States such as Maharashtra have made it mandatory for developers to register the ongoing projects
With the Real Estate (Regulation and Development) Act, or RERA, in place in several states, property developers are increasingly reaching out to lawyers to comprehend the law, which has strict rules and provides harsh penalties for violations.
Leading lawyers and solicitors have seen over 50 per cent jump in enquiries from developers in recent months, according to sources in the sector.
“There is a rush of enquiries from developers. They need to revisit their agreements, and understand the law and precautions to be taken. Even buyers want to know their rights under RERA,” said Sundip Mullick, partner at Khaitan & Co, a leading law firm.
Mullick said developers were concerned about the ongoing projects and what would happen to them. “They know that they have to build new projects according to the law, but they want to know how to treat the ongoing projects,” he said.
States such as Maharashtra have made it mandatory for developers to register the ongoing projects.
According to RERA, a developer has to keep 70 per cent of proceeds from a project in an escrow account, register the project he is launching, register every phase of a project, has to state the cash inflows and outflows from a project, time span of the project and so on. The Act has strict penalties, including prison terms, for non-compliance by developers.
Apeksha Suaris Murray, partner at Kanga & Co, another leading law firm, said, “The enactment of RERA has brought about a learning phase in the business life of developers as well as their legal advisors. The biggest challenge is to interpret the Act and the most transparent and effective modality of implementing the same within the timelines laid down by the authorities.”
Murray said the most common enquiry by developers was whether there would be a standstill in business because of RERA.
“Developers are keen to know whether the time period of three months provided to them is adequate enough to enable them to collate (details) and provide to the authorities. There are, thus, enquiries related to the requisites to be adhered to for smooth registration and the ultimate continuity of business,” she said.
Developers agree that solicitors and advocates were playing a vital role in making them understand the law.
Vijay Wadhwa, chairman, Wadhwa group, said, “There is a lot of confusion regarding RERA. Solicitors and advocates will be busy for the next six months till clarity emerges on the regulation. Both developers and buyers will go in for litigation.”
Gopal Sarda, group chief executive officer, Kolte-Patil Developers, said RERA being a new law needed to be interpreted properly and the advocates and solicitors would help them interpret it and understand the legal risks associated with it.
“They will help us devise protection for the company as to what kind of clauses has to be built into the agreement and what kind of commitments we need to meet as part of compliance.”
Sarda said Kolte-Patil had hired the services of Kanga & Co to understand the law.
“Legal aspects are very crucial in real estate. If something gets stuck in a legal matter, then the entire business model goes for a toss and financial discipline is in a mess,” he said.
Photograph: Shailesh Andrade/Reuters
