RERA Project Extension Procedures

The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to bring transparency, accountability, and discipline to the Indian real estate sector. One of the fundamental objectives of RERA is to ensure timely delivery of projects to protect homebuyers’ interests. However, delays can sometimes be inevitable due to various factors beyond the promoter’s control. To address this, RERA provides specific provisions allowing promoters to seek extensions of the project completion date under certain conditions.

The Importance of Timely Project Completion under RERA

At the time of registering a project with the Real Estate Regulatory Authority (RERA Authority), the promoter is required to declare a specific project completion or end date. This declared timeline forms the basis for the promoter’s obligations toward the allottees (homebuyers). The homebuyers invest significant money based on this schedule and plan their lives accordingly.

Timely delivery is crucial not only for buyers’ convenience but also for maintaining trust and credibility in the real estate sector. Delays can cause financial and emotional distress to buyers. Therefore, RERA has strict provisions to ensure that promoters complete projects within the promised timeframe.

When Are Project Extensions Necessary?

Despite sincere efforts, promoters may face delays for a variety of reasons. RERA recognises that some delays are genuine and unavoidable. The Act thus allows promoters to apply for extensions of the project completion date under two main circumstances:

• Force Majeure Events: Situations beyond the promoter’s control, such as natural disasters (floods, earthquakes, cyclones), wars, or other calamities caused by nature.
• Reasonable Circumstances: Delays due to factors like government approval delays, legal disputes, financial challenges, or supply chain disruptions, provided these are not due to promoter’s negligence or fault.

Extensions granted help promoters manage such challenges without being unduly penalised, while protecting buyers from indefinite or avoidable delays.

Legal Provisions Governing Project Extensions

Section 6 of RERA Act: One-Year Extension

Section 6 provides that if a promoter is unable to complete the project by the declared completion date, they may apply for an extension of up to one year. The application must be supported by sufficient reasons, either due to force majeure or reasonable circumstances.

The RERA Authority will assess the application and reasons and may grant or reject the extension. If granted, the promoter must pay the prescribed fee.

Section 7(3) of RERA Act: Extension in Lieu of Revocation

Sometimes, even after availing the one-year extension under Section 6, promoters may still be unable to complete the project. Section 7(3) gives the RERA Authority discretionary power to allow the project registration to remain in force, instead of revoking it. The Authority can impose terms and conditions it deems fit, keeping the interest of the allottees paramount.

This provision acts as a last-resort relief to promoters, but it requires the promoter to demonstrate bona fide efforts and obtain necessary consents from the allottees.

Application Procedure for Project Extension

Application under Section 6

• Form Submission: The promoter must submit an application in Form “E” to the RERA Authority.
• Explanatory Note: The application should include detailed grounds for the delay and the need for extension.
• Supporting Documents:
  • Proof of payment of prescribed fees.
  • Authenticated copy of the project plan showing the current stage of development.
  • Valid copies of permissions and approvals with expiry dates beyond the proposed extension period.

The Authority evaluates the application based on these documents and may call the promoter for a hearing.

Application under Section 7(3)

Since Section 7(3) does not have explicit procedural rules, promoters typically need to provide more detailed documentation, such as:

• Certificates from architects, engineers, and chartered accountants verifying the percentage of completion and pending work.
• Financial statements indicating funds realised and funds required to complete the project.
• Written consents from at least two-thirds of the allottees.
• Renewed approvals or NOCs if applicable.
• Affidavits confirming adherence to RERA provisions, including delay compensation.

The Authority exercises discretion after careful consideration and consultation with all stakeholders.

Fee Structure for Extension Applications

The fees for extension applications are computed based on the land area of the project. These vary depending on the type of project and state rules.

• For Standard Projects:
  • Rs. 10 per square metre of land proposed to be developed.
  • Minimum fee of Rs. 10,000 and maximum fee of Rs. 10,00,000.
• For Plotted Developments:
  • Rs. 5 per square metre of land.

In some states, a reduced fee (e.g., 50% of Section 6 fees) may apply for extensions under Section 7(3).

Assessment by the RERA Authority

The Authority’s role is to verify the promoter’s compliance with RERA and the genuineness of the delay:

• Check if quarterly progress reports and annual audit reports have been duly submitted.
• Ensure 70% of funds collected have been deposited in the designated escrow account (or a higher percentage if imposed).
• Verify that there are no unresolved complaints from allottees.
• Review the authenticity and sufficiency of reasons and documents submitted.
  

After assessment, the Authority holds a hearing and passes a reasoned order either granting or rejecting the extension.

Consequences of Non-Compliance and Rejection

• If the extension application is rejected, promoters have the option to appeal before the Real Estate Appellate Tribunal.
• Continued failure to complete the project may lead to revocation of registration under Section 7(1).
• In such cases, the Authority may take over the project completion under Section 8, appointing third parties if necessary.
• The promoter loses all rights to manage or market the project.

Interest Liability Parity

An important provision under RERA is that in case of default, both promoter and buyer are liable to pay the same rate of interest for delays:

• If the promoter delays possession, they must pay interest to the buyer.
• If the buyer delays payment, the promoter may charge interest.
• Many states link this interest rate to the State Bank of India’s highest marginal cost of lending rate plus 2%.

Conclusion

RERA’s project extension procedures provide a structured mechanism for promoters to seek additional time in genuine cases of delay. By following the statutory provisions and maintaining transparency, promoters can minimise legal risks and protect their reputation. Simultaneously, the rigorous checks and balances ensure that homebuyers’ interests remain safeguarded.