SC asks Centre to examine if state rules under RERA subserve interest of home buyers

The Supreme Court Monday directed the Centre to examine whether the rules framed by various states under Real Estate Regulatory Authority (RERA) are in conformity and subserve the interest of home buyers.

A bench of Justices D Y Chandrachud and Surya Kant gave three months to the Centre to examine if there are any deviations in the rules framed by the states to the rules framed by the Centre in 2016 and to place the report by first week of May, 2022.

The bench appointed advocate Devashish Bharuka as amicus curiae in the plea by advocate Ashwini Upadhyay seeking implementation of builder-buyer agreement to safeguard the interest of home buyers and requested him to assist the Union Ministry of Housing and Urban Affairs to examine the rules framed by the states.

The top court noted that the central government shared the draft 'agreement for sale' in 2016 after the enactment of RERA with all the states and Union Territories and currently West Bengal, Jammu and Kashmir and some noth-eastern states are yet to notify the rules.

"At the present stage, it is necessary for the court to be apprised whether the rules which have been framed by the states contain the essential norms which have been adopted by the Union government under the rules of 2016 and whether there is any deviation, which would not sub serve the interest of buyers," the bench said.

It added, "We direct that this exercise be carried out at central level by the Union Ministry of Housing and Urban Affairs which shall scrutinize the states' rules and place a report before this court on whether they comply with the sub-stratum of the rules, which have been framed by the Union Government. We also request advocate Devashish Bharuka to assist this court as amicus curiae. Bharuka shall also assist in carrying out this exercise."

It said this exercise shall be completed by the first week of May this year.

At the outset, Additional Solicitor General Aishwarya Bhati, appearing for the Centre, said the rules have been framed by the central government and many states have notified them with some changes keeping in mind the local conditions.

The bench agreed that there may be some local conditions which need to be taken care of by the states but most of the rules should be in compliance with the Centre's draft rules of 2016.

The bench asked Bhati if the Centre has examined whether the rules which have been framed by the states are in conformity with the rules the Centre has framed. Bhati said that they have compared the rules framed by major States where construction activity is more and they have done in the case of Maharashtra and Haryana.

She said that the Union of India will do that exercise of examining all the State rules and apprise the court about the same.

Senior advocate Menaka Guruswamy, appearing for Upadhayay said that the concerns still remain despite Centre's 2016 rules and that is why this writ petition was filed. She said that the Union of India says that it is the responsibility of state governments to frame rules and they ignore sections 41 and 42 of RERA which have been reproduced in the October 4, last year order of the court.

On January 17, the top court had emphasised the need for a model builder-buyer agreement to safeguard the interest of middle-class home buyers and asked the Centre to consider framing uniform rules under the provisions of RERA.

The top court had said that it wants that instead of leaving it to the States, the Centre makes the model builder-buyer agreement and model agent-buyer agreement which shall be applicable for the whole of the country.

It had said that the whole purpose of the present PIL is that there should be a model builder-buyer agreement which will be formulated by the central advisory council so that there is some uniformity in the basic terms and conditions and the flat buyers are not exploited.

The Centre in its affidavit said, "There is a robust regulatory mechanism and a draft 'agreement for sale' has already been prescribed under the provisions of RERA (Real Estate Regulatory Authority), which seeks to balance the rights and interest of home buyers and promoters in an accountable and transparent manner".

It has said that according to section 84 of RERA, the appropriate government that is the state government save in the instances involving its application in the territory of union territories has to notify rules for carrying out the provisions of this Act.

The affidavit has said that RERA mandates for registration of projects before advertising, marketing, booking, selling and the law ensures the timely delivery of real estate projects and the entire fund flow is also subject to strict monitoring by the regulator to avoid diversion of funds, which will also secure the interest of home buyers.

On October 4 last year, the top court had said it was important for the country to have a model builder-buyer agreement in the real estate sector for consumer protection because developers try to put numerous clauses in it, which common people may not be aware of. 

Upadhyay had said that there should be a model agreement prepared by the Centre as some states have it and some don't, and there is no uniformity in those agreements.

The PIL has sought direction to the Centre to frame model pacts for builders and agent buyers to protect customers and bring transparency in the realty sector in line with the RERA Act, 2016.