By Anushree Jois
The Real Estate (Regulation & Development) Act, 2016 (the RERA) came into effect earlier this year. Many petitions have been filed before various High Courts challenging the legality of the Act, including one such petition that was filed before the Bombay High Court. The division bench of the Bombay High Court has recently upheld the validity of the Act.
The constitutional validity of RERA
The RERA seeks to protect home buyers and to regularise the real estate sector. It places accountability on developers, agents and promoters, alike. The RERA, however, has been challenged and is presently pending before various High Courts.
The petitioners before the Bombay High Court were largely aggrieved by a few provisions on the penalty, delay and composition of regulatory authorities. However, developers, individual plot owners and a few others who were largely aggrieved by these provisions challenged the Act before the Bombay High Court. It was pointed out to the Court that if the developer fails to complete a project within stipulated time, he is liable to compensate the buyers. Registration of the developer or his project is liable to be cancelled. This provision is applicable to both ongoing and new projects. Only in cases of natural disasters or acts of force majeure, will the time be extended by one year. The petitioners also raised objections that the Act provided for an Appellate Tribunal, whose composition mainly included bureaucrats.
Upholding the RERA
The division bench of the High Court upon hearing the petitions rejected the pleas and upheld the constitutional validity of the RERA. The Court held that the applicability of provisions to ongoing projects by itself does not make it ‘retrospective’ and that the provision was valid. The Court pointed out that purpose of the Act was to regularise and ensure timely completion and delivery of projects. In order to achieve the purpose, penalties imposed on the developers are not only necessary but fair.
The Court, on the other hand, observed that the regulatory authorities could consider instances of delay on a case-to-case basis and if there exists ‘exceptional and compelling circumstances’ for such delay, to excuse the developers. Ruling on the composition of the Appellate Tribunal, the Court held that the division bench of the Appellate Tribunal should always consist of a judicial member and most members of the Tribunal should be judicial members instead of bureaucrats as the Act stands presently.
Impact on the stakeholders of the RERA
As the real estate sector was mostly left unregulated, most of the transactions were lopsided and in favour of developers and promoters. In order to make the transactions more equitable and protect consumers, the government introduced RERA. In fact, the Act is pathbreaking as it provides for the establishment of a regulatory authority for the real estate sector. The judgment of the Bombay High Court has been welcomed on most counts.
RERA’s introduction was welcomed by consumers. Now that the constitutional validity of the Act is upheld by the High Court, the consumers can heave a sigh of relief. The buyers can now expect their project to be ready in time, failing which they are entitled to compensation. Retaining provisions on penalties will make developers accountable.
The RERA brings scope for developers
From registration, usage of funds and disclosure to buyers, to timely completion of projects, developers are bound by the Act. Before the judgment, there was no scope for extension of time in case of delay, but now, in ‘exceptional and compelling circumstances’ the developers will not be penalized and the project will be considered for extension. This move of the Court is lauded as it balances the interests of developers and consumers.
The judgment provides for the inclusion of a judicial member in the Appellate Authority. Under the RERA, appeals have to be disposed of within sixty days. The Authority is also vested with quasi-judicial functions to perform its duties. With the inclusion of a judicial member, it can be expected that the Authority will increase its efficiency and relevance. This change is beneficial to all stakeholders.
Status of other states
RERA has been challenged before other High Courts as well and is pending consideration. The decision of the Bombay High Court has a persuasive value on the decisions of other High Courts. Meanwhile, those aggrieved by the decision of Bombay High Court may still choose to appeal. In which case, RERA may be put to test before the Supreme Court directly. It’s time to wait and watch how RERA will be analysed by various courts.
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