A very significant challenges faced by businesses in India is non – compliance. Most of the startups, MSMEs and sometimes large corporates are so focused on their core businesses that they forget that it is one of the most important task before them. They tend to go for breakdown maintenance instead of preventive maintenance and in their urgency they tend to pay more by hiring a professional without looking at their competence or whether they can properly tend to the requirements or not.
Today, I wanted to discuss the compliances regarding Real Estate Businesses. Real Estate Sector in India is governed by both Central and State laws in accordance with Article 246 of the Constitution of India. Some of the Central laws include the following:
The Real Estate Regulation and Development Act, 2016 (RERA)
Foreign Exchange Management Act, 1999 (FEMA) and Foreign Direct Investment Policy (FDI Policy)
Indian Contract Act, 1872
Registration Act, 1908
Indian Stamp Act, 1899
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013
Transfer of property Act, 1882.
Indian Easement Act, 1882
Income tax Act, 1961
GST Act, 2017
State Land Revenue codes.
There are mandatory registrations and Licenses required in the Real Estate Businesses. The following are the listed ones:
Key registration and licenses under the Real Estate Regulation and Development Act, 2016 (RERA):
1. Sale Deed: indicates the title of the ownership of the person and it must be produced in the original document form to get a valid registration.
2. Khata Extract: is a documentary proof that the property has a valid municipal title and it has been constructed in accordance with a proper plan.
3. General Power of Attorney: is a document which authorizes the sale and purchase in the valid legal manner. It denotes that the authorized agent has the valid power to deal in the property.
4. Copy of Building Plan: It is the duty of the buyer to get the construction plan approved by the Statutory Authority and confirm that the construction is legal and acceptable.
5. No Objection Certificate: Minimum of 19 NOCs are required by the developer from various regulatory authorities for buying a housing project.
6. Allotment Letter: is issued by the Housing Development Authority that clearly describes the particulars of the property including its location, amount and other related details.
7. Possession Letter: This document is acquired by the buyer from the developer while taking possession of the property. It mentions the date on which the property has been granted to the buyer.
There are other certificates like Encumbrance Certificate, Occupancy Certificates, Completion Certificates, Property Tax Receipts, Payment Receipts and other documents that may be required to be exchanged between the buyer, developer and different Statutory authorities.
Penalties of Noncompliance:
I. Buyers:
Non-compliance with RERA - Daily penalty up to 5% of the approximate cost of the project
Non-compliance with the Appellate Tribunal - Imprisonment up to 1 year or 10% of the approximate cost of the project, or both.
II. Promoters:
Non-registration - 10% of the project's estimated cost
Giving false information - 5% of the project's estimated cost
Violation of laws - Up to 3 years' imprisonment or a fine of 10% of the estimated cost of the property, or both
In the landscape of Indian real estate, 2024 brings new challenges and opportunities. For developers, compliance is non-negotiable. From RERA to local statutes, understanding and meeting legal obligations are essential. By securing registrations, licenses, and prioritizing transparency, developers can safeguard their projects and reputation. Compliance isn't just about meeting regulations; it's about building trust and sustainability in a dynamic market.
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