Bombay HC upholds validity of RERA

The Act also mandates that all developers or promoters register themselves under a state-level regulatory authority

The Bombay High Court today upheld the constitutional validity of the Real Estate (Regulation and Development) Act (RERA), observing it was crucial to protect the interests of flat buyers across the country and develop incomplete projects.

Noting that there are "enormous problems" in the housing sector, the court also said it's time to take a step forward to fulfil Mahatma Gandhi's vision of wiping every tear from every eye.

The court also addressed the issue of implementation of the act, saying it must be closely monitored. Although RERA is a central law, its implementation will depend on state governments since real estate is a state subject.

A bench of Justices Naresh Patil and Rajesh Ketkar pronounced its judgement on a bunch of petitions by real estate developers and individual plot owners, all challenging the constitutional validity of the Act that was brought into effect in May this year.

The bench, headed by Justice Patil, however, allowed a significant leeway for the developers in the judgement by permitting the state-level RERA Authority and the Appellate Tribunal to consider delays on a case-to-case basis, and not to cancel such projects or developers' registration in cases where the delay was caused due to "exceptional and compelling circumstances."

"In case the authority is satisfied that there are exceptional and compelling circumstances due to which a developer could not complete the project inspite of the one year extension granted, then the authority will be entitled to let the developers' registration continue," the court said.

Such powers shall be exercised on a case-to-case basis and the authority shall consult with the state in such cases if needed, it said.

"RERA is not a law relating to only regulatory control of the promoters (developers), but its objective is to develop the real estate sector, particularly the incomplete projects across the country," the bench said, observing it was crucial to protect the interests of flat buyers across the country.

"The problems are enormous. It's time to take a step forward to fulfil dreams of the Father of the Nation, Mahatma Gandhi, to wipe every tear from every eye," Justice Patil said.

The Act, among other things, mandates that all developers or promoters register themselves under a state-level regulatory authority.

It also allows buyers to claim compensation for delay in possession, and envisages cancellation of a developer's registration and imposition of severe penalties in case where the developer fails to complete the project within the stipulated deadline.

Most of the developers had challenged a provision of 'force majeure or a natural disaster'-- that allowed an extension of the deadline by a maximum of one year, if the delay was caused on account of natural disasters such as earthquakes or floods.

The developers had also opposed the composition of the state-level RERA Authority and the Appellate Tribunal.

The HC did not interfere with the composition of the state-level authority, but it ruled that the tribunal must be headed by a judicial officer and not a bureaucrat, or a member of the Indian legal services, and that majority of the members of such tribunal must be officers or members of the judiciary.

The Centre and the state of Maharashtra had vehemently defended the Act, and justified the strict provisions by arguing that the same were meant to protect buyers, and to rein in rogue developers.

While the bench concurred with the state and the Union government's arguments, it said that the authorities must also closely monitor the implementation of the Act.

"We are conscious of the fact that the actual implementation of RERA needs to be closely monitored in the years to come," the bench said.

In September, after several petitions challenging RERA were filed in high courts across the country, the Supreme Court stayed the proceedings in other courts and suggested that the Bombay High Court hear its RERA cases first.

Other courts should wait for the Bombay High Court's decision before hearing RERA-related matters, it said, while directing the high court here to expedite the hearings.