Tushar Jindal, Assistant Professor, School of Real Estate talks about impact of Real Estate Regulation Act (2016) on real estate agents
The recently passed Real Estate Regulation Act (2016) has been hailed as a much needed reform for the whole real estate industry. Professor Tushar Jindal talks about its impact on the real estate agents.
Gone are the days when anyone who was having the knowledge of their locality and were aware of which flat or plot is unoccupied or the owner is looking to let out, were becoming real estate agents. The most prominent real estate agent in such scenario was the watchman of the building who was aware of which flat is unoccupied and when any other will be going to be unoccupied. Also, people thought that becoming an agent is one of the easiest profession in which without any significant knowledge, without any big investment and with continuously ignoring the likes and desires of purchaser or tenant, they can continue with the profession.
To take control of this unorganised profession growing and taking away the faith of the buyer in the real estate market, “RERA” (Real Estate Regulation and Development Act) has imposed lots of check and balances on real estate agent and real estate sector. As quoted by Mr. Anuj Puri (former chairmen JLL residential) in an interview, due to RERA, fly by night brokers will leave the market and consolidation will take place. Also now the agent has to be both knowledgeable and ethical in their approach towards this profession.
Definition of Real Estate Agent as per RERA
As per the real estate (Regulation and Development) Act, 2016, it is necessary to give a proper definition of the term ‘Real estate agents’ and then formulate the rules and requirements around them, hence below mentioned is the definition of Real Estate Agent as per RERA.
As per the act, ‘Real estate agent’ means any person, who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building, as the case may be, in a real estate project, by way of sale, with another person or transfer of plot, apartment or building, as the case may be, of any other person to him and receives remuneration or fees or any other charges for his services whether as commission or otherwise and includes a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation for sale or purchase of plot, apartment or building, as the case may be, and includes property dealers, brokers, middlemen by whatever name called.
The definition is quite exhaustive in nature and includes almost all those, who can be a part of any kind of selling activity.
The market which was flourishing with agents and work mostly being carried out without any ethics, professionalism and rules is now protected from all sides and government has seriously left no scope for any agent. No escaping route is there through which such a person can get rid of his responsibilities. Beginning from registration of real estate agents to complete discharge of their duties and after that also keeping and maintaining all the records are some of the key areas which have to be taken care by government now.
So, following are the requirements which the real estate agents are required to follow to continue in this business:
Only registered agent can deal in registered property: No real estate agent shall facilitate the sale or purchase of or act on behalf of any person to facilitate the sale or purchase of any plot, apartment or building, as the case may be, in a real estate project or part of it, being the part of the real estate project registered under section 3 (prior registration of real estate projects with real estate authority), being sold by the promoter in any planning area, without obtaining registration as per the requirements raised by the authority. Thus the act ensures that no real estate agent makes any sales without getting themselves registered. Also the registered agent can sell the registered Real estate project only.
Registration of Real Estate Agent
Every real estate agent shall make an application to the Authority (It means Real Estate Regulatory Authority established under sub section (1) of section 20 of Real Estate (Regulation and Development) Act,2016) for registration in such form, manner, within such time and accompanied by such fee and documents as may be prescribed.
Responsibility of Authority
The Authority shall, within such period, in such manner and upon satisfying itself of the fulfilment of such conditions, as may be prescribed—
(a) Grant a single registration to the real estate agent for the entire State of Union territory, as the case may be;
b) Reject the application for reasons to be recorded in writing, if such application does not conform to the provisions of the Act or the rules or regulations made thereunder:
Provided that no application shall be rejected unless the applicant has been given an opportunity of being heard in the matter. This means that it is not that only the real estate agents that are responsible and accountable for their work but simultaneously authority is also responsible for its timely and proper functioning.
(c) Whereon the completion of the period specified under sub-section (3) i.e. within which such registration has to be granted or denied, if the applicant does not receive any communication about the deficiencies in his application or the rejection of his application, he shall be deemed to have been registered.
Highlighting registration number/other details by Agents: Every real estate agent who is registered as per the provisions of this Act or the rules and regulations made thereunder, shall be granted a registration number by the Authority, which shall be quoted by the real estate agent in every sale facilitated by him under this Act.
The importance of quoting such registration number on every sale made by agent is to show the authenticity of the agent who is making such sales and also to counter check that sales have been made by registered agents only.
• Validity of Registration: Every registration shall be valid for such period as may be prescribed, and shall be renewable for a period in such manner and on payment of such fee as may be prescribed. Hence no registration is valid for lifetime and renewals have to be done provided Real estate agent continues to comply all the responsibilities laid over him by authority.
Revocation and Suspension of Registration: Where any real estate agent who has been granted registration under this Act commits breach of any of the conditions thereof or any other terms and conditions specified under this Act or any rules or regulations made thereunder, or where the Authority is satisfied that such registration has been secured by the real estate agent through misrepresentation or fraud, the Authority may, without prejudice to any other provisions under this Act, revoke the registration or suspend the same for such period as it thinks fit provided that no such revocation or suspension shall be made by the Authority unless an opportunity of being heard has been given to the real estate agent. The importance of such clause is to keep the agents on their toes always and put them in self-check mode, as any complaint, noncompliance, breach of trust and responsibility can revoke or cancel their registration.
From the above mentioned points it is quite clear that there are several checks and balances on both authority and agent, but these are broad guidelines given by central act. Section 84 of the central act has given certain powers to state authorities so that they can take steps to formulate proper guidelines, formalities, forms etc. to be used in case of registration, renewal, revocation etc. of real estate agents.
State authorities are listing forms on their websites like form used by Maharashtra Real estate (Regulation and development) (Registration of real estate projects, registration of real estate agents, rate of interest and disclosure on website) Rules, 2017 has given the following Forms in relation to application , grant, renewal, revocation and cancellation of registration of real estate agents.
Similarly many other states may come up with such kind of details in near future.
Functions of Real Estate Agent:
It is not that just by applying for registration, getting registration number, applying for renewal of registration the work of real estate agent is over, rather, it is just a beginning. The act imposes various other functions which have to be taken up and performed by the real estate agent to continue in this profession.
The following are the functions of Real Estate Agent:
a) Every real estate agent registered under RERA (section 9) shall—
b) Not facilitate the sale or purchase of any plot, apartment or building, as the case may be, in a real estate project or part of it, being sold by the promoter in any planning area, which is not registered with the Authority
c) Maintain and preserve such books of account, records and documents as May prescribed;
d) Not involve himself in any unfair trade practices, namely:—
• The practice of making any statement, whether orally or in writing or by visible representation which falsely represents that the services are of a particular standard or grade; or represents that the promoter or himself has approval or affiliation which such promoter or himself does not have; or makes a false or misleading representation concerning the services;
• Permitting the publication of any advertisement whether in any newspaper or otherwise of services that are not intended to be offered.
e) Facilitate the possession of all the information and documents, as the allottee, is entitled to, at the time of booking of any plot, apartment or building, as the case may be;
f) Discharge such other functions as may be prescribed.
Penalties for non–registration and contraventions by Real Estate Agent under RERA Act
If any real estate agent fails to comply with or contravenes the provisions of RERA (mentioning his roles, responsibilities, registration, keeping of records, renewal etc.), he shall be liable to a penalty of ten thousand rupees for every day during which such default continues, which may cumulatively extend up to five per cent. Of the cost of plot, apartment or buildings, as the case may be, of the real estate project, for which the sale or purchase has been facilitated as determined by the Authority.
Penalty for failure to comply with orders of authority by Real estate agent
If any real estate agent, who fails to comply with, or contravenes any of the orders or directions of the Authority, he shall be liable to a penalty for every day during which such default continues, which may cumulatively extend up to five per cent., of the estimated cost of plot, apartment or building, as the case may be, of the real estate project, for which the sale or purchase has been facilitated and as determined by the Authority.
Penalty for failure to comply with orders of appellate tribunal by Real Estate Agent
If any real estate agent, who fails to comply with, or contravenes any of the orders, decisions or direction of the Appellate Tribunal, he shall be punishable with imprisonment for a term which may extend up to one year or with fine for every day during which such default continues, which may cumulatively extend up to ten per cent of the estimated cost of plot, apartment or building, as the case may be, of the real estate project, for which the sale or purchase has been facilitated, or with both.
From the above mentioned points we can easily see that the playing ground and referee both have been changed for real estate agents, what was once a no barrier kind of entry is now guarded from all sides, definitely it will discourage some of the players in the market but simultaneously it will encourage fair trade and will help in regaining the lost confidence of the prospective buyer in real estate market.
Role of Promoter / Developer towards Real Estate Agents
It might be a possibility that a fair percentage of real estate agents might become uncomfortable with RERA coming into place, this could be due to lack of knowledge i.e. how to do registration ,how to comply with the formalities laid down by act or simply there resistance to change. It is also quite evident that these real estate agents play a very crucial role in the sale of projects and are first point of contact with buyer. Hence in this changing phase of real estate industry, promoter/developer must take a step towards facilitating registration of agents and try to clarify any misconceptions which they have in mind.
The advantages of such facilitation are as follow:
• It will prevent many real estate agents from saying goodbye to this industry.
• In many situations it may lead to consolidation of work, which may bring better and effective results.
• It may also lay down a solid foundation of relationships between promoter and agent.
• Promoter must also understand this that only a registered agent can make sales, so if agents are not registered there sales will go down/suffer.
• Proper guidance from promoter will also prevent the agent from getting into defaulters list which may lead to cancellation of his registration.
One thing is for sure that with RERA coming into picture things will change they can either be good or bad but they are never going to remain the same. The need of the hour is not to panic or look for any way out, but to understand, implement and follow the requirements raised by the act. The one who is going to follow it is going to swim smoothly in this sea of rules and regulations and the one who is looking for loop holes and way outs is going to drown sooner or later. It is a welcome change and all the real estate agents and promoters should comply with it.
• The Real Estate (Regulation and Development Act), 2016
• Maharashtra Real Estate (Regulation and development)