The Union Ministry of Housing and Urban Poverty Alleviation has published the draft Model Real Estate (Regulation of Development) Act, which proposes to establish a regulatory authority to control and promote the construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties. As its name suggests, the model act has been created with the intention that it eventually be adopted by all states within India.
It seeks to establish a Real Estate Regulatory Authority (RERA) in each state. All real estate projects in which the area of land exceeds 1,000 metres, or where more than four apartments are proposed to be constructed, will have to be compulsorily registered with RERA.
A promoter applying for registration will have to furnish a bank guarantee equivalent to 5% of the project’s development cost in favour of the appropriate government agency. The government agency can invoke the bank guarantee and use the proceeds to complete the project if the promoter is unable to finish it within the period of registration (three years). If a promoter’s inability to meet the deadline is due to reasons outside their control, up to two renewals of one year each may be sought.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
