4th Floor, Centerpoint, Jn. of SV Road & Juhu Tara Road, Santacruz West
Mumbai, Maharashtra
400054 India

BUYER'S GUIDE

RERA ACT

OVER VIEW: REAL ESTATE (REGULATION & DEVELOPMENT) ACT, 2016.
1. While the Act has been notified on 25th March 2016, it comes into force from a date to be notified. 2. Different dates may be notified for different provisions of this Act to come into force. 3. The Act seeks to protect the interest of the allottees/purchasers by promoting transparency, accountability and efficiency in the construction and execution of real estate projects by promoters. 4. It also holds the promoters accountable for not registering their projects with the Real Estate Regulatory Authority (Regulatory Authority) or for providing insufficient information regarding their projects, and timely completion of the projects. 5. It also brings Real Estate brokers into its ambit, which facilitates the sale and purchase of units in a project. 6. Under the Act, a separate authority would be formed called “Real Estate Regulatory Authority”, which will be set up within one year from the date of coming into force of the Act. Till then, the appropriate State Government shall designate any authority from Housing Department as the Regulatory Authority. 7. Within a period of 1 year from the date of coming into force of this Act, Real Estate Regulatory Authority and Real Estate Appellate Tribunal and other such councils or forums would be formed for the smooth functioning and proper governance and compliance of the Act.
(A) REGISTRATION

1. The promoter of either a residential or a commercial project has to register with the Regulatory authority. 2. The registration is to be done before booking, selling or offering apartments for sale. 3. If the project or the site is to be promoted in phases, then each phase is to be considered as a stand-alone project, and the promoter shall obtain registration for each phase separately. 4. For the projects which have already commenced but the Completion Certificate has not been received from the competent authority on the date of commencement of the act, the promoters shall make applications for registration of such projects within 3 months from commencement of the Act. 5. Projects where completion certificate is received before commencement of the Act are not required to register with the regulatory authority.

(B) APPLICABLITY

1. Projects where the area of land proposed to be developed exceeds 500 Square meters or, the number of apartments to be constructed exceeds 8 apartments. 2. Projects for purpose of renovation, repairs or re-development, only if they require advertisement, marketing, selling and new allotments of any apartment, plot or building.

2. Projects for purpose of renovation, repairs or re-development, only if they require advertisement, marketing, selling and new allotments of any apartment, plot or building.

(C) PROCEDURE FOR REGISTRATION

1. Every promoter has to make an application for registration in such form, manner, within such time and accompanied by such fee as may be specified by the regulations made by the Authority. 2. Documents for application :- i) Details of the promoter (such as its registered address, type of enterprise – sole proprietorship, society, partnership, company, competent authority). ii) Brief details on projects launched by promoter in past 5 years, either completed or ongoing; including current status of project, delay in completion, details of pending cases, details of type of land and pending payments. iii) An authenticated copy of approvals and commencement certificate from competent authority. If the project is in phases, then same is required for each phase. iv) The sanctioned plan, layout plan and specifications of the project, plan of development works to be executed in the proposed project, the proposed facilities to be provided thereof and the location details of the project; v) Proforma of the allotment letter, agreement for sale and conveyance deed proposed to be signed with the allottees; vi) Number, type and carpet area of the apartments and the number and areas of garages for sale in the project; vii) The names and addresses of the promoter’s Real Estate Agents, if any, and contractors, architects, structural engineers affiliated with the project; viii) A declaration supported by an affidavit stating that : a. the promoter has a legal title to the land, free from all encumbrances, and in case there is an encumbrance, then details of such encumbrances on the land including any right, title, interest or name of any party in or over such land along with the details; b. the time period within which he undertakes to complete the project or the phase, c. 70% of the amounts realized for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.

2. Documents for application :- i) Details of the promoter (such as its registered address, type of enterprise – sole proprietorship, society, partnership, company, competent authority). ii) Brief details on projects launched by promoter in past 5 years, either completed or ongoing; including current status of project, delay in completion, details of pending cases, details of type of land and pending payments. iii) An authenticated copy of approvals and commencement certificate from competent authority. If the project is in phases, then same is required for each phase. iv) The sanctioned plan, layout plan and specifications of the project, plan of development works to be executed in the proposed project, the proposed facilities to be provided thereof and the location details of the project; v) Proforma of the allotment letter, agreement for sale and conveyance deed proposed to be signed with the allottees; vi) Number, type and carpet area of the apartments and the number and areas of garages for sale in the project; vii) The names and addresses of the promoter’s Real Estate Agents, if any, and contractors, architects, structural engineers affiliated with the project; viii) A declaration supported by an affidavit stating that : a. the promoter has a legal title to the land, free from all encumbrances, and in case there is an encumbrance, then details of such encumbrances on the land including any right, title, interest or name of any party in or over such land along with the details; b. the time period within which he undertakes to complete the project or the phase, c. 70% of the amounts realized for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.

(D) UTILIZATION OF THE AMOUNT REALIZED

1. 70% of amount received by the promoter from allottees at different stages should be deposited in a separate scheduled bank account, and to be used for the particular project only.

2. Amount from the account can be withdrawn by the promoter for the cost of the project and in proportion to percentage of completion; only after it is certified by an engineer, an architect and a Chartered Accountant in practice that it is in proportion to the percentage of completion.

3. Promoter is required to get the books of accounts audited within six months after the end of every financial year, and obtain a certificate from a CA in practice that the amount collected is used for the project and amount withdrawn from the bank account is in proportion to the percentage of completion.

(E) GRANT OF REGISTRATION & EXTENSION

1. On receipt of application, Regulatory Authority shall grant or reject the registration within the period of 30 days. 2. If the application is either not granted or rejected within 30 days of application by the Regulatory Authority, then project is deemed to be registered. 3. Upon registration, promoter will be provided with registration number, Login id and password to access the website of Regulatory Authority; to create the web page and fill in the details of the proposed project. 4. Registration granted would be valid till the period of completion of project as stated by promoter to the regulatory Authority. 5. The period of registration can be extended in reasonable circumstances, without default on the part of the promoter, based on the facts of each case, for reasons to be recorded in writing, but by not more than 1 year on payment of such fees as may be specified in the regulations made by the Regulatory Authority. It can also be extended for longer periods under force majeure events, such as war, fire, flood or other natural calamities.

2. If the application is either not granted or rejected within 30 days of application by the Regulatory Authority, then project is deemed to be registered. 3. Upon registration, promoter will be provided with registration number, Login id and password to access the website of Regulatory Authority; to create the web page and fill in the details of the proposed project. 4. Registration granted would be valid

3. Upon registration, promoter will be provided with registration number, Login id and password to access the website of Regulatory Authority; to create the web page and fill in the details of the proposed project. 4. Registration granted would be valid till the period of completion of project as stated by promoter to the regulatory Authority. 5. The period of registration can be extended in reasonable circumstances, without default on the part of the promoter, based on the facts of each case, for reasons to be recorded in writing, but by not more than 1 year on payment of such fees as may be specified in the regulations made by the Regulatory Authority. It can also be extended for longer periods under force majeure events, such as war, fire, flood or other natural calamities.

4. Registration granted would be valid till the period of completion of project as stated by promoter to the regulatory Authority. 5. The period of registration can be extended in reasonable circumstances, without default on the part of the promoter, based on the facts of each case, for reasons to be recorded in writing, but by not more than 1 year on payment of such fees as may be specified in the regulations made by the Regulatory Authority. It can also be extended for longer periods under force majeure events, such as war, fire, flood or other natural calamities.

5. The period of registration can be extended in reasonable circumstances, without default on the part of the promoter, based on the facts of each case, for reasons to be recorded in writing, but by not more than 1 year on payment of such fees as may be specified in the regulations made by the Regulatory Authority. It can also be extended for longer periods under force majeure events, such as war, fire, flood or other natural calamities.

(F) REVOCATION OF REGISTRATION

1. Regulatory authority may revoke the registration of the promoter if ; a. Promoter defaults in doing anything as per rules or act; b. Promoter violates terms and conditions on which approval or registration was granted. c. Promoter is engaged in any of unfair practices or irregularities.

2. Unfair practices would include falsely representing that the services are of a particular standard or grade, that the promoter has an approval or affiliation which he does not have, and permitting publication of advertisement or prospectus stating services that are not intended to be offered.

3. Registration can be revoked only after regulatory authority gives 30 days notice in writing stating the grounds of revocation.

4. On revocation, the promoter would be debarred from accessing the website and his name would be added in the list of defaulters on the website.

5. On revocation, the remaining development work to be carried out by the competent authority or association of allottees or in any other manner as determined by Regulatory authority.

6. Association of allottees have the first right to refuse carrying out of the remaining development work.

7. The Regulatory authority would direct the bank to freeze the project bank account.

(G) FUNCTIONS AND DUTIES OF PROMOTER

Website:

1. On receipt of login Id & Password, the promoter has to create his web page on the website. 2. He has to enter details of the registration granted by the authority on the website. 3. Quarterly update status of the project along with the list of approvals obtained and approvals pending subsequent to commencement certificate. 4. Quarterly update list of the number and types of apartments or plots or garages, as the case may be, booked.

For Private Circulation only CNK & Associates LLP Page 5 of 8 Advertisements:

1. The advertisement or prospectus issued should mention the website address where all details of the registered project is entered. 2. Advertisement should include the registration number obtained from the Regulatory Authority. 3. In case any person makes any advance or deposit to the promoter on basis of advertisement and sustains loss or damage because of any incorrect or false information included in the advertisement, then the promoter would be liable to compensate in the manner as provided in the act. 4. If the person affected by such incorrect or false statement in the advertisement wants to withdraw from the project, his entire investment will be returned to him (along with interest at such rate as may be prescribed and compensation in the manner provided under the Act).

Advances & Deposits:

1. A promoter shall not accept a sum of more than 10% percent of the cost of the apartment, plot, or building, as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement of sale with such person and registering the said agreement of sale.

Plans & Project Specifications:

1. The promoter cannot make any addition or alteration in the approved and sanctioned plans, structural designs, specifications and amenities of the apartment, plot or building without the previous consent of the allottees. 2. The promoter cannot even make any other addition or alteration in the approved and sanctioned plans, structural designs and specifications of the building and common areas within the project without the previous written consent of at least 2/3rd of the allottees, other than the promoter, who have agreed to take apartments in such a building. 3. If there is any structural defect or any defect in workmanship or quality of provision of service and the same is brought to the notice of the promoter within a period of 5 years from the date of possession by the allottee, the promoter will have to rectify the same without any additional charge and within 30 days.

Transfer of Project:

1. The promoter cannot transfer or assign the rights & liabilities of a project to a third party without obtaining written consent from 2/3rd of the allottees and without written approval of the regulatory authority. 2. On transfer of the project, the intending promoter has to comply with all the pending provisions of the Act and the pending obligations as per the agreement of sale. Moreover the intending promoter needs to complete the project within the earlier allowed time limit only; no extension of time would be given on account of transfer.

For Private Circulation only CNK & Associates LLP Page 6 of 8 Other Duties:

1. The promoter shall obtain insurance as may be notified by the appropriate Government, including but not limited to the title of the land, building and construction of the project. The promoter shall also be liable to pay the premium and charges in respect of the insurance. 2. The promoter shall compensate the allottees in case of any loss caused to them due to defective title of the land in the manner as provided under the Act, and such claim for compensation shall not be barred by limitation provided under any law for the time being in force. 3. The promoter shall execute a registered conveyance deed in favour of the (i) Allottee in respect of the apartment, plot or building; and (ii) association of allottees of competent authority in respect of the undivided proportionate title in the common areas, and hand over possession of the same within the period as specified under the local laws. In the absence of any local law, such conveyance deed shall be executed by the promoter within three months from date of issue of the occupancy certificate. 4. After the promoter executes an agreement for sale for any apartment, plot or building, no mortgage or charge can be created by the promoter on such apartment, plot or building.

(H) OFFENCES & PENALTY

1. If the promoter does not register its project with the Regulatory Authority – the penalty may extend up to 10% of the estimated cost of the project as determined by the Regulatory Authority. 2. If the promoter does not comply with the aforesaid order of the Regulatory Authority – liable to imprisonment which may extend up to three years and a further penalty of up to 10% of the estimated cost, or both. 3. In case the promoter provides any false information while making an application to the Regulatory Authority or contravenes any other provision of the Act – the penalty may be up to 5% of the estimated cost of the project or construction.

(I) ROLE OF CHARTERED ACCOUNTANTS

Following would be the Role of the Chartered Accountant under this Act:- 1. To audit the books of accounts of the promoter. 2. To verify and certify that the promoter has utilized the amount collected for a specified project for that particular project only. 3. To verify and authorize that when promoter is withdrawing the amount from the specified project bank account, it is in compliance with the proportion to the percentage of completion of project. 4. To act as an authorized representative for the applicant or appellant to present the case before the Appellate Tribunal or the Regulatory Authority or the Adjudicating officer.

CONCLUSION

1. Better Regulation 2. Expect higher investment by Foreign Direct Investment For Private Circulation only CNK & Associates LLP Page 7 of 8 3. Improve the image of the sector notorious for the unscrupulous deals. 4. The rate of interest that the promoter can charge would be the same as that payable by him in the event of default 5. Practice of selling on super built-up or sellable area would end; as carpet area is clearly defined in the law. It would include the area occupied by the internal walls. 6. Real Estate agents prohibited from marketing projects that are not registered, or making false or misleading statements. 7. Funding by investors in flats against allotment letters may no longer be feasible 8. Would help reduce the flow of black money in the sector.

LEGAL

LEGAL

Get a copy of the title report by the solicitor of the property. Make sure that there are no conditions written in fine print and that there are no specific reservations by the state government.

Look for specific clearance reports. For instance, if the construction is near a seafront, you will need to check for a Coastal Regulation Zone (CRZ) clearance. If the project is being constructed over or in the close vicinity of a heritage building, you must check for any heritage reservations for the premises. The idea is to ensure that you do not get stuck with a property that is or may get caught in any sort of disputes. Lack of clearance of titles also means that you will not be able to avail home loans.

PERMISSION AND APPROVALS

Before a construction can begin, the builder must seek several permissions and approvals from relevant bodies. Without these clearances, the construction may come under litigation.

Here is a list of documents and approvals that the builder must possess for all building work to commence in Mumbai:

  • ULC order (in specific cases)
  • IOD and CC of the project
  • MCGM approved plans

HOME LOAN

ELIGIBILITY

Home Loan

You must be at least 21 years of age for the loan to be sanctioned. The loan must terminate before or when you turn 65 years of age. You must be employed or self-employed with a regular source of income.

Office premise loan

You must be at least 21 years of age for the loan to be sanctioned. The loan must terminate before or when you turn 65 years of age. You must be self-employed with a regular source of income. The loan can be for the purchase / construction / extension of a non-residential property. A loan for renovation or improvement will be given only at the time of acquisition of property. Professionally qualified and self-employed individuals can apply. A minimum of 3 year’s work experience is a must.

LOAN AMOUNT

A number of factors such as your income, age, number of dependants, qualifications, assets and liabilities, income stability/ continuity of your employment / business etc. are taken into account when assessing your repayment capacity.

However, there are ways by which you can enhance your eligibility: If your spouse is earning, add him/her as a co-applicant. The additional income shall be included to enhance your loan amount. Incidentally, if there are any co-owners they must necessarily be co-applicants. Did you know that your fiancée’s income could also be considered for sanctioning the loan on your combined income? The disbursement of the loan, however, is done only after you submit proof of your marriage. Providing additional security like bonds, fixed deposits and LIC policies may also help to enhance eligibility. While there is no need for a guarantor, having one might enhance your credibility with us. If so, our loan officer would provide you with the necessary details. However, the final amount to be sanctioned will depend on your repayment capacity. In the total cost, registration charges, transfer charges and stamp duty costs are included.

SANCTIONING

Documents required for applying for a home loan (for self-employed professionals and businessmen)

General Documents

  1. Updated bank passbook or a Xerox of the statement of accounts for the last 6 months
  2. Age proof: PAN card, Voters ID, Passport and License Xerox of ration card Business profile with details on the nature of business, list of clients, suppliers, staff strength, geographical spread, etc.
  3. Xerox of education qualifications certificate and proof of business existence
  4. Xerox of last 3 years Income Tax returns Last 3 years profit /loss and balance sheet Processing fees cheque
  5. Documents required for applying for a home loan (for employed professionals)
  6. Latest salary certificate / slip in original
  7. Age proof: PAN card, voters ID, passport, license
  8. Xerox of Form no.16 A (TDS Form) from employer. Certificate in original from employer for any other allowances, which are not reflected in salary slip
  9. Updated bank pass book / Xerox of statement of accounts for last 6 months
  10. Xerox of your company’s ID or ration card
  11. Passport size photographs of applicant and co-applicant
  12. Processing fees cheque
  13. You may be asked to submit further legal documents if required by the bank or its approved lawyers. Retain photocopies of all the documents being submitted by you.
DISBURSEMENT

Your loan will be disbursed after you identify and select the property that you are purchasing and submit the requisite legal documents. Each and every single document asked for will be verified and checked for your safety. This may take some time but we want to ensure a clear title by completing all the legal and technical verifications so that you have full rights to your home. The 230 A Clearance of the seller and / or 37I clearance from the appropriate income tax authorities (if applicable) is also needed. On satisfactory completion of the above, registration of the conveyance deed and investment of your own contribution, the loan amount (as warranted by the stage of construction) will be disbursed by Bank. The disbursement will be in favour of the builder/seller.

List of documents for disbursement

  1. Loan Agreements
  2. Disbursement Requests
  3. Post-dated cheques
  4. Personal guarantors documents, as the case may be

AGREEMENT FOR SALE

AGREEMENT FOR SALE

Once you have found the property you want to buy, you must ensure that the vendor cannot sell the property to another purchaser. To cover this potential problem you and the vendor must sign a contract that binds the vendor to sell and you to buy. It also allows time for you to finance the purchase and collect the documents needed for the final deed.

Considering the importance of this contract, it is advisable to ask a professional to draft this agreement. His/her professional experience will serve as the best guarantee against any loophole.

STAMP DUTY & REGISTRATION

STAMP DUTY

As per Maharashtra stamp act,1958, the purchaser must pay a 5% stamp duty on the purchase of any flat within thejurisdicary limits of Municipal corporation act of greater Mumbai and 6% for within the limit of TMC. Without the payment of this stamp duty, your solicitor will not be able to officially register your new house in your name, even when the house is transferred within the family.

The rate of stamp duty for shops/galas/office premises and garage even if just used for car parking is 5% in Mumbai.

Procedure for Stamp Duty

When the flat purchaser desires to enter into an agreement, the stamp duty amount is calculated for him/her as per the agreement value or market value, whichever is higher. Once the stamp duty amount is given to the flat purchasers, they need to get the pay-order, which will be addressed in favour of “SUPERINTENDENT OF STAMPS, Mumbai”.

The pay-order is given for franking of the agreement. Later, the said agreement is duly filled and signed by the respective parties:

The Stamp Duty Offices in Mumbai

The Superintendent of Stamps
General Stamp Office,
Ground Floor, Town Hall Building,
Shahid Bhagatsingh Road, Fort,
Mumbai 400 023
Ph: 266 4589, 266 4585

Office of the Superintendent of Stamps

First Floor, B.M.R.D.A. Building,
Bandra (East),
Mumbai 400 051
Ph: 645 1894

Stamp Office

Town Hall,
Collector’s Office Compound,
Thane (West) 400 601

(The Thane stamp office is open on Tuesdays and Fridays only and is closed on the 18th of each month for accounts. If the 18th happens to be Tuesday or Friday, the office is opened on the next working day.)

REGISTRATION

The stamp duty paid document has to be registered under the Indian Registration Act with the sub-registrar of Assurances, of the jurisdiction where the property is situated. The basic purpose of registration is to record the ownership of the flat. Until the title deeds in your name are registered or recorded, you are not officially the legal owner of the house.

Compulsory Registration of Documents – Section 17 of the Registration Act, 1908

  • Registration Procedure

For registration, the original document printed on one side along with two photocopies of the original; have to be submitted to the registering officer. The registration procedure also requires the presence of two witnesses and the payment of the appropriate registration fees.

  • On Completion of Procedure

A receipt bearing a distinct serial number is issued. The following requirements for completing the registration are usually stated on the receipt:

  1. Market value of the property
  2. Income-tax clearance; i.e., N.O.C. under Section 269 UL (3) issued by the appropriate authority constituted under chapter XX-C of the Income Tax Act,1961, if the same is applicable
  • Registration Fee

The registration fee currently fixed for registering documents relating to property transactions is approximately 1% of the market value or agreement value, whichever is higher, subject to Maximum of Rs.30,000/-. The registration fee for the following immovable property transactions is levied on the market value of property on which stamp duty is charged:

  1. Conveyance
  2. Exchange
  3. Gift
  4. Partition
  5. Transfer of lease by way of assignment
  6. Sale
  7. Power of attorney given for consideration
  8. Authorization to the attorney to sell the property

EMI

What is an EMI?

EMI refers to equated monthly instalment. It is a fixed amount which you pay every month towards your loan. It comprises of both, principal repayment and interest payment.

When does the repayment start?
EMI payments start from the month following the month in which the full disbursement has been made.
How is the EMI paid?

The EMI should be paid every month through post-dated cheques (PDCs) or direct deductions from your salary. If you are opting for PDCs, you will have to provide 36 upfront. These PDCs are to be dated for the 1st of every month. However, most financial institutions do have flexible rules for dating of the cheques, keeping in mind the delay in processing of salaries. For definitive details, check the rules and regulations of the financial institution you are associating with.

What if a PDC bounces?

In the case of a bounced cheque or delayed payment, charges and outstanding dues will be charged as per the prevailing company policy. You can replace old PDCs with new ones within 5 – 7 working days.

What is pre-EMI interest?

In the case of part disbursement of the loan, monthly interest is payable only on the disbursed amount. This interest is called pre-EMI interest (PEMI) and is payable monthly till the final disbursement is made, after which the EMIs would commence.

When do I pay PEMIs?

The first PEMI is payable by cheque by the end of the month in which the disbursement is made. Each subsequent PEMI is payable at the end of every month till the commencement of EMI.

Application Process

The moment you decide to buy a home, you can put in your application. Please note that the property does not need to be in the same city where you are residing.

If your financial status or plans to buy a house change, you can withdraw your sanction within 6 months of approval.

TAX BENEFITS

Section 24 of the Income Tax Act.

This section deals with deduction available on Interest paid on capital borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of property. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.

So, should you borrow money to purchase or construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh on interest paid. The criteria being: the property has to be acquired or constructed within 3 years from the end of financial year in which the capital was borrowed and be self – occupied.

When put in figures, this is quite an amount:

  • Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
  • Assume interest payment during the first financial year is Rs 1.60 lakh
  • Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh – Rs 1.5 lakh being the maximum limit)
  • Total tax amounts to Rs 24,720 (tax of Rs 24,000 + Education Cess Rs 480+ SHEC Rs. 240)
  • Tax saved is Rs 46,350 (tax @30% on Rs 1.5 lakh plus 2% EC+ 1% SHEC as purchaser is in the highest tax bracket)
Section 80C of the Income Tax Act

A deduction u/s  80C (2) (xviii) is available on repayment of principal during a financial year up to Rs. 1,00,000/-, this aforesaid limit is within the overall limit of Rs 1 lakh specified in section 80C of the Income Tax Act. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount. This deduction is from Gross Total Income.