Real Estate Regulations Central V/s. State Bill

Accommodation Times Bureau


BY K. K. Ramani (Advocate)

The Real Estate (Regulation & Development) Bill 2011 is an attempt to regulate and ensure planned development in the real estate sector and introduce efficiency and transparency in the sale of immovable properties. This is sought to be done, inter alia, by establishing Real Estate Regulatory Authority (RERA) and an Appellate Tribunal known as Real Estate Appellate Tribunal (REAT) for speedy resolution of disputes.
2. The proposed enactment is a laudable step taken by the Government at the Centre particularly in States which do not have their own legislation to regulate the activities of the builder. Its efficiency is, however, doubtful in states like Maharashtra which has its own legislation meant to achieve the same purpose. The present enactment MOFA is now sought to be substituted by a fresh enactment Maharashtra Housing (Regulation and Development) Act 2011, a draft of which has been circulated for eliciting reactions of the stakeholders.

3. A question is being raised as to whether the two legislations – central as well as state – existing simultaneously are required and whether they will create confusion, duplication and contradictions creating a breeding ground for corruption, mistakes and an opportunity for unscrupulous builders to reap the benefit of confusion created by them. A reading of the two draft bills bring out that the proposed provisions in the two bills are starkingly different in some respect and if one is to adhere to both, it will not only be unworkable but lead to enormous duplication and confusion.
Even though R.E (R&D) Act is an Act of the Central Government, it depends on the “Appropriate Government” in several matters. “Appropriate Government” has been defined to mean the concerned State Govt.

As per the Bill —

The RERA shall furnish a detailed report to the State Govt. with reasons for delay in granting registration [Proviso to Sec.4(6)]

The RERA is required to consult the Govt. in the matter of carrying out the remaining work in the event of lapse or cancellation of registration (Sec.6).

The RERA is to act as the nodal agency to co-ordinate all efforts of the State Govt. regarding the development of real estate Sector [Sec.29(2)(c)].

The RERA is to make recommendations to the Govt. on matters connected with the Act [Sec.29(2)(h)].

The RERA is to perform such other functions as may be entrusted to it by the Govt.

From the Scheme it is clear that the State Govt. has a role to play in the working of the Act and also a power to issue directions to the Authority. With its role in another Act with similar purpose, how the system will work can only be a matter of guess.

Both the enactments envisage appointment of ‘Competent Authority’ but the constitution and functions of the two are not similar. The Central Act envisages the CA as the local authority or any other authority exercising authority over the land and having power to give permission for development. In other words C.As are present municipal bodies. The State Act, however, provides for such authority to be an officer of Co-operative department not below the rank of Dist. Dy. Registrar. The C.A. under the State Act is to exercise powers and perform duties u/s. 7, 12 and 13 which means ensuring maintenance of separate account of advances and deposits by builders, ensuring steps for formation of co-operative society and effecting conveyance of title to it.

The two Acts seek to regulate the activities of the promoters. The meaning given to the term, however, is significantly different. The Central Act has a wider scope and include within this term the following which are not included under the State Act:-

Persons developing colony for selling plots.
Dev. Authority at whose disposal buildings are placed by the government.
Dev. Authorities owning plots for selling
Co-operative Housing Finance Societies.
Person acting as Contractor.

Apart from the difference in scope under the two Acts, it is not clear as to how and in what manner the provisions can be applied to those selling plots only and those acting as contractor for the builders.
(d) The concept of carpet area is also different under the two Acts. Whereas the State Act excludes area specifically exempted from FSI computation, there is no such exclusion under the Central Act. The promoter in such cases will be at a loss to determine how to abide by both the legislations.

4. Apart from the concept of ‘promoters’ and the subject matter of regulation, the obligations of promoters under the two Acts are different in many respect.

The obligation to get registered under the Central Act does not apply where the land area does not exceed 4000 Under the State Act, the exempted project is one where land area does not exceed 250 sq. mt. Projects between 250 and 4000 will need to be registered under the State Act only and those above 4000 under both. It is not clear whether other provisions of the Act will apply even if registration requirement is not there.

Further, the State Act exempts those projects in which the number of flats is less than 5. There is no such exemption in Central Act. The State Act exempts projects of renovation, repair, reconstruction or redevelopment which does not involve marketing. Such exemption is not under Central Act.

In the matter of receiving deposit/advances from the buyer, the two Acts are significantly different. While the Central Act prohibits any payment except refundable application fees before the agreement is executed, the State Act prohibits payment exceeding 20% before execution of agreement.

The Central Act provides for 70% of the amount realized from the allottees to be kept in a separate account for meeting the cost of real estate project and the same can be used only for that purpose. The provision is designed to prevent the practice of launching a project and start booking even before the project is ready to commence and use the amount realized for other projects. There is no similar provision proposed in the State project.

5. I have not considered the constitutional aspect of legislating on the subject in the foregoing paragraphs. Without going into such aspect, it can be said that although the two Acts have the same object to achieve, the provisions are materially different and if one is to abide by both, there is bound to be insurmountable confusion resulting in duplications, delays, conflicts and resulting corruption and harassment.
6. A possible solution can be reconciliation of the two. One possible suggestion can be for the centre to make the law as a model Act and leave it to the States to enact their own law on similar lines. The other can be for the centre to make certain provisions mandatory and leave it to the state to make adjustments in others depending upon the need and circumstances prevailing in the State.

K. K. Ramani (Advocate)

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One thought on “Real Estate Regulations Central V/s. State Bill

  1. The learned writer, as is seen on the first reading, has touched upon several areas requiring a fresh look by the Centre, before going ahead with the proposed legislation.
    Undoubtedly, some of the views put forth should help.
    For the viewpoints canvassed from a different but not totally varying perception, one may wish to go through the related Blog on the Google website @ Such independent views, of course, require be putting across effectively and reaching to the ministry, in order that they really serve the intended purpose or objective.

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