In a major relief to homebuyers, the Bombay High Court on Wednesday upheld the validity of the Real Estate (Regulation and Development) Act (RERA) 2016 for all incomplete and ongoing projects. Several real estate developers and individual plot owners had challenged the constitutional validity of the act that came into force on May 1 this year and some of its provisions.
Minister for housing and urban affairs tweeted, “While I await a copy of the detailed judgment, I am delighted that Bombay High Court has upheld the constitutional validity of RERA which was challenged by some builders. Should come as a relief to homebuyers.”
A bench comprising of Justice Naresh Patil and Justice Rajesh Ketkar pronounced its judgment on a bunch of petitions filed by the developers and individual plot owners. “We hold that the challenge to constitutional validity of first proviso to section 3(1), 3(2)(a), explanation to section 3, section 4(2) (l) (c), section 4(2) l) (d), section 5(3) and the first proviso to section 6, section 7,8,18,22,38,40,59,60,61,63,,64 of Real Estate (Regulation & Development) Act, 2016 fails. These provisos are held to be constitutional, valid and legal,” said the bench.
However, the court permitted the RERA Authority to grant an extension of time to developers for completion of projects on a case-by-case basis. It also said that the authority should not cancel projects or developers' registration in cases where the delay was caused due to "exceptional and compelling circumstances."
The court also struck down a provision that called for the appointment of bureaucrats as members of an appellate tribunal. In the constitution of a tribunal, majority members must be judges or judicial officers, the court said.
“Having constitutionally upheld RERA, High Court of Bombay has reinforced the need for regulations to protect homebuyers’ interests in the real estate sector. RERA has now passed through the executive, legislature and judicial test. We urge the Centre, states and regulatory authorities to implement RERA in letter and spirit expeditiously and protect homebuyers’ interests,” says Abhay Upadhayay, president, Forum For People’s Collective Efforts.
Builders too reacted saying that they support the decision of the Bombay High Court to uphold the validity of the Act.
“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 homebuyers and we fully support the decision of the hon. 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,” said Jaxay Shah, President, CREDAI National.
Commenting on the Bombay High Court decision to allow the regulatory authority to grant extension of time for completion of a building beyond the stipulated one year, though only in exceptional cases and on a case-by-case basis, Dr Niranjan Hiranandani, CMD, Hiranandani Communities and also president, National Real Estate Development Council (NATION), said, “From a builder’s perspective, there may be genuine impediments in competition of the project, which would render builders liable to penal actions for such delays. This is a realistic decision by the Hon’ble Division Bench of the Bombay High Court.”
“Ground realities have to be taken into consideration for purposes of calculating the time for completion of a building. The Bombay High Court’s decision effectively means that those problems which are beyond the control of the builders, such as time overruns for clearances and permissions – take for example, environmental clearance or height clearance, or the existing stay order on account of solid waste management issues – these will be taken into consideration in case there is a delay in the project’s completion,” he said.
Builders had filed cases in the High Courts of Bombay, Nagpur, Aurangabad, Bangalore challenging provisions of RERA including the provision of ongoing projects. DB Realty group of companies, had challenged as illegal, a provision which bars—except in case of a force majeure or a natural disaster—any extension beyond a year for completion of project, if it is not completed within the deadline mentioned by the builder while registration.
The government of India had filed a Transfer Petition in the apex court that sought for clubbing all similar cases in various courts. Thereon, the Supreme Court had directed High Court of Bombay to hear the cases filed in Maharashtra with a directive to give a judgment within 2 months.
The Bombay High Court had concluded hearing arguments in this matter last month.