Land Owner – Promoter under RERA Act 2016

The real estate sector plays an important role in fulfilling the need and demand for housing and infrastructure in the country. Builders and promoters have different responsibilities under RERA. All builders and promoters who are undertaking a real estate project with more than 8 units or 500 square meters of built-up area are required to obtain RERA registration and come under the ambit of RERA regulations. Under RERA, a promoter is defined as a person who is entrusted with the task of promoting a project that has been developed or constructed by a developer. In this article, we will discuss the promoter under RERA Act 2016.

Who is a Promoter?

The definition of promoter is broad and covers all types of promoters i.e. developer, builder, GPA holder, colonizer, contractor, plot owner in a real estate project. Thus, any person who develops and sells is included in the definition of promoter.

The land owner is the person who causes the construction of the project, who can grant the rights to the developer through the grant of development rights, GPA, etc., for that reason, the land owners along with the builders are jointly responsible for the allottee in the project.

Definition of Promoter under RERA

Section 2(zk) “promoter” means

• a person who constructs or causes to be constructed a detached building or a building consisting of flats or converts an existing building or part thereof into flats, for the purpose of selling all or some of the flats to other persons and includes its agents; or
• a person who develops land into a project, whether or not such person constructs structures on any of the land, for the purpose of selling all or some of the land in said project to other persons, whether with or without structures thereon; or
• any development authority or any other public authority in respect of allottees of-
  • buildings or flats, as the case may be, constructed by such authority or authority on land owned by or made available to them by Government; or
  • land owned by or made available to such authority or body by the Government for the purpose of selling all or any of the flats or land; or
• a state-level apex housing finance co-operative society and a primary co-operative housing society which constructs flats or buildings for its members or in relation to persons allotting such flats or buildings; or
• any other person holding himself out as a builder, colonizer, contractor, developer, or under any other name or purporting to act as the holder of a power of attorney from the owner of the land on which the building or flat is constructed or the land is constructed for sale; or
• such other person who constructs any building or apartment for sale to the general public.
  Explanation – For the purposes of this Article, if the person who constructs or converts the building into flats or constructs the plot for sale and the persons who sell the flats or plots are different persons, both shall be deemed to be the promoters and shall jointly bear the functions and responsibilities established by this Act or the rules and regulations made thereunder.

Important aspects under RERA between land owner and promoter under joint development agreement​​

• RERA Act does not differentiate between land owner or developer. Both have the same responsibility and obligations towards the project participants.
• The Land Owner or Developer Agreement (JDA) defines their roles and responsibilities. Hence, all possible clauses should be incorporated while drafting the JDA to name a few–
• Who is responsible for RERA registration, quarterly updates, compliance with annual audit rules, advertising compliance.
• How to open a RERA project designated bank account – who is the signatory of the bank account/operation.
• How to collect money from allottees, mandatory deposit of 70% to bank account designated by RERA including proceeds from sale of Landowner units in the project.
• How to operate bank account designated by RERA to protect interests of both (land owner and developer)
• Withdrawal of money from bank account designated by RERA, distribution of such collected money between land owner and developer based on project completion ratio.
• Use of money collected only for the purposes of the Project 7) Delay in handing over possession of the units to the purchasers. Compensation payable to the beneficiaries on account of such delay in the completion of the project.
• In case of non-compliance, if a fine is imposed, who will be responsible and comply with it.

Responsibilities of the Promoter

The promoter is primarily responsible for the registration of the real estate project with RERA. The builder or promoter is also responsible for all duties, responsibilities and functions as per the provisions of the RERA Act.

• Website: All builders and promoters are required to create a website and display it on the RERA website and enter all necessary details of the proposed project for public display which include details like:
  • Registration details approved by the Authority.
  • Quarterly list of number and type of apartment or plots reserved, list of received and pending approvals after commencement, project status, etc.
• Certificate of Completion: Organizers are entrusted with the responsibility of obtaining the Completion or Occupancy Certificate from the Competent Authority for making it available to allottees either individually or to a group of allottees.
  In addition, the proponent is responsible for obtaining a sale deed or lease confirmation that specifies the lease period and certifies that all fees and charges related to the leased land have been paid. This Land Sale Agreement, Lease Agreement and Completion Certificate must be made available to the assignee.
• Provision and maintenance of services: Promoters are required to provide and maintain essential services at a reasonable cost until the allottee association takes over the project.
• Establishment of an association: The promoter is entrusted with the responsibility of enabling the formation of the association, company or cooperative of the assignees or their federation according to the applicable laws. In the absence of local laws, the allottee association must be formed within three months after the majority of allottees have reserved their plot, flat or building in the project.
• Availability of documents: The promoter should facilitate the availability of documents during reservation and issue of allotment letter which includes for example approved plans and layout plans which are duly approved by the competent authority.
• Registered waybill: The promoter must take responsibility for the execution of the registered real estate transfer agreement in favor of the transferee. This must be accompanied by an undivided proportional title in the common areas of the association of owners who have reserved their property in the project.
• Payment of expenses: The promoter must pay all the expenses until he transfers the physical ownership of the real estate project to the allottee or association of allottees, which includes rent, land costs, maintenance charges, etc. If the promoter fails to pay all or any of the expenses of the allottee or association of allottees, then he is liable even after the transfer.
• Mortgage restrictions: After the conclusion of the contract for the sale of any property, no lien or encumbrance may be placed on such property. Even if this provision is violated, the right and interests of the assignee should not be compromised.

Final words

RERA promoters are tasked with various responsibilities under the RERA Act. All promoters who take up a project with more than 8 units or 500 square meters are required to do RERA registration and come under the ambit of RERA regulations.