SIRC of ICAI X NAREDCO X Taxmann's Karnataka RERA | Law & Practice

© SOUTHERN INDIA REGIONAL COUNCIL OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

Price : ` 3995

Edition : 2024

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Published by :

CA. Panna Raj S., Chairman, Southern India Regional Council of The Institute of Chartered Accountants of India, ICAI Bhawan,122, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. Tamil Nadu, India.

Tel : 044-39893989

Email : sirc@icai.in

Website : www.sirc-icai.org

Disclaimer: The opinions and views expressed in this book are those of the compiler and are general in nature and may differ according to facts of the case. Southern India Regional Council of The Institute of Chartered Accountants of India does not necessarily concur with the same. While every care is taken to ensure the accuracy of the contents of this compilation, neither compilers nor Southern India Regional Council of The Institute of Chartered Accountants of India is liable for any inadvertent error or any action taken on the basis of this book.

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PREFACE BY THE EDITOR AND CO-EDITOR

RAMESH S. PRABHU, Editor

Co-Editor and Convenor for Study Group

FROM EDITOR & CO-EDITOR DESK

Dear Friends,

We sincerely thank CA.S. Panna Raj, Chairman, SIRC of ICAI and his entire team for giving us an opportunity to bring out the 1st Edition of “Karnataka RERA Law & Practice” by forming the Study group of professionals from Karnataka and other Indian states, RERA Authorities, Industry representatives and the stakeholders. We express our gratitude to Shri Kishore Chandra H.C, IPS (Retd.), Chairman, Karnataka Real Estate Regulatory Authority and team of Karnataka RERA for supporting the publication by sharing the required information, data and inputs. We also appreciate Mr. G. Hari Babu, President, National Real Estate Development Council (NAREDCO) and council members for agreeing to publish this book jointly with SIRC of ICAI and for providing the necessary support and co-operation in brining out this publication.

CA. S. Panna Raj, Chairman, SIRC of ICAI was happy to receive Maharashtra RERA Law & Practice edited by us by forming the study group and he suggested to us to form the similar study group of professionals to publish Karnataka RERA Law & Practice to build the capacity of stakeholders in smooth implementation of RERA in Karnataka. Accordingly, a study group was formed and we started interacting with Shri Kishore Chandra H.C., IPS (Retd.), Chairman, Karnataka Real Estate Regulatory Authority and his team and also with Mr. G. Hari Babu, President, NAREDCO and his team about the design and contents of the new RERA manual.

We are also thankful to CA. Ranjeet Kumar Agarwal, President of ICAI and CA. Charanjot Singh Nanda, Vice President of ICAI for inspiring us to bring out this manual by providing the message to this RERA manual.

I-19

CA.

CA. VINAY THYAGARAJ

Our special thanks to Shri Rakesh Singh. IAS, Additional Chief SecretaryUrban Development department, Government of Karnataka for congratulating the authors for their dedication under the leadership of CA. Ramesh Prabhu, CA. Vinay Thyagaraj and expertise in compiling this invaluable resource.

The study group includes all the real estate stakeholders like promoters, agents, professionals such as CAs, Architects, Engineers, CSs, Valuers, Advocates, Solicitors etc. officials from the Authority and the Appellate Tribunal. The study group members volunteered to author the chapters for the RERA manual and volunteered to review and update the RERA manual.

We are thankful to all study group members who have gone extra mile to share their knowledge and expertise, experience and who have interacted and reviewed the chapters to bring the RERA manual to the present form.

The RERA manual has been divided into multiple chapters to address each practice area viz., registration, certification, quarterly updates, annual audits, redressal, other compliances under RERA. It has also been organised to attend to needs of multiple stakeholders, namely, promoters, allottees, regulatory authorities, professionals, bankers, investors, etc. The relevant legal provisions, followed by the procedure, Standard Operating Procedure (SOP), FAQ and the judicial rulings have been included to make the manual simple, relevant, practical and practice oriented. we have tried to make the manual as simple as possible and have discussed the provisions along with Rules, regulations, circulars, notifications etc., Without restricting the contents of the manual to only RERA provisions, the peripheral subjects connected with real estate transactions such as applicability of Income Tax, GST, Insolvency and Bankruptcy, consumer protection, FEMA, PMLA, KOFA, Karnataka Apartment Ownership Act, Karnataka Town and Country Planning Act etc. also included. This inter contextual knowledge, we believe will widen the canvas of practitioners in this field by adding to their domain knowledge of real estate sector.

The Manual attempts to serve as a guide to the new entrants, practitioners in the Karnataka RERA Practice and also as a reference manual to the professionals who are already into real estate practice. Keeping in mind the new area of practice opened by RERA to Chartered Accountants, Architects, Engineers and to Advocates especially to represent before Real Estate Regulatory Authority, Adjudicating Officer, Real Estate Appellate Tribunal, this manual has covered many of the legal aspects. The various formats, drafts and specimen are included in the RERA manual as ready references. The Practitioners may accordingly, decide to adapt the drafts considering the facts circumstances and the relief claimed.

The team realised early on that one uniform approach & template cannot be applied for practice and non-practice-oriented topics. We recognised this limitation and this challenge may not have been overcome fully. We hope, that the practice-oriented topics will allow for both beginners and intermediate level practitioners to raise their standards. Limitations in the perceived shortcomings of written word of law should not restrict or bar practitioners in pursuing best practices, enabling them to meet the objectives of RERA simultaneously with that of the needs of the client.

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PREFACE BY THE EDITOR AND CO-EDITOR

We believe that no tool is ‘omnicompetent’ and there is no such thing as a master-key that will unlock all doors. Similarly, no manual is perfect and has all answers. For professionally qualified Chartered Accountants & Professionals. It is up to the members to wear their thinking hats and apply their overall skills and specialised knowledge to seek out answers to difficult situations. Yet, professionals advising clients must understand, and be clear that creative paper solution towards compliances cannot be a substitute for timely project completion as envisaged under RERA. When in doubt, revert to the objectives of RERA to get clarity.

This manual does not delve into how ideally the law should function. We are aware that today’s knowledge will not be the same as yesterdays, and will give way to revisions, given the dynamic nature and evolution of RERA, legal pronouncements, as well as constantly changing building regulations.

Whilst all care has been taken to ensure arranging and organising the chapters and contents in a smooth manner, we are sure, there is enough scope to improve the arrangement as well as contents of the RERA manual. The authors have drawn the judgments of various other states as a reference to the readers. This being the first edition there may be many short comings. In all humbleness, we request the users of this manual to give their feedback and constructive suggestions to improve the manual for revision in the proposed future editions to editors on reramanual@gmail.com with a copy marked to SIRC of ICAI on email: sirc@icai.in

Referencing and drawing inspiration from the practices and judgments of Maharashtra RERA makes a lot of sense, especially considering its pioneering role in implementing RERA and its extensive experience in real estate development and redevelopment. By including these references, the authors aim to provide readers with a more comprehensive understanding of the subject matter and to showcase practical insights derived from a region with significant exposure to real estate dynamics. This approach not only enriches the content but also allows readers to appreciate the nuances and complexities involved in real estate regulation and development.

We are thankful to each of the authorities and the dignitaries who have appreciated the manual by giving their message in writing or orally and each of the study group members for their contribution and support in bringing out this 1st edition of “Karnataka RERA Law & Practice” Manual published by SIRC of ICAI jointly with NAREDCO and actively supported by Karnataka RERA. We are also thankful to entire team of Taxmann for agreeing to print and distribute this manual and also for printing this manual in very short time.

Once again, we are thankful to SIRC of ICAI and NAREDCO and their team for giving us this opportunity to serve the profession.

Happy readings and our best wishes to build and develop Karnataka RERA Practice.

With regards

CA. Ramesh S Prabhu, Editor CA. Vinay Thyagaraj, Co-Editor & Convenor for Study Group

Release of early copies of KARNATAKA RERA Law & Practice by Vice President ICAI, Sri CA. Charanjot Singh Nanda, on 22nd February 2024 at Southern India Regional Council (SIRC), Chennai, Tamilnadu. The publication is jointly published by SIRC of ICAI and National Real Estate Development Council (NAREDCO).

Copy of the KARNATAKA RERA Law & Practice is handed over to Vice President ICAI, Sri CA. Charanjot Singh Nanda by the Co-Editor CA.Vinay Thyagaraj, Bengaluru and CA Sujatha G, PRESIDENT Karnataka State Chartered Accountants Association after release of the publication.

Also present Central Council Members Sri. Cotha S Srinivas, CA. Sripriya K, CA. Rajendra Kumar P, CA. Muppala Sridhar, CA. Prasanna Kumar and SIRC immediate past chairman CA. Panna Raj S, SIRC Chairperson CA. Geetha A B, SIRC Secretary CA. Subbarao Muppala.

PART 3

AGENT - FROM THE REAL ESTATE AGENT PERSPECTIVE

PART 4

5

PART 6 DISPUTE REDRESSAL - COMPLAINTS, APPEALS, SECOND APPEALS, CONCILIATION

PART 11 CIRCULARS, NOTIFICATIONS OF KRERA

KARNATAKA RERA REPORT 2024

Real estate statistics provide data-based insights to all stakeholders in assessing the health and dynamics of the real estate market. It helps stakeholders to understand the overall direction of the market. This report aims to provide a comprehensive overview of key statistics and trends within the real estate market, as monitored and regulated by RERA. By analyzing data from various districts and sectors, this report offers valuable insights into the performance and dynamics of the real estate industry over the specified period.

LIFE CYCLE OF THE REAL ESTATE PROJECTS

Several sectors in the market often require time to hand over products after receiving an advance payment. Real estate is one among it where customers often pay an advance amount to initiate the process, but the final product delivery may take months, or even years depending on the complexity of the project or product. It’s essential for builders to communicate clearly with customers about expected timelines and the specifications/offers made over the time.

In Karnataka, more than 50% of total projects registered with KRERA are falling under the interval of 2 to 5 years of total estimated project lifetime to complete and handover the units to the allottees. Indeed, maintaining transparency for more than 1 year and fulfilling promises made at the beginning of a project is crucial in overcoming challenges in sector where product handover takes time.

More than 5000 projects registered with KRERA are having duration of over and above 2 years to complete and handover the project. Delays in project completion can often lead to dissatisfaction among buyers and investors, as well as financial strains on developers.

Around 100’s of projects are having the lifetime of 10 years and above which can raise concerns about the efficiency and effectiveness of project management, as well as potential challenges in completing the developments within reasonable timeframes. Implementing a platform to ensure transparency and accountability in the real estate sector is a significant step toward addressing the challenge of meeting promises/specifications made by builders.

KARNATAKA RERA REPORT 2024

ESTIMATED PROJECT LIFE CYCLE

Less than 2 years2-5 years5-10 yearsMore than 10 years

KRERA has achieved platform to report all the specifications/promises of the project at the time of registration of project and it will be visible to all the stakeholders irrespective of duration of completion of the project. By centralizing all project specifications and promises on a single platform, KRERA enables stakeholders, including buyers, investors, and regulatory authorities, to access accurate and up-to-date information easily. This transparency fosters trust and accountability in the real estate market. To avoid the disputes between builders and buyers especially regarding project specifications, delays in handover of the dream homes, or promises RERA serves mandatory registration of Project.

REGISTRATION OF REAL ESTATE PROJECTS

The registration of real estate project has been made mandatory in the planning area, where the size of land proposed to be developed is more than 500 square meters or where the number of apartments proposed to be developed are more than 8, where there is no marketing of any additional units or the completion certificate of which is received before 1st May, 2017. No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area within respective jurisdiction, without registering the real estate project with KRERA.

KRERA has received the applications around more than 7800 for registration of real estate projects which ensures the transparency and generate faith and confidence of the real estate buyers.

An average increase of 100 project registration applications are received by the authority in a one-month span of time. It underscores the importance of efficient processing and oversight by the regulatory authority

KARNATAKA RERA REPORT 2024

to ensure that projects adhere to necessary standards and regulations, promoting transparency and consumer protection within the industry.

90% applications received for registration are approved by the KRERA with valid documentations and explanations.

The application for registration will be rejected by the KRERA based on the various reasons and the promoter or customer having the right to withdraw from the project on the ground of non-delivery of possession, any loss or damage, incorrect or false statement etc… Even though the projects withdrawn under KRERA is comparatively very less.

Once the real estate project got registered with KRERA, that will regulated in all aspects of the project especially promotes the timely delivery of properties or projects which helps to protect the interest of buyers. If any promoter fails to register the real estate project as per the requirements of the Act, he shall be liable to a penalty which may extend up to ten per cent of the estimated cost of the real estate project. KRERA has enabled application in the website for providing the unregistered project details which helps to bring all the real estate projects under one umbrella of regulation and promotion to bring transparency in the sector.

Along with the applicability of limits, as per the proviso of section 3 states that the project ongoing on the date of commencement of this Act and for which the completion certificate has not been issued, the promoter shall make an application to the Authority for registration of said project.

Over 1500 projects i.e., 20% of total projects in market launched before 2017 and ongoing without obtaining completion certificate has been registered with KRERA within a period of three months from the date of commencement of this Act.

Projects started development in 2005 onwards also got registered with KRERA is a step towards addressing potential issues and ensuring that developers fulfill their obligations to homebuyers and other stakeholders.

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KARNATAKA RERA REPORT 2024

The initiation of a record number of projects, totalling 1278, in 2022 and their registration with the authority signals significant activity and growth within the real estate sector.

The statistic that 80% of total projects launched in the market as ‘new project’ which was started the development after 2017 comply with the provisions of the Real Estate (Regulation and Development) Act, reflects a significant level of adherence to regulatory standards within the real estate sector.

The registration of projects reflects the trends in the real estate sector as is evident from the lowest registration during the pandemic year 2020.

This statistic provides a snapshot of the level of new project registrations in 2024, within a specific timeframe of three months in the year.

Yearwise

Project Launching

Overall, the statistic underscores the positive impact of RERA in promoting transparency and accountability in the real estate sector, benefiting both developers and consumers alike.

Bengaluru Urban is taking the lead of project registrations in Karnataka. Bengaluru, being the capital and a major economic hub of Karnataka, often spearheads development initiatives in the state.

Real estate being the fastest growing sector, all other districts are stepping forward with the new projects which reflects all the 31 districts in Karnataka having at least one registered real estate project and the diversification of real estate development beyond Bengaluru Urban reflects a broader trend of economic growth and urbanization in Karnataka.

KODAGU

KARNATAKA RERA REPORT 2024

Districtwise Projetcs Approved

VIJAYANAGARA

YADGIR

GADAG

HASSAN

BIDAR

RAICHUR

BAGALKOT

DAVANGERE

CHIKKAMAGALURU

CHITRADURGA

KOPPAL

TUMAKURU

RAMANAGARA HAVERI

CHAMRAJANAGAR

VIJAYAPURA

MANDYA

UTTARA KANNADA

SHIVAMOGGA KOLAR

CHIKBALLAPUR

DHARWAD

KALABURGI

UDUPI

BALLARI (BELLARY)

BELAGAVI (BELGAUM)

BENGALURU RURAL

DAKSHINA KANNADA

MYSORE

BENGALURU URBAN

COMPLETION OF THE REAL ESTATE PROJECT

Expected completion of the project shall be mentioned in the application of registration which is agreed with the authority and other stakeholders of the project. It provides stakeholders, regulators, and investors with a comprehensive understanding of the financial scope of the project and helps in assessing its viability and feasibility. It also shows the project trustfulness in the real estate market.

As per the applications made by the promoters for the registration of the real estate projects, indeed a noticeable hike in the completion of projects in 2023 with RERA compliance, suggests positive developments in the real estate sector, benefiting both developers and homebuyers alike.

By considering the minimum lifecycle of the project as 5 years to handover the units to the homebuyers, it has sharply reflecting that the after the implementation of Karnataka Real estate Regulatory Authority in 2017 its enforcement mechanisms became more effective, incentivizing developers to adhere to its provisions to avoid penalties and legal issues.

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KARNATAKA RERA REPORT 2024

It signifies greater transparency and accountability in the real estate sector, boosting investor confidence and encouraging more investment in projects. Homebuyers benefit from projects completed in compliance with RERA, as it provides them with greater protection against delays, financial risks, and other issues commonly associated with real estate transactions.

Applied for Completion of the project

EXTENSION OF REAL ESTATE PROJECT

Section 5 of RERA states that the registration of a real estate project shall be valid for the period declared by the promoter in its application. Section 6 allows the Authority to extend the registration for a further period not exceeding one year, on account of a force majeure event such as war, flood, drought, fire, cyclone, earthquake or another calamity. Post RERA, developers focussed on the timely delivery of projects and clearing their unsold inventory.

Construction industry was significantly impacted by the COVID-19 pandemic, with many projects experiencing delays or halts due to lockdowns, supply chain disruptions and safety concerns.

As a result, contractors and developers often had to apply for extensions and hence a major hike in 2019 for applications for extensions to project timelines to accommodate these unforeseen circumstances.

Governments and regulatory bodies in many regions introduced measures to support the construction sector, such as allowing flexibility in project deadlines and providing financial assistance to mitigate the effects of the pandemic.

KARNATAKA

It is notable that extensions after a year is rare, they can occur under exceptional circumstances where all parties involved agree that it is necessary to ensure the successful completion of the project.

High percentage 87% in one year extension indicates pragmatic response to the various challenges encountered during the pandemic, including supply chain disruptions, labour shortages, and restrictions on construction activities. Extending project registrations allows developers to adapt to these challenges while ensuring that their projects remain viable in the long term.

No. of days for extension applied

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DAYS

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Bengaluru Urban have a larger number of real estate projects compared to other regions due to its status as a major economic and technological hub. With more projects in progress, there’s a higher likelihood which is

Karnataka RERA | Law & Practice

AUTHOR : SIRC OF ICAI, NAREDCO, KARNATAKA

RERA, RAMESH S. PRABHU, VINAY THYAGARAJ

PUBLISHER : TAXMANN

DATE OF PUBLICATION : MAY 2024

EDITION : 2024 EDITION

ISBN NO : 9789357787512

NO. OF PAGES : 1620

BINDING TYPE : PAPERBACK

Rs. 3995 | USD 53

Description

Karnataka RERA Law & Practice emerges as a comprehensive and authoritative guide tailored to the nuances of real estate regulation in Karnataka. This first edition is a collaborative effort among the Southern India Regional Council (SIRC) of the Institute of Chartered Accountants of India (ICAI), the National Real Estate Development Council (NAREDCO), and the Karnataka Real Estate Regulatory Authority. This manual serves as both a practical guide and a reference for new entrants and seasoned practitioners involved in real estate, particularly those representing clients before regulatory bodies. This book is authored by a study group of industry experts and stakeholder representatives and edited by esteemed Chartered Accountants Ramesh Prabhu and Vinay Thyagaraj; this publication is designed to enrich the knowledge and application of practitioners in the real estate sector.

The Highlights of the Book are as follows:

 [Content and Structure] The book is meticulously structured into chapters that delve into critical aspects of real estate practice, including registration, certification, quarterly updates, annual audits, and other compliances under RERA.

 [Practical Tools] It equips users with practical tools such as Standard Operating Procedures (SOPs), Frequently Asked Questions (FAQs), and judicial rulings, enhancing the practical utility of the book.

 [Dynamic and Adaptable Content] Acknowledging the evolving nature of legal frameworks, the book offers a wealth of legal aspects, formats, drafts, and specimens as ready references for adaptable application.

 [Legal and Peripheral Subjects] Beyond the core provisions of RERA, the manual expands into peripheral subjects like Income Tax, GST, Insolvency and Bankruptcy, consumer protection, and FEMA. This broadens the reader’s understanding of interrelated legal areas impacting real estate transactions.

 [Practical Application] Includes various formats, drafts, and specimen documents that serve as practical references, allowing practitioners to tailor their strategies to specific needs and situations.

 [Inspirational Comparative Analysis] Inspired by Maharashtra’s implementation of RERA, the book includes comparative analyses to provide a more enriched perspective on real estate regulation and practice.