The Bombay High Court on Wednesday upheld the constitutional validity of the Real Estate (Regulation and Development) Act (RERA), which had mainly been challenged by real estate developers. The court held that RERA “has an adequate mechanism, which balances the rights and obligations of the promoter, real estate agent and the allottee”.
A bench of Justice Naresh Patil and Justice Rajesh Ketkar pronounced the judgment after hearing a bunch of petitions filed by real estate developers, individual plot owners and cooperative societies that had challenged the constitutional validity of various sections of the Act brought into effect in May this year.
The bench, however, allowed significant prayers by the developers permitting the Real Estate Regulatory Authority to grant extension of time to a builder to complete the project in exceptional cases and on a case-to-case basis. “In case the Authority is satisfied that there are exceptional and compelling circumstances due to which a developer could not complete the project in spite the one-year extension granted, then the Authority will be entitled to let the developers’ registration continue,” said the bench. “Such powers shall be exercised on a case by case basis…The Authority shall consult with the government in such cases if needed,” said the bench.
Most developers had challenged a provision which bars — except in case of a force majeure or a natural disaster — an extension beyond a year for completion of the project that could not be completed within the deadline mentioned by the builder while registering it. The court also observed that the appellate tribunal set up to hear such matters shall comprise judicial members.
On the matter of payment of compensation to an allottee, if a project is delayed, Justice R G Ketkar said, “In my opinion, Section 18 is compensatory in nature and not penal. The promoter is in effect constructing the apartments for the allottees. The allottees make payment from time to time… It is, therefore, not unreasonable to require the promoter to pay interest to the allottees whose money it is when the project is delayed beyond the contractually agreed period.”
The bench ruled that the Act was crucial to protect the interest of flat buyers across the country. “We are conscious of fact that the actual implementation of RERA needs to be closely monitored in years to come. RERA is not a law relating to only regulatory concerns over the promoter but it’s objective is to develop the real estate sector, particularly the incomplete projects across the country. The problems are enormous and it’s time to take a step forward to fulfil the dream of the Father of the Nation to wipe every tear from every eye,” said the court.
The Act, among other things, mandates that all developers or promoters register themselves under a state-level regulatory authority. It also allows buyers to claim compensation for delay in possession and envisages cancellation of a developer’s registration besides imposing severe penalties in a case where the developer fails to complete the project within the stipulated deadline. “Merely because sale and purchase agreement was entered into by the promoter prior to coming into force of RERA does not make the application of enactment retrospective in nature,” said Justice Patil.
“RERA was passed because it was felt that several promoters had defaulted and such defaults had taken place prior to coming into force of RERA. In the affidavit in reply, the Union of India had stated that in the State of Maharashtra, 12,608 ongoing projects have been registered, while 806 new projects have been registered. This figure itself would justify the registration of ongoing projects for regulating the development work of such projects,” he added.
Additional Solicitor General Anil Singh and Advocate General A Kumbhakoni along with advocate Shardul Singh had defended the Act and justified the strict provisions by arguing that it was a beneficial legislation and had been brought to balance the interest of all stakeholders.
In September, after several petitions challenging the Act were filed in high courts across the country, the Supreme Court stayed the proceedings in other courts and suggested that the Bombay High Court hear its RERA cases first.
Devendra Fadnavis, Chief Minister, Maharashtra
“The Bombay High Court’s decision to uphold the constitutional validity of MahaRERA is good news. It would provide huge relief to the common man. It would help the government to pursue the process of streamlining and bringing greater accountability and transparency in the construction sector. The purpose of introducing MahaRERA was to get rid of unexplained delays that often worked detrimental to the common man who often invests his/her hard earned money in the house.”
Jaxay Shah, President, CREDAI National
“CREDAI continues to support the implementation of RERA and aims to fulfil its purpose to safeguard the best interests of all stakeholders while also working towards the long-term development of the Indian real estate industry. We believe that the soul of RERA lies with the home buyers, and we fully support the decision of the High Court to uphold the validity of the Act. RERA will prove to be a significant game-changer for the industry which is already evident from the increased demand for real estate properties in the country. We hope and expect that the sector’s upward trajectory will endure over the course of the New Year and beyond.”
Dr Samantak Das, Chief Economist & National Director-Research, Knight Frank (India) Pvt Ltd.
“This is a welcome move, as the main objective of RERA is to establish a legal regulator. RERA gives the required confidence to the buyers to invest in real estate. Many developers, not all, didn’t want this type of regulation because this means that they would have to share the details of their project. Add to that, the penal charges in the form of interest rate also hurts the developers. With the coming of RERA, the real estate industry is no longer skewed against the buyer, the playing field is equal.”