As the July 31 deadline approaches for developers to register their projects with the regulatory authority, RERA rules framed by most states including Haryana, Uttar Pradesh, Andhra Pradesh, Rajasthan leave out a majority of ongoing real estate projects from the ambit of the new regulatory law. These states have moved away from the Centre’s definition of ongoing projects and excluded projects for which lease deeds of either 50 percent or 60 percent of the apartments have been executed or for which partial completion or occupation certificates have been obtained by the developer. This leaves little hope for homebuyers stuck with old unfinished projects.
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In some states mere filing of application to the authority for issue of completion or occupation certificate is enough to ensure that the project does not come under RERA. Strangely, one state has even ruled that laying of slabs in a housing project is enough for the real estate project to be out of purview of the Act.
How does the Central Act define ongoing projects?
The Central Act simply has a completion certificate as the benchmark for exemption of projects under RERA. It clearly states that projects that have not received completion certificate on the date of the notification of the Act will be considered as ongoing. But states have gone a step further to define ongoing projects to suit their convenience.
Under the Central Act “The promoter of an ongoing project which has not received completion certificate (CC) shall, within the time specified in the said sub-section, make an application to the Authority as provided in rule 3.
The promoter shall disclose the following information, namely:-
(a) the original sanctioned plan, layout plan and specifications and the subsequent modifications carried out, if any, including the existing sanctioned plan, layout plan and specifications;
(b) the total amount of money collected from the allottees and the total amount of money used for development of the project including the total amount of balance money lying with the promoter;
(c) status of the project (extent of development carried out till date and the extent of development pending) including the original time-period disclosed to the allottee for completion of the project at the time of sale including the delay and the time period within which he undertakes to complete the pending project, which shall be commensurate with the extent of development already completed, and this information shall be certified by an engineer, an architect and a chartered accountant in practice.
For projects that are ongoing and have not received a completion certificate, on the date of commencement of the Act, the promoter shall, within a period of three months of the application for registration of the project with the authority, deposit in the separate bank account, seventy percent of the amounts already realised from the allottees, which have not been utilised for construction of the project or the land cost for the project which shall be used for the purposes specified therein.
Here’s a look at how states have interpreted ‘ongoing projects’
The Haryana Cabinet approved the final Haryana (Regulation and Development) Rules, 2017, this week and claimed that the central Act had not been diluted. Under the rules, the term “ongoing project means a project for which a licence was issued for the development under the Haryana Development and Regulation of Urban Area Act, 1975 on or before 01.05.2017 and where development works were yet to be completed on the said date, but does not include (i) any project for which after completion of development works, an application under Rule 16 of the Haryana Development and Regulation of Urban Area Rules, 1976 or under sub code 4.10 of the Haryana Building Code 2017, as the case may be, is made to the Competent Authority on or before publication of these rules and (ii) that part of any project for which part completion/occupation certificate or part there of has been granted on or before publication of these rules.”
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Under Haryana rules, ongoing projects are those for which licence has been granted on or before May 1, 2017 and where development work is yet to be completed. It excludes projects that have submitted an application with the authority on or before notification of the RERA rules. Projects for which part completion has been given on or before publication of the rules will also be out of RERA.
“Projects or any part of a project that has a part occupation certificate or a part completion certificate or an occupation certificate are now exempted from HRERA as per final rules. This is in contravention to RERA ACT 2016 which only talks about CC as the deciding factor for applicability of RERA on the project,” says Gaurav Prakash, a homebuyer.
In Gurgaon alone over 2 lakh housing units could have come under the purview of RERA if the rules had followed the Central definition but now most of them may not be covered as per HRERA, he says.
A media report quoted an official of the Haryana department of town and country planning as saying that this was the “only practical way of implementing RERA. No residential project in Gurgaon has a completion certificate. Only a few commercial projects have taken a CC. Not changing the criteria of ongoing projects would have created a big problem,” the official said.
Uttar Pradesh became the fifth state in the country to launch its Real Estate Regulatory Authority (RERA) website www.up-rera.in this week. Over 450 developers and more than 250 agents have registered so far. There are over 10,000 builders spread across the state. Punjab, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh are the five states that have a RERA website. Builders now have four days to register their ongoing projects. Over 1000 homebuyers have also filed complaints.
Under UP RERA, ongoing projects refer to projects where development work is on and for which completion certificate has not been issued. It excludes projects where services have been handed over to the local authority for maintenance; where common areas and facilities have been handed over to the association or the residents’ welfare association for maintenance; where all development work has been completed and sale/lease deeds of sixty percent of the apartments/houses/plots have been executed and where development works have been completed and application has been filed with the competent authority for issue of completion certificate.
“In this case too mere filing of application with the authority and execution of 60 percent of lease deeds is enough for projects to be out of RERA. In case a builder has taken 12 years to complete a project and executed 60 percent of sale deeds, it is highly unlikely that he will be encouraged to complete the remaining 40 percent as the project will in any case be out of RERA,” says Abhay Upadhyay, National Convenor, Fight For RERA, adding buyers in these projects, therefore, cannot bank on Rera for a solution.
Noida and Greater Noida together currently have 82 ongoing builder projects.
In Andhra Pradesh, RERA defines ongoing project as one where development is going on and for which occupation certificate or a completion certificate has not been issued. It excludes projects that fulfill the following criteria on the date of notification of the rules. They include - where roads, open spaces, amenities and services have been handed over to the local authority in layout projects; where all slabs are laid in housing projects; where all developmental works have been completed and sale /lease deeds of 50 percent of the apartments/houses/plots have been executed and where development works have been completed and application has been filed to the competent authority for issue of completion or occupancy certificate.
“Some of the exclusion provisions in this case are ludicrous. Projects where the concrete structure is ready are out of RERA is unbelievable,” says Upadhyay. Also, mere filing of application with the authority will guarantee that the project is out of RERA. There is no requirement for a competent official to provide an audit report for the project, give an assessment of the extent of work completed before issuing a completion certificate, adds Upadhyay.
In case of Maharashtra RERA rules, a developer of an ongoing project, in which all buildings as per sanctioned plan have not received occupancy certificate or completion certificate, as the case may be, shall be required to submit application for registration for each such phase of the project, within a period of three months from the date of commencement of Section 3.
It explains that the expression "phase of the project" means the building or buildings in a project in respect of which occupancy or completion certificate has not been received.
It defines the term “completion certificate” to mean such building permission or certificate, by whatever name called, which is issued by the competent authority by or under the provisions of Maharashtra Regional Town Planning Act, 1966 or any other law for the time being in force, in accordance with which the permission for development has been granted.
Maharashtra rules state that if a completion certificate or occupancy certificate has not been granted for all buildings coming up as part of a phase-wise project development, that phase will be required to register under RERA. This is confusing because the reverse may also be true. If there are four buildings in phase one of a project and only one building has a completion certificate, the remaining three buildings will also be out of RERA by default. Also, it must be remembered that under the Central Act there is no mention of phase-wise completion of a project. It only refers to completion of the entire project.
Developers from Jabalpur and Nagpur have initiated legal proceedings in Bhopal and Mumbai high courts against the implementation of RERA on ongoing projects. The stance of the National Real Estate Development Council (NAREDCO) is that it will not move the court against implementation of RERA, with regard to ongoing projects, simply because it will help build confidence among buyers.
NAREDCO is not opposed to implementation of RERA on ongoing projects, but some aspects ideally, should not have been implemented with retrospective effect. One point which media reports suggest prompted the two developers from Jabalpur and Nagpur to move their respective high courts - depositing unused 70 percent of the money collected from the buyers in a dedicated escrow account. In Maharashtra, MahaRERA stipulates 70 percent of all future payments from buyers in ongoing projects must go in the escrow account. This would be a better option, and a more practical one as opposed to the point which has prompted the two developers to move the courts, a Naredco statement said.
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Punjab RERA rules define “ongoing projects” to mean real estate projects which are ongoing and in which development and development works are still under way. It excludes the area of portion of the real estate project for which partial completion or occupation certificate, as the case may be, has been obtained by the promoter of the project.
Rajasthan RERA rules also define “ongoing projects” to mean projects where development is going on and for which completion certificate has not been issued. Projects that may be excluded from the ambit of the Act are those where common areas and facilities have been handed over to the association of allottees or the competent authority, as the case may be, for maintenance; where sale/lease deeds or possession letter of minimum sixty per cent of the apartments /houses/plots in the phase/project have been executed; where all development works have been completed and completion certificate has been obtained from chartered engineer in practice as per prevalent township policy; where completion certificate has been obtained from the competent authority or where all development works have been completed and application has been filed with the competent authority. Where development is executed in phases, then each phase shall be considered as a separate project and the phases which fulfill any of the above conditions shall be excluded.
Karnataka RERA rules define ongoing projects where development is going on and for which completion certificate has not been issued but excludes such projects which fulfil any of the following criteria on the date of notification of these rules, namely where the streets and civic amenities sites and other services have been handed over to the local authority and planning authority for maintenance; where common areas and facilities have been handed over to the registered association consisting of majority of allottees; where all development works have been completed as per the Act and certified by the competent agency and sale/lease deeds of sixty percent of the apartments/houses/plots have been registered and executed; where all development works have been completed as per the Act and certified by the competent agency and application has been filed with the competent authority for issue of completion certificate /occupation certificate and where partial occupancy certificate is obtained to the extent of the portion for which the partial occupancy certificate is obtained.
Experts point out that there is no concept of partial completion certificate or phase-wise completion of the project under Central RERA. It only talks about project completion in its entirety.
“Section 3 (1) of the Central Act talks about completion certificate, which is defined under Section 2 (q) of the Act. So unless law defines otherwise completion certificate will mean only completion certificate and nothing else. To mean it anything else, like partial completion etc, it must be backed by law,” says Narendra Kumar, advocate on record, Supreme Court.