Status as on- 17/07/2023
“OWNING A HOME IS A KEYSTONE OF WEALTH, BOTH FINANCIAL AFFLUENCE AND EMOTIONAL SECURITY”
INTRODUCTION
The demand for housing has increased and become the most important part of an individual’s life. Access to sufficient housing can be a primary goal for the delight of several human rights, including the right to work, health, education, vote, right to privacy, and so on free from any danger lodging is an essential need of a man. Housing is a key input in economic, social, and civic development. Real Estate plays an important role in providing the need and the demand for housing and infrastructure. But this sector has been unregulated for a longer period of time with the absence of professionalism and standardization and lack of adequate consumer protection. Though the consumer protection Act, of 1986 is available as a forum to buyers in the real estate market, the recourse is only curative and is not adequate to address all the concerns of buyers and promoters in that sector.
In Belaire Owners Association vs. DLF Limited, HUDA, and others, in this case, it was strongly emphasized the need for regulatory authority for real estate in the country. The inadequacy of laws and regulations results in domination of the certain anti-social elements and illegal developments in the housing sector.
But, surprisingly until the year 2016, there was no specific central legislation to govern the Real Estate sector. Therefore, the parliament in order to regulate this one of the fastest-growing sectors passed “The Real Estate (Regulation and Development) Act, 20164 which came into effect on 1st May 2016. The evolution of the Act commenced in the year 2009 when the Union Minster “Mr. Venkaiah Naidu”.
In India, one of the major reforms was introduced in the form of RERA, which ensures to deliver much-needed accountability and transparency in the sector of real estate. It promised to build up and strengthens consumer protection by providing that the consumer gets the delivery of its product on the promised time, thereby enhancing consumer confidence and also facilitating to creation longer lasting developer brands which are durable quality, and timely delivered.
The Act makes mandatory for the promoter or a developer of a project needs to get registered under the Act by making the required application to the Real Estate Regulatory Authority who will have the right to grant or refuse the registration within thirty days from the date of the application.
“DON’T WAIT TO BUY REAL ESTATE, BUY REAL ESTATE AND WAIT”
SITUATION PRIOR TO RERA
Real Estate carries out an impetuous part in creating the requirement for housing and infrastructure in any state. Hence, it leads to demand for regularity, proficiency, insufficient consumer protection, and thus competing for the healthy and precise development of the industry. In the last few years, the purchase in search of better housing, they are now a victim and have become prey to dishonest builders. After taking the money the contractors diverge from the liability and leave behind the suffering holders’ anguish because of illegal construction being revealed and jeopardy of destruction. There have been a few examples from the past where the courts have highlighted that the unauthorized construction not only violates the local laws and the idea of the planned outline as guaranteed by the Constitution. Experienced and professional developers should appreciate the regulation more accurately and escape by such developers can circumspectly stimulated to be thoughtful and consummated with the motive of gaining more profit and hence, entitled to be dealt with more punitive measures for the future. Some groups of people in this sector do not recognize that the construction done in breach of relevant laws levies an inadequate burden on the basic public amities like water, electricity, etc.
The quickest developing area passed “The Real Estate (Regulation and Development) Act, 2016 which happened on the first of May 2016.
IMPACT OF RERA ON GST
For the construction of complexes, flats, buildings, etc. under the existing indirect tax prior to the implementation of the GST regime- mainly three types of taxes were involved namely:-
- Central Exercise Duty
- VAT
- Service Tax
Central Excise duty levied and payable on most of the construction input materials was at the rate of 12.5%. VAT on such items ranges from 12.5% to 14.5% and service tax at the rate of 12%. Whereas on output construction products Service Tax after abatement was charged and payable at the rate of 4.5% and VAT on the construction of flats was levied at the rate of 1% to 2% which varied from state to state. It is to be noted that input tax credit was not allowed, and therefore, the cascading effect of taxation continued. The Central Excise and VAT levied and charged as aforesaid are ultimately borne by the consumers, consequently resulting in the increase in the price of the real estate project.
REAL ESTATE REGULATIONS AND DEVELOPMENT BILL 2013
The DLF v. Belaire case promulgated the draft of the real estate regulation and development bill of 2011. The bill had come into existence on 4th June, 2013 after certain amendments were made to it. It was introduced in Rajya Sabha on 14th August 2013 by the Housing and poverty alleviation ministry. The establishment of the real estate regulatory authority is changed with the responsibilities of regulating the real estate development activities and also to ensure transparency in the sector. It shall also be responsible for keeping a maintained record of development activities by making inquiries and directing the roles of promoters, allottees, and real estate agents. The real estate regulating authority along with the central advisory council shall advise the government on various policy matters governing the real estate. Under this real estate regulating and development bill 2013, residential real estate development projects shall require to register themselves with the real estate regulatory authority having jurisdiction over any location where development is deemed to be constructed.
DLF V. BELAIRE :- CASE STUDY
Over the span of years, the demand for housing in India has raised significantly. Taking advantage of the circumstances, private identities have gained a dominant position in the real estate sector without bothering about the buyers or consumers. As a result, the consumers cannot get complete knowledge or impose accountability against builders and developers in the non-availability of an effective redressal system in place.
Even though the Consumer Protection Act, of 1986 was enforced for the victims of the real estate market, the remedy was only corrective and was incompetent to meet all the problems of buyers and promoters in the real estate sector. The lack of professionalism had been a restraint to the strong and regulated growth of the industry. Therefore, the demand for administrating the real sector had been pinpointed in various forums. DLF Limited (DLF) advertised for the launch of their new project of a Group Housing Complex, known as ‘The Belaire’ which was situated in Gurgaon, Haryana. In the month of August 2006 to November 2006, the buyer had booked a flat by paying the advance of INR 2,000,000/- and the buyer’s agreement was signed months after the payment of advance money, before which more amount was also paid to the buyer.
In the original advertisements, the complex was to be a five-storied building of 19 floors each and 368 to be the number of apartments to be built therein. But, later instead of 19 floors with 368 apartments, 29 floors were constructed. As a result of which the areas and facilities were compromised for initial allottees and the completion of the project was also delayed which was promised to be three years from the date of the apartment buyer’s agreement. The above changes in the plans were made without informing the initial allottees and serious violations of the rights of allottees. When it came to the knowledge of the allottees regarding such development, the apartment allottees of ‘The Belaire’ formed the Belaire Owner’s Association) and filed a complaint in the Competition Commission of India on 5 May 2010. The complainant argued DLF had abused its dominant position as prescribed under s 4(2) (a)45 of the Competition Act, 2002, unfair and unreasonable conditions on the buyers, in the relevant market of residential accommodation in Gurgaon. Complete the contentions of the complainant while filing the complaint and included the arbitrary, unreasonable, and unfair clauses of the buyer’s agreement.
DLF also pointed out the stiff competition in the market and the number of players. It argued that it has a high turnover because of its presence in other markets. DLF argued that the conditions in the buyer’s agreement are generally followed terms of the industry and adopted by every builder and the agreement was signed after reading the same. The market share of DLF was revealed in the relevant market on the basis of the survey report of the Centre for Monitoring Indian Economy (CMIE) for the month of April 2010.
CONCLUSION
Sectors of real estate being probably the greatest area of our economy till now have stayed unregulated. Real estate contributes 9 % to the GDP of India’s growth. To address various issues in the real estate sector, the Central government enacted “The Real Estate (Regulation and Development) Act, 2016” which came into effect on 1st May 2017. The act postulates a constitution for every state’s regulatory authority which will have the responsibility to register and regulate real estate transactions and is required to maintain a website, which can be easily accessed by the buyers and allottees. The website shall contain information on all the real estate projects for which registration has been done. It is normal that RERA will change the situation of working in the real estate land area sector and make it more straightforward and available for buyers. The authority constituted under RERA has been vested with wider powers to impose penalties on the developer for any violation held by the developer. Therefore, the dispute resolution in RERA would be quicker and it will also act as a deterrent to the builder. It has been enacted at the right time when the developers exploit the buyers/allottees and their life savings are pocketed by the developers with no deliveries.
Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at ibc@centrik.in.
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