalty continues to be imposed at the daily rate till the time the promoter deposits the penalty amount and ensures full compliance of its orders. Furthermore, in the event of subsequent default in complying with its order, a recovery certificate will be issued by their respective District Magistrates for the recovery of amount as arrears of land revenue.
- In another order, UPRERA has imposed penalties worth INR 1.24 crore on a group of 11 real estate developers for non-compliance of its orders including revocation of registration for a few.
- In yet another order, UPRERA had directed a developer to hand over possession of houses with an interest for delay to homebuyers by June 2019 along with Occupancy Certificate and Completion Certificate. UPRERA in its order further mentioned that failure to deliver possession by June 2019 would result in buyer having the right to claim refund. Thereafter, the developer made a default on the abovementioned terms and as a consequence, a group of complainants approached the Authority for execution of orders. UPRERA, once again exercising its powers ordered a penalty of INR 93 Lakh for non-compliance of its order along with the refund of amount paid by homebuyers with interest.
- Similarly, Maharashtra Authority (“MAHARERA”), in one of its orders where delay in handing over of vacant possession occurred, ordered the defaulting developers to refund money to the homebuyer. However, neither did they file an appeal within the limitation period nor did they honour the order. Thereafter, upon bringing this to the notice of MAHARERA, a show-cause notice was served upon defaulting developers for not complying with the order and seeking response as to why a penalty should not be levied upon them, however, the defaulting developers did not appear, as a consequence of which recovery warrants were issued under section 40(1) of RERA.
In view of the foregoing, it can be stated that the Authority under RERA has been taking strict actions against the defaulting promoters/developers in different states of the country in order to reinstitute investor confidence in the Indian real estate sector and trust in the legal system. There has been a paradigm shift in terms of the penal provisions in the post RERA regime, as a result of which, there have been cases were developers/promoters abide by the orders of Authority. However, on the other hand, there have been numerous cases wherein the orders of the Authority are still not getting executed. Thus, execution remains a grey area in the RERA and it requires more stringent measures to be taken, in order to successfully implement the orders. Therefore, it would not be inappropriate to conclude that while the enactment of RERA has been a commendable step towards protecting the interest of buyers, however, the legislature’s objective behind it is yet to see the light with which it is enacted.
Mr. Hardik Harjani is an Associate with Century Maxim India. Views are personal.