Explore Section 12 of the RERA Act in-depth and gain a comprehensive understanding of its implications and significance in the real estate regulatory framework
Introduction
The real estate sector plays a crucial role in the Indian economy and is expected to expand to a market size of US$ 1 trillion by 2030, a significant increase from the US$ 200 billion recorded in 2021. Furthermore, it is anticipated to contribute 13% to the nation’s GDP by 2025.
However, before 2016, this sector was characterized by disorganization and a complete lack of transparency. Buyers often faced challenges such as signing arbitrary documents, delayed property possession, or receiving properties vastly different from what was advertised and promised by developers.
To address these issues, the central government introduced the Real Estate (Regulation and Development) Act, of 2016, commonly known as the RERA Act. The RERA Act was enacted to enhance efficiency, and transparency, and safeguard the interests of property buyers. One critical provision within this act is Section 12, which outlines the promoter’s obligations concerning the accuracy of advertisements and prospectuses.
What is Section 12 of the RERA Act?
Section 12 of the RERA Act serves as a punitive measure, compelling promoters to provide compensation or refunds to buyers if they have accepted advances or deposits based on false or misleading advertisements.
Promoter’s Responsibilities as Per Section 12 of the RERA Act
It is not uncommon for promoters to make deceptive claims in their advertisements, enticing buyers with model apartments or plots. Buyers, swayed by these representations, invest substantial sums in these properties, only to realize after taking possession that they have been deceived.
In such cases, Section 12 comes to the buyer’s aid, entitling them to compensation for any losses incurred due to the builder’s inaccurate and false statements. Additionally, if the buyer wishes to withdraw from the project, they are entitled to a refund of their investment, along with applicable interest.
Sanctions Under Section 12 of the RERA Act: Examples
A notable instance of sanctions under Section 12 is the Maharashtra Real Estate Regulatory Authority (MahaRERA) permitting homebuyers to withdraw from a project where the builder provided false information and misleading details in the project brochure during the flat booking process.
This occurred in the case of the Ruparel Skygreens I project located in Borivli. MahaRERA resolved the matter by instructing the builder to refund the entire amount paid by the buyers, along with a two per cent interest rate.
Retroactive Application of Section 12
Section 12 is retroactively applicable, meaning it covers all ongoing projects without completion certificates as of the enactment of the RERA Act in 2016, as well as projects initiated after the act came into force. This interpretation has been consistently upheld by the courts.
Analysis of Case Laws Under Section 12
In the case of The Bombay Dyeing & Manufacturing Company Limited v/s Ashok Narang and Ors., the Bombay High Court, in its ruling on August 30, 2021, affirmed that Section 12 has a quasi-retroactive nature and applies to agreements made before the act’s implementation.
The High Court upheld the RERA tribunal’s decision against Bombay Dyeing, a developer of two “ultra-luxurious” towers in Wadala, directing them to refund the investments made by buyers along with interest.
The aggrieved buyers had booked their flats in 2012-13, with the brochure indicating that flat delivery would occur in 2017.
The court held that Section 12 of the RERA Act imposes obligations on the promoter regarding information provided to buyers before project registration as well.
Significance of Section 12 of the RERA Act
Section 12 of the RERA Act is an important provision that protects the interests of the allottees and ensures that the builder adheres to the obligations and responsibilities specified in the agreement.
Importance of Section 12 of the RERA Act
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an important legislation that aims to regulate the real estate sector in India. Section 12 of the RERA Act deals with the issue of builder’s obligations and responsibilities towards the allottees of a real estate project.
As per Section 12 of the RERA Act, the builder is required to adhere to the following obligations and responsibilities:
- Adherence to the Approved Plans and Project Specifications
The builder is required to construct the real estate project in accordance with the approved plans and project specifications. Any changes to the plans or specifications must be approved by the allottees and the concerned regulatory authority.
- Timely Completion of the Project
The builder is required to complete the real estate project within the time frame specified in the agreement with the allottees. In case of any delay, the builder is liable to pay compensation to the allottees.
- Transfer of Title
The builder is required to transfer the title of the real estate project to the allottees as per the agreement. The builder is also required to obtain the necessary approvals and certificates from the concerned authorities before transferring the title.
- Quality of Construction
The builder is required to construct the real estate project in accordance with the quality standards specified in the agreement. The builder is also required to rectify any defects or deficiencies in the construction within a specified time frame.
- Maintenance of Common Areas
The builder is required to maintain the common areas of the real estate project until the formation of a society or a residents’ welfare association.
- Refund of Amounts
The builder is required to refund the amounts paid by the allottees along with interest in case of any default or delay in handing over possession of the real estate project.
Conclusion
As previously mentioned, the RERA Act was introduced to safeguard the interests of buyers. Chapter III of the act outlines various functions and duties of promoters, with Section 12 being a pivotal provision within this chapter.
Therefore, it is the promoter’s obligation to provide accurate information to buyers about the project. To reinforce the effectiveness of this provision, it has been made punitive to discourage promoters from engaging in deceptive practices of furnishing false information to lure buyers into their projects.
Consequently, Section 12 is an integral component of the act, working in conjunction with other provisions to achieve the act’s objectives.
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