One of the key aspects that led to the implementation of The Real Estate (Regulation and Development) Act in 2016 was to give homebuyers a safe space that allows them to know that the real estate sector is regulated, and transparent and that players of the sector are accountable for their actions.

If we look at the period before 2016, we will come across various instances of fraudulent transactions, cases of false promises made by developers, and homebuyers reeling under red tape, in case they wanted to complain; all leading to a hostile and 'unsafe' homebuying environment.

To put this in check and to renew the confidence of the homebuyers, one of the main goals of the K-RERA Act was to make sellers accountable for their actions. Therefore, in short, if the govt finds any seller not compliant with the provisions of the act, he has to face the penalties and consequences as mentioned in the act.

In this article, we will take a closer look at the grounds for which a developer can be held accountable for their actions in case of non-compliance. To make an informed decision as a homebuyer in Karnataka, you should understand what constitutes non-compliance and what penalties one can expect.

Penalties for Promoters under RERA

Registration Non-Compliance

Developers and promoters are required to register their real estate projects with the respective state's RERA authority.

Section 3 of the Act emphasizes the mandatory registration of a real estate project before its advertisement or marketing. A promoter violating this code by failing to register under Section 59(1) may incur penalties of up to 10 percent; of the projected cost, as determined by the Relevant Authority.

Additionally, non-compliance with orders and requirements specified in Section 59(1), leading to continued absence of registration despite orders, may result in imprisonment for up to three years a fine of up to 10 percent; of the projected cost, or both.

Delayed Project Delivery

RERA mandates developers to adhere to project timelines. If there is a delay in project completion, the developer may be liable to pay interest to the homebuyers for the delay period. In some cases, they might also face penalties for the delay.

Quality of Construction:

If the construction quality does not meet the agreed standards or there are structural defects, developers may face penalties and might be required to rectify the issues at their own expense.

False Information or Registration of Project

As per the RERA Act, every promoter of a real estate project has to apply for registration of the real estate project to the authority and the application needs to follow the timeline and guidelines prescribed by the authorities. In case a promoter submits false information while applying for registration, in such a case, the promoter may face a penalty of up to 5 percent; of the project's estimated cost as deemed fit by the authorities.

Non-Compliance with Orders of Appellate Tribunal by Promoter

If a promoter doesn't follow the orders of the Appellate Tribunal, they could face up to three years in jail or a fine. The fine could be up to ten percent of the estimated cost of the real estate project, and this penalty could apply for each day the violation continues.

Penalties For Real Estate Agents Under RERA

False Information and Non-Registration of Real Estate Agents

Section 63 of the RERA Act states that in case a real estate agent does not get themselves registered with the authority and deals in unregistered real estate properties or does not follow the guidelines as prescribed in Sections 9 and 10 of the RERA Act, then the real estate agent has to pay a penalty of 10,000 rupees every day for which the default has been done; which can extend upto 5 percent; of the cost of the project for which the sale has been completed.

Non-Compliance with Orders of RERA Authority by Real Estate Agents

If a real estate agent doesn't follow the orders or directions of the Authority, they could face a penalty for each day they don't comply. This penalty could be up to five percent of the estimated cost of the plot, apartment, or building involved in the real estate project where the sale or purchase was facilitated, as determined by the Authority.

Non-Compliance with Orders of Appellate Tribunal by Real Estate Agent

If a real estate agent doesn't follow the orders of the Appellate Tribunal, they could face up to one year in jail or a fine. The fine could be up to ten percent of the estimated cost of the plot, apartment, or building involved in the real estate project where the sale or purchase was facilitated. This penalty could apply for each day the violation continues.

Penalties Homebuyers Can Face Under RERA

The RERA law was not just set up to safeguard the rights of the homebuyers but to safeguard and protect the rights of both buyers and sellers. Under the act, even homebuyers have to face penalties in case of dereliction of guidelines. Below are the reasons which can be a reason for a homebuyer to face a penalty under RERA

Non-Compliance with Orders of RERA Authority by Homebuyer

If a homebuyer (allottee) doesn't follow the orders or directions of the Authority, they could face a penalty. This penalty could be up to five percent of the cost of the plot, apartment, or building involved, as determined by the Authority, for the duration of the default.

Non-Compliance with Orders of Appellate Tribunal by Homebuyer

If a homebuyer (allottee) doesn't follow the orders or directions of the Appellate Tribunal, they could face punishment. This might include imprisonment for up to one year or a fine for each day the default continues. The fine could add up to ten percent of the cost of the plot, apartment, or building involved, or both penalties could apply.

Penalties Companies Face Under RERA

If the offense is committed by a company, the individuals in charge of running the company's business at that time will also be considered guilty of the offense. However, if they can prove they were unaware of the offense or took all necessary steps to prevent it, they might not be punished.

Furthermore, even if a company commits an offense, if it's proven that it happened with the agreement, cooperation, or negligence of any director, manager, secretary, or other company officer, they too will be considered guilty and can be punished accordingly.

Consequences for Developers and Promoters

Financial Penalties: RERA has provisions for imposing fines, which can be substantial, on developers for non-compliance. These fines could be a percentage of the project cost and can significantly impact the financial viability of the project.

Imprisonment: In severe cases of non-compliance, imprisonment provisions are also present under RERA. If the developer fails to comply with the orders of the regulatory authority, they may face imprisonment for a specified period.

Project Revocation: RERA holds the authority to revoke the registration of a project if there is consistent non-compliance. This revocation can seriously affect the developer's credibility and ability to continue the project.

How RERA Benefits Homebuyers?

RERA plays a pivotal role in safeguarding the interests of homebuyers in several ways:

Transparency: With RERA in place, homebuyers have access to detailed information about the project, such as approvals, timelines, and financial disclosures. This transparency helps them make informed decisions.

Timely Delivery: The stringent regulations and penalties for project delays push developers to stick to project timelines, ensuring timely possession of properties for homebuyers.

Quality Assurance: RERA mandates adherence to construction quality standards, ensuring that homebuyers receive properties of the promised quality.

Speedy Grievance Redressals: Earlier homebuyers had no idea who to reach out to in case of fraud, or problems faced due to unscrupulous developers and real estate agents. With RERA's speedy grievance redressal in place, it is very convenient for homebuyers to lodge a complaint and get the complaint addressed in a short period.

Case Studies:

Amrapali Group Case

The Amrapali Group faced penalties and legal actions under RERA due to mismanagement and diversion of homebuyers' funds. RERA intervened, took control of the projects, and appointed a new agency to complete the pending constructions, providing relief to the affected homebuyers.

Unitech Case

Unitech, a prominent real estate developer, faced legal action and penalties for project delays and financial mismanagement. RERA took strict measures, including revoking project registrations and initiating legal proceedings, to protect the interests of homebuyers.

RERA's penalties and consequences act as a deterrent, encouraging developers to adhere to regulations and commitments, thereby enhancing transparency and trust in the real estate sector, which ultimately benefits both buyers and sellers in the industry.