Section 6 of the Real Estate (Regulation and Development) Act, 2016 ("Act") permits the authority to grant extension of registration of a project to the Promoter under reasonable circumstances where there is no default on the part of the promoter, for a period not exceeding one year.

In the event, the Promoter is unable to complete the Project within the time stipulated at the time of initial declaration or under extended period, the Authority may revoke under Section 7 of the Act, the registration granted to the Promoter. However, Section 7(3) of the Act states that the Authority may, instead of revoking the registration under Section 7 (1) of the Act, permit it to remain in force subject to such further terms and conditions as the Authority thinks fit to impose in the interest of the allottees, and any such terms and conditions so imposed shall be binding upon the promoter.

In the case of the Neel Kamal Realtors Suburban Pvt. Ltd. and Anr. Vs. Union of India and Ors1 , disputes were raised regarding the constitutional validity of Section 6 and Section 7(3) of the Act. Upon considering the submissions made by all parties, the Hon'ble Bombay High Court observed that intention of the legislation is to be viewed looking at the larger public interest and the answer lies in Section 7(3) of the Act which empowers the Authority to further grant extension beyond one year based on merits of the case. The Court stated that harmonious and balance construction of Section 6 and Section 7(3) shall suffice the purpose of enactment of RERA law. Authority is required to consider each case individually on merit and decide the terms and conditions to be imposed upon the promoter for further extension instead of revoking the registration of project.

2019 Circular

On the basis of the aforesaid judgement and in order to ensure that interest of the allottees are protected and completion of the registered project is achieved, the MahaRERA Authority vide Order No. 7 of 2019 dated 8 th February 2019 ("2019 Circular") had resolved as follows2 :

"In cases, where the promoter of a MahaRERA registered project is unable to complete the project in the extended time of one year, granted under Section 6, further extension may be given only in those cases where the concerned association of allottees resolve that instead of revoking the registration, the existing promoter be permitted to complete the project in a specific time period and on payment of same fees as prescribed under the Rules for extension.

Provided that Association of Allottees shall be Association or society or cooperative society or a federation or any other body by whatever name called, consisting of a majority of allottees having booked their plot or apartment or building, as the case may be, in the project."

Accordingly, the 2019 Circular was issued by the MahaRERA Authority to grant extension of registration of a Project subject to seeking approval from the Association of Allottees or society or cooperative society or a federation or any other body by whatever name called, consisting of a majority of allottees having booked their plot or apartment or building.

Allottees not keen to consent

Pursuant to issuance of the 2019 Circular, it was noted by the MahaRERA Authority that when promoters are seeking consents from the concerned association of allottees consisting of a majority of allottees who have booked their plot or apartment or building in the real estate project in respect of extension of project registration under Section 7 (3) of the Act, the consents are often not being provided by the allottees. In cases where there has already been significant delay, many allottees file complaints before MahaRERA for interest payment and other reliefs and in such situations, giving extension to promoters may prejudice the outcome of such complaints. Further the delay in completing the project despite extension of a year being provided, does not inspire any confidence in the allottees and they are thus reluctant to continue giving opportunities to a promoter who has already defaulted. Due to this and other reasons, allottees do not consent for further extension of the registration.

However, this often results in the promoter being ousted from the project even where a promoter is genuinely keen on completing the project and delivering units to the allottees and where delay has been caused by reasons not foreseen or controllable by the promoter.

It is also pertinent to note that soon after the issuance of the 2019 Circular, the COVID-19 pandemic began which had an unprecedented effect on the real estate sector and economy. Although mandatory extensions in registrations were given on this account, recovery from a global pandemic has not been easy and in many cases, despite developers doing their best, projects have been delayed.

2022 Circular

Thus, in order to enable completion of projects as the same would ultimately operate in the interest of maximum allottees, the MahaRERA vide Order No. 40/2022 dated 27th December 20223 ("2022 Circular"), issued directions to permit extension even if the Promoter has not been able to comply with the 2019 Circular.

The 2022 Circular states that in cases where the promoter is not able to comply with the 2019 Circular, the following compliances will inter alia be required while applying for extension of registration:

  1. Promoters shall submit the consents as obtained from the allottees irrespective of the number of such consents along with:
    1. reasons why the required percentage of consents from allottees could not be obtained; and
    2. why the application for extension should be considered without the 51% consent.
  2. Promoters shall submit an explanatory note setting out
    1. the grounds and reasons for delay in completion of the real estate project as well as setting out the need for grant of extension along with documents supporting such grounds and reasons.
    2. the steps that would be taken by him to complete the project within the extended period sought.

Takeaways

While the 2022 Circular provides an opportunity for promoters to set their house in order and complete delayed projects, it should not be granted nor treated as an automatic extension as the 2022 Circular itself mandates that promoters support their applications with clear steps which would be taken by promoters to complete such project and give reasoning as to why their application should be considered despite lack of requisite consent.

Under the 2022 Circular, further terms and conditions can also imposed by the Authority in the interest of the allottees. The rights of allottees will also not be affected by grant of such extension. As such, the 2022 Circular seeks to achieve a fine balance by protecting allottees' rights while also not jeopardizing the entire project by ousting the promoter. It is hoped that it is used by all parties concerned in the right spirit to achieve project completion and satisfy the intent of this opportunity given by the MahaRERA Authority.

Footnotes

1. Neelkamal Realtors Suburban Pvt. Ltd. & Anr. v/s. Union of India And Ors., 2017 SCC OnLine Bom 930

2. MahaRERA Order No. 07/2019 dated 8th February 2019

3. MahaRERA Order No. 40/2022 dated 27th December 2022

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.