To address the lack of transparency in the entire home buying process, the government in 2016 imposed the Real Estate Regulation and Development Act (RERA)

The RERA Act is applicable for all apartment developments with over 8 units and plot development over 500 square meters. Any real estate project that falls under the ambit of the RERA Act must obtain registration under this Act. In this article, we look at penalties applicable under RERA Act for non-compliance by the "promoter".

What is a "Promoter"

It is important to know that the RERA act does not give any specific definition of a "builder" or "developer" per se but it defines a promoter.

According to the Act, a "promoter" means a person who constructs an independent building or a building consisting of apartments, or convert an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees.

For failing to register a project:

According to section 59 of the Act, it is mandatory for the "promoter" of the project to register it with the authority and if he fails to do the same, he shall be liable to a penalty of up to 10% of the estimated cost of the real estate project. If the promoter, after repeated warnings fails to register a project, he can even face imprisonment of up to three years or both.

The promoter will also be fined up to 5%; of the estimated cost of the real estate project if he provides any false information or violates any provisions falling under the registration of real estate projects.

For non-compliance of orders of the Authority:

If the promoter fails to comply with all the orders of the authority, he shall be liable to pay a penalty for every day until the default has been rectified. The penalty will be around 5%; cumulatively of the estimated cost of the real estate project.

For non-compliance of the orders of the Appellate Tribunal:

If the promoter fails to comply with all the orders of the Appellate Tribunal, he shall be liable to pay a penalty for every day until the default has been rectified or may face imprisonment for up to three years or both.

Penalties under MahaRERA

While in a broader perspective we have mentioned the penalties that a builder would face under non-compliance with RERA, here is what happens if your project is specifically located in Maharashtra and comes under the governance of MahaRERA.

As per reports, the state regulator has planned to levy heavy penalties on builders who do not obtain the Occupancy certificate for their already occupied projects within three months. In case a developer fails to do, he will have to pay an interest amount to every resident of the building that files a complaint.

Earlier, the regulatory authority had also increased the penalty amount for not registering projects from Rs 50,000 to Rs 1 lakh.

Even as the Real Estate(Regulation and Development); Act, 2016 is a turning point for the real estate industry in safeguarding the interest of home buyers, it is still advisable to be vigilant.

Union territories Dadra Haveli Nagar and Daman And Diu have also come under the purview of the Maharashtra Real Estate Regulatory Authority.