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RERA REGIME - The Exemption Conundrum
In this third edition of our RERA Regime series[3], we aim to understand the parameters of a very specific exclusion provided under Section 3(2)(a) of RERA which was originally devised to provide relief to small real estate projects from the rigours of registration under RERA.[4]
Regulatory Overview
Under RERA, registration of a real estate project is mandatory if a promoter[5] intends to “advertise, market, book, sell, or offer for sale, or invite persons to purchase” any plot, apartment or building in such real estate project[6]. There are, however, certain exceptions to this rule provided under Section 3(2) of RERA, and if a real estate project falls within the ambit of any such exception, then such real estate project need not be registered.
Section 3(2) of RERA reads as follows:
“Section 3 – Prior registration of real estate project with Real Estate Regulatory Authority -
(1) …..
(2) Notwithstanding anything contained in sub-section (1), no registration of the real estate project shall be required –
(a) where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight inclusive of all phases:
Provided that, if the appropriate Government considers it necessary, it may, reduce the threshold below five hundred square meters or eight apartments, as the case may be, inclusive of all phases, for exemption from registration under this Act;
(b) where the promoter has received completion certificate for a real estate project prior to commencement of this Act;
(c) for the purpose of renovation or repair or re-development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building, as the case may be, under the real estate project.
Explanation - For the purpose of this section, where the real estate project is to be developed in phases, every such phase shall be considered a stand alone real estate project, and the promoter shall obtain registration under this Act for each phase separately.” (emphasis supplied)
Section 3(2)(a) of RERA states that registration of a real estate project is not required, if: (i) the area of land on which the project is to be developed does not exceed 500 (five hundred) square meters, or (ii) not more than 8 (eight) apartments[7] are to be developed in such project, including all the phases of such project. From a review of, the various judgements, orders and rulings passed and circulars issued, by the Authorities (which have been discussed below), it appears that there are 2 (two) conflicting views taken by the Authorities with respect to the meaning and intent of the exemption provided in Section 3(2)(a) of RERA:
View 1 – a real estate project is required to be registered under the provisions of RERA, if it does not meet the criteria provided in either (i) or (ii) of the preceding paragraph.[8] (emphasis supplied)
View 2 – a real estate project is required to be registered under the provisions of RERA, if it does not meet the criteria provided in both (i) and (ii) of the preceding paragraph.[9] (emphasis supplied)
For illustrations of View 1 and View 2, we may rely on the following frequently asked questions ("FAQ(s)”) framed by the different Authorities and available on their respective websites:
View 1
Telangana State Real Estate Regulatory Authority:
“FAQ No. 4: Q. If a real estate project has land area more than 500 Sq. mts but containing less than 8 apartments. Does it still need to be registered?
Ans. Yes. Every real estate project which has land area more than 500 Sq. mts or has more than 8 apartments needs to be registered."[10]
“FAQ No. 5: Q. If a real estate project has land area less than 500 Sq. mts but contains more than 8 apartments. Does it still need to be registered?
Ans. Yes. Every real estate project which has land area more than 500 sqmts or has more than 8 apartments needs to be registered."[11]
View 2
Maharashtra Real Estate Regulatory Authority (“MahaRERA”):
“FAQ No. 4: Q. If a real estate project has land area less than 500 sq.mts but contains more than 8 apartments. Does it still need to be registered?
Ans. No. Every real estate project which has land area more than 500 sq.mts and has more than 8 apartments needs to be registered.”[12]
“FAQ No. 38: Q. Our society land is less than 500 sq.m. but there are 16 apartments in the redevelopment project. Does MahaRERA apply?
Ans. No, As land is less than 500 sq.m.”[13]
Interpretation of the Authorities
Maharashtra
Ascribing to View 2, the majority of members of the MahaREAT[14] in the case of Messrs Geetanjali Aman Constructions v. Hrishikesh Ramesh Paranjpe[15] by their order dated July 10, 2019, emphasised on the word “or” between the 2 (two) conditions provided in Section 3(2)(a) of RERA, and clarified that in the event any one of the conditions is satisfied then the real estate project is not required to be registered under RERA. MahaREAT, inter-alia, held that:
“From the above proceedings, it is clearly discernible that by retaining the word 'or' in the relevant clause, the legislature always intended to provide two contingencies where if either of the two is satisfied, the project is to be held eligible for exemption from registration. Had the legislature intended to apply both the conditions collectively or conjunctively, the simple use of the word(s) 'and' or 'and/or' would have achieved the objective.” (emphasis supplied)
Interestingly, 1 (one) of the members of the Bench in the same matter[16] took a dissenting view and held that to be eligible for an exemption under Section 3(2)(a) of RERA, the real estate project has to satisfy both the conditions provided therein, i.e. View 1. The dissenting member held that:
“…. project must satisfy both conditions i.e. area of plot not exceeding 500 sq. meters and number of flats not exceeding 8 for getting exemption from registration as per section 3(2)(a) of RER Act. Satisfaction of one condition is not sufficient to exempt the project from registration.” (emphasis supplied)
Following the majority decision of the MahaREAT in M/s. Geetanjali Aman Constructions v. Hrishikesh Ramesh Paranjpe[17], the MahaRERA issued a circular on October 11, 2019[18], under which it clarified as follows:
“It is therefore necessary to clarify that the following transactions / projects do not require MahaRERA Project Registration for Agreement for Sale / Sale Deed Registration:
- Real Estate Projects that are excluded from MahaRERA Registration
- Real Estate Projects where the area of land proposed to be developed is less than or equal to five hundred square meters.
- Real Estate Projects where number of apartments proposed to be developed is less than or equal to eight apartments.
- the area of land proposed to be developed either for building flats, floors, shops, commercial space or for plotting exceeds 500 square meters, in all phases…..
- the number of apartments whether called block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, tenement, unit or by any other name; proposed to be developed exceeds eight, in all phases, on any size of the plot…..
- The area of land proposed to be developed exceeds five hundred square meters; or
- The number of apartments proposed to be developed exceeds eight.
- The area of land proposed to be developed is less than or equal to five hundred square meters; and
- The number of apartments proposed to be developed is only eight or less than eight.