Revocation of RERA Registration [Section 7]

The Indian real estate sector has long faced issues such as delayed possession, incomplete projects, diversion of funds, and a lack of accountability from developers. 

The enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA) was a significant reform aimed at protecting homebuyers, promoting transparency, and ensuring the timely delivery of projects. Among the various powers granted to the RERA Authorities, the ability to revoke a project’s registration under Section 7 is one of the most crucial. 

Understanding RERA and Its Objectives

RERA was implemented to regulate and promote the real estate sector in India. It sought to establish a transparent system for registration of real estate projects and agents, set clear timelines for project delivery, ensure financial discipline, and protect the interests of consumers. The Act mandates that all real estate projects, except those specifically exempted, must be registered with the respective State RERA Authority before being marketed or sold.

The objectives of RERA include:

• Protecting homebuyers’ rights and interests
• Promoting fair play and transparency in transactions
• Ensuring timely delivery of real estate projects
• Creating accountability among promoters and agents

Section 7: The Power of Revocation

Section 7 of the RERA Act empowers the RERA Authority to revoke the registration of a real estate project. This power can be exercised under specific circumstances where a promoter fails to comply with the law or engages in unethical or fraudulent conduct.

Revocation is not a routine action but a significant step with far-reaching consequences for both the promoter and the homebuyers. It is, therefore, exercised with due care, following principles of natural justice and procedural fairness.

Grounds for Revocation of Registration

The Act lays down clear grounds under Section 7(1)(a) to (d) for revocation of a project’s registration:

Default in Doing Anything Required by or Under the Act (Section 7(1)(a))

This is a broad ground and covers any failure by the promoter to comply with the provisions of the Act, rules, or regulations. Common examples include:

• Misuse or Diversion of Project Funds: If the promoter fails to keep 70% of the amounts realised from allottees in a separate account (as mandated under Section 4(2)(l)(D)) and diverts or misuses these funds.
• Delay in Possession: Failure to deliver possession of the real estate project within the time promised to allottees.
• Non-Execution of Agreements: Not entering into the required agreement for sale with the buyers, in violation of Section 13.
• Ignoring RERA Orders: Failure to comply with orders, directions, or decisions of the RERA Authority.
• Violation of Financial Discipline: Not maintaining proper accounts or failing to deposit/withdraw money in accordance with Section 11.
• Unapproved Changes: Making material alterations in the sanctioned plans, layout, or project specifications without the prior consent of at least two-thirds of the allottees (Section 14).
• Unauthorised Transfer of Rights: Transferring majority rights or liabilities in the project to a third party without the required approval and consent.

Violation of Approval Terms and Conditions (Section 7(1)(b))

Every real estate project must obtain statutory approvals from various authorities such as the town planning department, municipal corporation, fire department, and environmental authorities. Section 7(1)(b) comes into play when the promoter:

• Deviates from Sanctioned Plans: Constructs the project in a manner not conforming to the plans approved by competent authorities.
• Engages in Hazardous Construction: Uses substandard materials or construction practices that pose risk to the environment or the safety of inhabitants.
• Ignores Approval Norms: Fails to adhere to the conditions imposed by statutory bodies as part of the approval process.

Engaging in Unfair Practices or Irregularities (Section 7(1)(c))

RERA strictly prohibits promoters from engaging in any unfair, deceptive, or irregular practices. These include:

• False or Misleading Advertisements: Claiming that the project is certified or of a particular standard when it is not.
• Misrepresentation of Approvals: Falsely representing that the project has approvals or affiliations which it does not have.
• Deceptive Promises: Promoting facilities, services, or amenities that are not part of the sanctioned project.
• Unfair Marketing Tactics: Any act intended to mislead buyers or obtain money under false pretences.

Indulging in Fraudulent Practices (Section 7(1)(d))

Fraudulent practices are treated very seriously under RERA. These may include:

• Ponzi Schemes: Collecting money from new buyers to pay earlier investors without any actual construction or development.
• Multi-level Marketing Schemes: Using a chain or pyramid model to attract investors with promises of high returns.
• Fake Buyback Guarantees: Promising guaranteed buybacks or returns without financial backing.
• General Fraud: Any act intended to cheat, mislead, or defraud allottees or stakeholders.

Procedure for Revocation

Revocation of registration under Section 7 involves a transparent and fair process:

Initiation of Proceedings

The process may be initiated by:

• Receipt of a formal complaint from a buyer or any aggrieved party
• Suo motu (on its own motion) by the Authority
• On the recommendation of another competent authority

Issuance of Notice

Before revoking the registration, the Authority must issue a 30-day show-cause notice to the promoter (usually in Form “D”). This notice explains the reasons and gives the promoter an opportunity to present their case and explain why the registration should not be cancelled.

Hearing and Consideration

The promoter is given a fair hearing. They can submit their explanation, produce documents, and present evidence in their defence. The Authority must consider all material placed before it and decide whether there is sufficient ground for revocation.

Decision and Communication

If the Authority is satisfied that the promoter is indeed at fault, it can revoke the registration. Alternatively, the Authority may decide to allow the registration to continue with additional conditions, if it is in the interest of the allottees.

The promoter is then officially informed of the decision. The order of revocation is also communicated to other State RERA Authorities.

Consequences of Revocation

The revocation of registration has several immediate and long-term consequences for the promoter and the project:

Debarment of Promoter

The promoter is debarred from further involvement in the project. They cannot market, sell, or promote the project any further. All their activities relating to the project come to a halt.

Listing as Defaulter and Blacklisting

The promoter’s name is published in the defaulter or blacklist section of the RERA portal. This public disclosure seriously impacts their reputation and can affect their ability to undertake future real estate projects, even in other States.

Freezing of Bank Accounts

The RERA Authority may direct that the designated project bank account (where buyer payments are deposited) be frozen. This prevents the promoter from misusing or diverting funds and ensures that the money is available for project completion or refunds.

Communication to Other RERA Authorities

Information about the revocation is shared with other RERA Authorities across India. This prevents the promoter from escaping scrutiny by starting new projects in other regions under a different name or company.

Ensuring Completion of Project (Section 8)

In the interest of homebuyers, the Authority may take steps to ensure the project is completed. This may include:

• Appointing an alternative promoter or contractor to finish the project
• De-freezing the bank account for making payments strictly for project completion
• Supervising the use of remaining funds for the benefit of the allottees

Refunds and Compensation

If project completion is not possible, the Authority may order refunds to buyers along with applicable interest and compensation for any loss or inconvenience caused.

Conclusion

The revocation of registration under Section 7 of the RERA Act is a powerful tool in the hands of regulatory authorities. It is designed not only to punish wrongdoers but also to protect the broader interests of buyers and the real estate market as a whole. 

By following due process, enforcing transparency, and ensuring stringent consequences for non-compliance, RERA has created an environment where promoters are compelled to honour their commitments. Buyers, too, can approach the Authority with confidence, knowing that there are robust remedies available if things go wrong.