1. Decoding Real Estate (Regulation and Development) Act
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
PUNE BRANCH OF WIRC
Decoding Real Estate (Regulation and Development) Act
CA Jayesh Kariya
22 December 2017

2. Framework of RERA

3. Framework of RERA Section Provisions of the Act 1 – 2
Scope and Definitions
3 – 8
Registration of the Project
9 - 10
Registration of Agents and its Functions
11 – 18
Functions and duties of Promoters 19
Rights and Duties of Allottees
RERA Authority – Constitution, Administration, Functions, Powers, etc. 40
Recovery of Interest or Penalty or Compensation from Developer b the Authority as Land Revenues
43 – 58
RERA Tribunal - Constitution, Administration, Functions, Powers, etc.
59 – 72
Penalties and Offences
73 – 78
RERA Authority – Accounts, Finance, Audit and Reports
79 – 92
Miscellaneous Provisions:
Bar of Jurisdiction, Power to make Rules & Regulations, Act to have overriding effect over other Acts,
Repeal of MOFA 2012

4. Framework of MAHA RERA Sr Rules and Regulations 1
Maharashtra (Real Estate & Development) (Registration of real estate projects, registration of agents, rates of interest and disclosure on website) Rules 2017 2
Maharashtra (Real Estate & Development) (Recovery of Interest, Penalty, Compensation, Fine payable, Forms of Complaint and Appeal, etc.) Rules 2017 3
Maharashtra Real Estate Appellate Tribunal (Members, Officers and Employees) (Appointment and Service Conditions) Rules, 2017 4
Maharashtra Real Estate Regulatory Authority (Form of Annual Statement of Accounts and Annual Report) Rules, 2017 5
Maharashtra Real Estate Regulatory Authority , Chairperson, Members Officers and Other Employees (Appointment and Service Conditions) Rules, 2017 6
Maharashtra Real Estate Regulatory Authority (General) Regulations, 2017
Rights and Duties of Allottees:
Formats of Certificates of Architects, Engineers, Chartered Accountants, Annual Audit report by Statutory Auditors, Power of Attorney for Representation and Application for Inspection/Obtaining Copies of Documents/Records 7
Maharashtra Real Estate Regulatory Authority (Recruitment and Conditions of Service of Employees) Regulations, 2017 8
Notifications and Orders by RERA Authority

5. Pivotal pillars of the Act
Real Estate Act
Improve the perception of the sector among various stakeholders
Uniform regulatory environment
Financial discipline
Transparency
Accountability
Customer centricity
Compliance
COMMERCIAL and RESIDENTIAL projects including PLOTTED DEVELOPMENT
Land under development MORE THAN 500 SQ MTS / NO. of UNITS exceed 8
Projects which do not have COMPLETION CERTIFICATE before commencement of ACT
RENOVATION or REPAIR or REDEVELOPMENT projects not involving Marketing, Advertising, Selling & New Allotment NEED NOT BE REGISTERED

6. Fiscal discipline will play a critical role in project development and requires utmost importance
Real Estate Act
Financial discipline
Transparency
Accountability
Customer centricity
Compliance
Financial Discipline
What it entails
70% of the funds collected from allottees needs to be deposited in the project account
Withdrawals to cover construction and land cost
Withdrawals to be in proportion to the % completion method
Withdrawal to be certified by Engineer, Architect, and CA
Project Accounts to be Audited / FY. Copy to be submitted to RERA
Promoter to compensate buyer for any false or incorrect statement with full refund of property cost with interest
Provision for RERA to freeze project bank account upon non-compliance
Interest on delay will be same for customer and promoter
Provision for stronger financial penalties for RERA non- compliances

7. Structured communication is required to furnish all project related information to the customers
Real Estate Act
Financial discipline
Transparency
Accountability
Customer centricity
Compliance
Transparency
What it entails
Number, type and carpet area of apartments
Consent from affected allottees for any major addition or alteration
Quarterly updating of RERA website with details such as unsold inventory and pending approvals
Project completion time frame
No false statements or commitments in advertisement
No arbitrary cancellation of units by promoter
Informing allottees about any minor addition or alteration
Consent of 2/3rd allottees about any other addition or alteration
No launch or advertisement before registration with RERA
Consent of 2/3rd allottees for transferring majority rights to 3rd party

8. A PMO would be required to track and monitor developments as per the defined project plan
Real Estate Act
Financial discipline
Transparency
Accountability
Customer centricity
Compliance
Accountability
What it entails
Quarterly update of project progress along with pending approvals on RERA website
Every officer of a company, who was in charge or responsible will be liable for the conduct of the company and deemed to be guilty
Offence by an officer committed with the consent or connivance of any director, manager, secretary or other officer of the company, will also be guilty

9. CRM would help to enhance customer centricity focus
Real Estate Act
Financial discipline
Transparency
Accountability
Customer centricity
Compliance
Customer centricity
What it entails
Sharing information project plan, layout, government approvals, land title status, sub contractors
Increased assertion on the timely completion of projects and delivery to the consumer.
An increase in the quality of construction due to a defect liability period of five years.
Formation of RWA within specified time or 3 months after majority of units have been sold
Consent of 2/3rd allottees for any other addition or alteration
Consent from affected allottees for any major addition or alteration
Informing allottees for any minor addition or alteration
No false statements or commitments in advertisement
Unbiased interest on delays
Defect Liability period of 5 years- Section 14(3)
Formation of RWA within 3 months- Provisio to Section 11(4)(e)
Consent from Allottees for change in plan- Section 14
No false statement or commitment in advertisement- Section 12

10. Quarterly update of project progress on RERA website
Registration of all projects & agents and a strong dispute management required
Real Estate Act
Financial discipline
Transparency
Accountability
Customer centricity
Compliance
Compliance
What it entails
Authenticated copy of all approvals, commencement certificate, sanctioned plan, layout plan, specification, plan of development work, proposed facilities, Proforma allotment letter, agreement for sale and conveyance deed to be given when applying for project registration with RERA
Mandatory registration of new and existing projects with RERA before launch
Registration of agents/brokers with RERA
Dispute resolution within 6 months at RERA and RERA appellate tribunals
Separate registration of different phases of a single projects
Developers to share details of projects launched in last 5 years with status and reason for delay with RERA
Timely updating of RERA website
Maximum 1 year extension in case of delay due to no fault of developer
Annual audit of project accounts by a CA
Conveyance deed for common area in favor of RWA
Construction and land title insurance
Quarterly update of project progress on RERA website

11. Registration Process

12. RERA will have power to scrutinize the application
Additional powers of RERA
RERA may review the following documents submitted by a promoter:
Nature of rights and interests of the promoter to the land
Extent and location of area of land proposed to be developed
Layout of the project
Financial, technical and managerial capacity of the promoter to develop
Plan regarding the development works to be executed in the project
Conformity of development of the project with neighboring areas
Requires clarity as managerial capacity is a subjective assessment
Requires further clarity
A second level scrutiny as the same is being done by local development authorities

13. Issues and nuances for First Time Registration
Definition of Project to be registered – Single tower, Multiple towers etc.
Determination of Land Area allocable to the respective tower to be registered in case of a layout project .
Estimation of Project Cost – Various factors to be considered – Escalations, Contingencies, Future regulatory fees (eg. BMC fees) etc.
Allocation of cost already incurred to respective towers in case of layout project.
Allocation of cost on case of SRA project involving Rehab building and sale building.
Land owners and JDA partners to be considered as “Promoters”.
Society to be considered as a Promoter in case of a redevelopment project.
Ensure appropriate disclosures in agreement for sale as well as details to be uploaded at the time of registration to overcome penalty exposure.

14. Redressal Mechanism

15. RERA Appellate Tribunal**
Redressal mechanism
Suo-motto investigation
Promoter Or
Allottee Or
RE Agent
Call for details / information as maybe required, call for attendance, etc and give opportunity for hearing 1
RER Authority /AO 2
Any aggrieved person can file complaint 3
Issue order*
RERA Appellate Tribunal**
Aggrieved person can file an appeal within 60 days from receipt of order 4 5
Issue order
High Court
File a appeal before the High Court against the order of RERA Appellate Tribunal within 60 days from receipt of order 6
*for payment of compensation/ penalty basis complaint received or suo-moto investigation
**Promoter aggrieved by the order of the Authority or of AO, the appeal before RERA Tribunal can be heard only after deposit of atleast 30% of the penalty or such higher % as may be determined or payment of interest and compensation to the Allottee, or both

16. Appellate Tribunal Important Aspects
Tribunal to pass the order within 60 days – record reasons for any delay in disposal of appeal
Tribunal not bound by the procedures under Code of Civil Procedure 1908 – can have its own procedures and shall be guided by principles of natural justice
Tribunal not bound by the rules of evidence under Indian Evidence Act, 1872
Tribunal has same powers as are vested in Civil Court under the Code of Civil Procedures 1908 – examine documents, issue summons, examination on Oath, asking affidavits, issuing commissions for examination of documents/witness, reviewing decisions, etc.
All proceedings before Tribunal to be judicial proceedings under Indian Penal Code and tribunal shall be deemed to be a Civil Court for the purposes of Code of Criminal Procedure 1973
Order passed by Tribunal to be executed as Decree of Civil Court
Allottee or Complainant cannot seek remedy both before the Tribunal and Civil Court – No Civil Court has jurisdiction to entertain any suit or proceedings in respect of any matter with the Authority or Tribunal
Appeal can be preferred against the order of Tribunal before HC within 60 days
Representations before Authority and Tribunal can be made by Company Officer or CA or CS or Cost Accountant or legal practitioner

17. Offences and Penalties

18. Offences and Penalty Provision Promoter Agent Allottee
Non-registration of project/agent with RERA and continue to do so
Up to 10% of the estimated project cost
Penalty of INR10,000 per day during default tenure up to 5% of property cost
False information while making an application to RERA
Up to 5% of the estimated project cost
Contravention of any provisions of the Act (other than stated above)
Up to 5% of the property cost
Non-compliance with the order of RERA
Daily penalty up to 5% of the estimated project cost
Daily penalty up to 5% of property cost
Non-compliance with the order of the Appellate Tribunal
Up to 10% of project cost
Up to 10% of property cost

19. Prosecution and Compounding
Important Aspects
Non compliance of penalty order by Promoter (for non-registration of Project) issued by the Authority entails imprisonment upto 3 years or further penalty of 10% of estimated cost or both
Non compliance with the order of the Appellate Tribunal by Promoter entails imprisonment upto 3 years or further penalty of 10% of estimated cost or both
Non compliance with the order of the Appellate Tribunal by Agent entails imprisonment upto 1 year or daily fine of 10% of estimated cost of apartment or plot of land
Non compliance with the order of the Appellate Tribunal by Allottee entails imprisonment upto 1 year or daily fine of 10% of estimated cost of apartment or plot of land
Imprisonment punishment could be compounded (before or after the institution of prosecution) can be compounded by the Court

20. Separate project account (70:30 Rule)

21. Safeguarding consumer interest 70:30 Rule
Separate Project account (70:30 Rule)
Safeguarding consumer interest 70:30 Rule
Of the total collections, only 30% can be withdrawn without any restriction.
Rest of the amount (70%) can be withdrawn in stages in proportion to the percentage completion of the project (construction cost plus land cost).
Withdrawals to be certified by CA, Engineer and Architect; Audit report by a practicing CA to be submitted to RERA annually.
70:30 Formula
Formula
Total Cost incurred for the project / Estimated Cost of the project x 100

22. Applicability of the 70:30 rule to the ongoing projects
Applicable Prospectively
70% of the amount to be realized from the allottees shall be deposited in such separate account
100% of the Amount to be realized to be deposited
In the event where the estimated receivables of the ongoing project is less than the estimated cost of completion of the project, then 100% of the amount to be realized from the allottees shall be deposited in the said separate account

23. Applicability of the 70:30 rule to the ongoing projects
Sr. No.
Particulars
Estimated Cost (in crores)
Amount Incurred (in crores) 1
Land Cost
1000 2
Construction Cost
600
200 3
Other Cost and Marketing Cost
100 4
Total Cost
1800
1300 5
Amount realized in separate bank account
1600
Maximum Amount that can be withdrawn- 1,200 Crore

24. Applicability of the 70:30 rule to the ongoing projects
Sr. No.
Particulars
Estimated Cost (in crores)
Amount Incurred (in crores) 1
Land Cost
1000
500 2
Construction Cost
600
200 3
Other Cost and Marketing Cost
150 50 4
Total Cost
1550
750 5
Amount realized in separate bank account
Maximum Amount that can be withdrawn- 700 Crore

25. Withdrawals from Project Account
Withdrawal from project accounts – following documents are required for withdrawal from project account
A certificate from Architect certifying the percentage of completion of construction work
A certificate from the engineer for the actual cost incurred on the construction work
A certificate from a CA for the cost incurred on construction cost and land cost
The Chartered Accountant shall also certify the proportion of the cost incurred on construction and land cost to the total estimated cost of the project
The total estimated cost of the project multiplied by such proportion shall determine the maximum amount which can be withdrawn by the promoter from the project account.
As per the Act, the land cost can be withdrawn only in proportion to construction cost even if it has been paid in full.

26. Project and Land Cost Project and Land Cost Land Cost
The costs incurred by the Promoter for acquisition of ownership and title of the land parcels proposed for the real estate project, including its lease charges, which shall also include overhead cost, marketing cost, legal cost and supervision cost;
Premium payable to obtain development or redevelopment rights;
Amount paid for acquisition of TDR;
Premium for grant of FSI, including additional FSI (if any), fungible FSI; and any other instruments permissible under the Development Control Regulations;
Consideration payable to the outgoing developer to relinquish the ownership and title rights over such land parcels;
Amounts payable to State Government or Competent Authority or any other Statutory Authority of the State or Central Government, towards Stamp Duty, transfer charges, registration fees etc.; and

27. Construction Cost Project and land cost Construction Cost
All such costs, incurred by the Promoter, towards the on-site and off-site expenditure for the development of the Real Estate project including:
Payment of Taxes, Fees, Charges, Premiums, Interest etc. to any Competent Authority or Statutory Authority of the Central or State Government under any laws or rules or regulations of the time being in force;
Principal sum and interest, paid or payable to any financial institutions including scheduled banks or non-banking financial companies etc. or money-lenders (under the Maharashtra Money-Lending Regulation Act, 2014) for the Real Estate Project;
Excludes loan obtained from banks, non-banking finance companies or money-lenders, for the purpose of purchase of land for the project or for obtaining the development rights over such land.

28. Role of Chartered Accountant in MahaRERA

29. Certificates to be issued by CAs
At the time of Registration of the Project by the Developer – Form 3
At the time of withdrawals by the developers from a RERA Account – Form 3
Statutory Audit Certificate on annual basis by a Statutory Auditors – Form 5
Other Certificates Required
Certifying the cost of Rehabilitation Cost – Explanation IV to Rule 5
Existing Projects – Separate Certificates for following aspects?
Receivables from sold Inventories
Verification of Balance unsold area
ASR value of unsold flats to be realised

30. Certification by a Chartered Accountant under RERA

31. CA’s Certificate- Form 3
The CA’s certificate has to be issued in Form 3 as prescribed per MahaRERA regulations.
The Certificate contains the details (Both Estimated as well as Actual) of-
Land Cost, Development Cost,
Total Estimated Cost and actual Cost incurred
Percentage completion of the work (as per Architects Certificate)
Percentage of Cost incurred to estimated costs
Withdrawable amount from the designated bank account after considering the amount already withdrawn till date.
For ongoing projects
Estimated Balance Cost
Balance amount of receivables from the sold apartments
Estimated amount of sales proceeds in respect of unsold Apartments based on ASR Rate (Ready Reckoner Rate)
Amount to be deposited in the bank account.
The CA has to attach his workings as per prescribed format as per MahaRERA (i.e. Annexure A to Form 3).

32. Sr. No. Particulars Amount A Land Cost Estimated Amount Actual Amount
Form 3
Chartered Accountants Certificate (on the Letter head)
(FOR REGISTRATION OF A PROJECT AND SUBSEQUENT WITHDRAWAL OF MOnEY)
Cost of Real Estate Project MahaRERA Registration Number
Sr. No.
Particulars
Amount A
Land Cost
Estimated Amount
Actual Amount a
Acquisition Cost of Land or Development Rights, lease Premium, lease rent, interest cost incurred or payable on Land Cost and  legal cost
XXXX b
Amount of Premium payable to  obtain development rights, FSI, additional FSI, fungible area, and any other incentive under DCR from Local Authority or State Government or any Statutory Authority c
Acquisition cost  of TDR (if any)  d
Amounts payable to State Government or competent authority or any other statutory authority of the State or Central Government, towards stamp duty, transfer charges, registration fees etc; and e
Land Premium payable as per annual statement of rates (ASR) for redevelopment of land owned by public authorities 

33. Sr. No. Particulars Amount A Land Cost Estimated Amount Actual Amount
f[i]
Estimated construction cost of rehab building including site development and infrastructure for the same as certified by Engineer 
Actual Cost of construction  of rehab building incurred as per the books of accounts as verified by the CA 
f[ii]
Cost towards clearance of land of all or any encumbrances including cost of removal of legal/illegal occupants, cost  for providing temporary transit accommodation or rent in lieu of Transit Accommodation, overhead cost 
f[iii]
Cost of ASR linked premium, fees, charges and security deposits or maintenance deposit, or any amount whatsoever payable to any authorities towards and in project of rehabilitation 

34. Development Cost/ Cost of ConstructionB
Development Cost/ Cost of Construction
Estimated Amount
Actual Amount
a[i]
Estimated Cost of Construction as certified by Engineer
Actual Cost of construction  incurred as per the books of accounts as verified by the CA 
a[ii]
On-site expenditure for development of entire project excluding cost of construction as per a(i) above, i.e. salaries, consultants fees, site overheads, cost of services (including water, electricity, sewerage), cost of machineries and equipment including its hire and maintenance costs, consumables etc. All costs directly incurred to complete the construction of the buildings /wings of the project registered 

35. Development Cost/ Cost of ConstructionB
Development Cost/ Cost of Construction
Estimated Amount
Actual Amount
Payment of Taxes, cess, fees, charges, premiums, interest etc to any statutory Authority C
Principal sum and interest payable to financial institutions, scheduled banks, non-banking financial institution (NBFC) or money lenders on construction funding or money borrowed for construction
Total Cost of Real Estate Project(A+B)
Total Estimated Cost of the Real Estate Project
[1(i) + 1(ii)] of Estimated Column
Total Cost Incurred of the Real Estate Project [1(i) + 1(ii)] of Incurred Column
% completion of Construction Work %
(as per Project Architect’s Certificate) XX%

36. Additional Information for Ongoing Projects
Estimated Balance Cost to Complete the Real Estate Project (Difference of Total Estimated Project cost less Cost incurred ) (calculated as per the Form IV)
Balance amount of receivables from sold apartments as per Annexure A to this certificate (as certified by Chartered Accountant as verified from the records and books of Accounts)
(i) Balance Unsold area (to be certified by Management and to be verified by CA from the records and books of accounts)
(ii) Estimated amount of sales proceeds in respect of unsold apartments (calculated as per ASR multiplied to unsold area as on the date of certificate, to be calculated and certified by CA) as per Annexure A to this certificate
4. Estimated receivables of ongoing project- Sum of 2 + 3(ii)
5.Amount to be deposited in Designated Account – 70% or 100%
IF 4 is greater than 1, then 70 % of the balance receivables of ongoing project will be deposited in designated Account
IF 4 is lesser than 1, then 100% of the of the balance receivables of ongoing project will be deposited in designated Account %

37. Unit Consideration as per Agreement
Annexure A to Form 3
Statement for calculation of Receivables from the Sales of the Ongoing Real Estate Project
Sold Inventory
Sr. No.
Flat No.
Carpet Area (in sq.mts.)
Unit Consideration as per Agreement
/Letter of Allotment
Received Amount
Balance Receivable

38. Unit Consideration as per Read Reckoner Rate (ASR)
Annexure A to Form 3
Unsold Inventory Valuation Ready Recknor Rate as on the date of Certificate of the Residential /commercial premises INR XXX per sm.
Sr. No.
Flat No.
Carpet Area (in sq.mts.)
Unit Consideration as per Read Reckoner Rate (ASR)

39. Form 5- Annual Report on Statement of Accounts
Form 5 is an annual report on the statement of accounts.
It has to be issued by the Chartered Accountant who is the Statutory Auditor of the Promoters company/ Firm)
It should be obtained within 6 months six months from the end of the fiscal year for every registered Project
It should be a report on the fund utilization and withdrawal by the promoter with respect to the project
Not a certificate by an audit and opinion
Not a full fledged Audit report of the Developer but of every Project
Required to be provided by all Promoters – whether incorporated entity or not
The Promoter should provide a Self- Declaration to the Bank confirming that the Statutory Auditors Certificate has been obtained and need to be submitted to their Bankers

40. Other Clarifications issued by MahaRERA

41. Treatment of Cancellation Charges
Cancellation amounts if any to be paid by the Promoter to the Allottees on cancellation of Booking/ Allotment of the Apartment, should be treated as cost incurred for the Project and the Same can be withdrawn from the Separate Bank account to the extent of 70% of the amounts to be paid to the Allottees on cancellation of booking/allotment, since only 70% of the amounts realized from the Allottees would have been deposited in the separate bank account.
However, the Compensation / interest paid by the promoter to the Allottees should be treated as cost incurred for the project and hence the entire sum required to be paid by the way of compensation / interest to the allottees can be withdrawn from the Separate Bank account.
- MahaRERA Circular No. 7/2017 dated 4 July 2017

42. Fixed Deposits with Banks
The Separate Bank account opened in accordance with the provisions of section 4(2)(1)(D) of RERA, shall be a no lien account and withdrawal from such separate bank account shall always be in accordance with the Provisions of RERA, Rules, Regulations and Circulars issued by MahaRERA from time to time.
The Excess monies lying in the Separate Bank account can be put in a fixed deposit with the bank operating the separate bank account and which has to be a no lien Fixed Deposit and no loan can be obtained against or on such fixed deposit nor any charge can be created on such fixed deposit. “
In case of Fixed Deposit being made from the monies lying in the separate bank account , then the Chartered Accountant shall verify that there is no lien or Charge on such fixed deposits.
The Promoter and/or Chartered accountant shall verify that there is no lien or Charge certificate in respect to such fixed deposit , from the bank once every three months
- MahaRERA Circular No. 7/2017 dated 4 July 2017

43. Fixed Deposits with Banks
In case of Fixed Deposit being made from the monies lying in the separate bank account , then the Chartered Accountant shall verify that there is no lien or Charge on such fixed deposits.
The Promoter and/or Chartered accountant shall verify that there is no lien or Charge certificate in respect to such fixed deposit , from the bank once every three months
- MahaRERA Circular No. 7/2017 dated 4 July 2017

44. Pass through Charges
The Promoter to Deposit the Pass through Charges (amount collected for and on behalf of Legal Entity or Apex Body or any statutory Authority or Local body) should be deposited preferably in a designated bank account opened just for the purpose of depositing such Pass through Charges or in any other bank account of the promoter and should not be deposited in the separate bank account .
However, Promoter shall be required to give account of the monies collected as Pass through Charges to the legal Entity or Apex Body.
- MahaRERA Circular No. 7/2017 dated 4 July 2017

45. Open issues
Allocation of Land Cost in case of layout and large developments
Allocation of costs for common amenities and Infrastructure
Allocation of off-site costs to various projects
Which method of accounting to be followed – cash or mercantile?
Meaning of Incurred – to be applied prudently
Payment of fungible premium in case of layout and large developments
Allocation of costs in case of Parking Projects registered separately or shown as common areas
Allocation of cost of Public Parking in case of layout projects
Marketing cost of acquisition of land/projects – whether covered as land cost?
Circulars and Clarifications issued by RERA Authorities should be applied blindly? Will it survive if beyond the Act and Rules?
Amount withdrawn to be utilized Only for the Project – Can it be utilized for purchase of land for other projects
Meaning of On-site and Off-site costs – not reflected in certificate

46. Disclosures and Disclaimers by CAs

47. Disclosures and Disclaimers by CAs
Obtain Management Representations from the Promoters
Certificates obtained from various professionals and agencies and relied upon
Assumptions and views taken on various aspects
Escalations considered
Basis of allocation of land cost in case of layout plans and large formats
Basis of allocation of Construction Costs in case of layout plans and large formats
Treatment given to specific clauses in respect of interest payments to Investors and Financial Institutions
Provision for Warranties and contingencies
Provision for Encumbrances
Provision for Disputed taxes, duties, cess ,etc.

48. Disclosures and Disclaimers by CAs
Disclosure of financial terms of JDAs considered for certification
ASR value has been considered based on third party certificates
NO monies borrowed against FDs created out of funds in RERA Account or lien created against such FDs
Certificates issued relying on the Provisions of the RERA Act, RERA Rules, Circulars/Clarifications/Orders/FAWs issued by MahaRERA Authorities and judicial rulings, if any
Common Amenities and Infrastructure
Allocation of costs in relation to Common Amenities and Infrastructures
Contingent liabilities which are not considered
Any unusual or aggressive position taken while computing the costs to be certified
Accounts & documents reviewed, clarifications considered,
Not conducted an audit of accounts or detailed review of documents – disclose the process followed and principles applied

49. Joint Development Arrangements

50. Joint Development Arrangements- Mechanism
Upfront consideration
Developer
Land Owner
Initial backlog
Increased project cost
Tight liquidity
Rise in cost of capital
Consolidation
Enters into development agreement
% share in revenue
% share in revenue
Revenue Sharing Models
Development of Project
Upfront Payment of
Consideration
Or/ And
Lease /sale of asset to earn income
Built- Up Area
Or/ And
Gross / Net Revenue

51. Clarification on Joint Development Arrangements
Promoter now includes any person(s) or organization(s) who, under any agreement or arrangement with the promoter of a Real Estate Project is allotted or entitled to a share of total revenue generated from sale of apartments or share of promoters shall be as per the agreement or arrangement with the Promoters, however for withdrawal from Designated Bank Account, they shall be at par with the Promoter of the Real Estate Project.”
Initial backlog
Increased project cost
Tight liquidity
Rise in cost of capital
Consolidation
Following implications would result on account of the above –
The Investors and/or Land-owners, as the case may be, having an arrangement with the Developer will also fall into the ambit of the 70:30.
Details of the Promoter to be provided at the time of registration with MahaRERA and a copy of the agreement and arrangements should be uploaded on the website as well.
Existing JDA arrangements (mainly with revenue share or profit share arrangement) will need to be revisited.
The Bombay High Court, in the case of Ismail Ibrahim Patel and others vs State of Maharashtra and others, has allowed the petitioner to withdraw the petition after the Secretary, Maharashtra Real Estate Regulatory Authority, withdrew the office order..

52. Joint Development Arrangements- Open Issues
In case of Revenue Share arrangement
Whether a single RERA Account required OR two separate account required?
Whether separate CA Certificates to be obtained by the Promoter?
How to apply and compute POCM?
What would be the costs for the Promoter?
In case of Area Share arrangement
Whether this Clarification will apply to Investors?
Whether this clarification applies to Construction Companies jointly developing projects and sharing revenues/areas?
Initial backlog
Increased project cost
Tight liquidity
Rise in cost of capital
Consolidation

53. Professional Opportunities for CAs under RERA

54. Professional Opportunities for CAs under RERA
Tax and Regulatory Advisory Services in relation to RERA;
Assistance in Registration of Ongoing and New Projects under RERA;
Assistance in ongoing compliances under RERA;
Certification in Form 3 and Form 5 respectively;
Assistance in providing submissions and clarifications in response to the notices received from RERA Authorities;
Representation Services before the RERA Authorities and the Tribunal.
Lot of new opportunities thrown open by RERA for Chartered Accountants apart from issuance of certificates – a NEWERA of Practice for CAs

55. Impact of RERA

56. Possible impact on sector
Initial backlog
Increased project cost
Tight liquidity
Rise in cost of capital
Increase in project launch time
Consolidation
Initially, a lot of work is to be done to get the existing and new project registered.
Details such as status of each project executed in last 5 years, promoter details, detailed execution plans etc. needs to be prepared.
Registration with RERA and insurance cost for construction and land title
Land and approval costs to be meted out of internal accruals as pre- launch concept may end.
it may lead to a shift in equity financing from debt financing prevailing currently.
The cost of capital may go up as developers may now have to fund the land and approval cost through equity.
With frequent delay in obtaining approvals, debt funding may not be an ideal route for developers.
With entry in the sector made difficult, the sector may witness consolidation
Strong financial and execution capability is required to launch a project.
The development model/agreement may gain prominence
The project launch time may increase since a lot of time will involve in finalizing finer details before launching a project.
Details such as complete drawings, utilities layout, etc. needs to be finalized before project starts.

57. Perceived benefits of RERA
Industry
Developer
Buyer
Governance and transparency
Project efficiency and robust project delivery
Standardization and quality
Enhance confidence of investors
Attract higher investments and PE funding
Regulated Environment
Common and best practices
Increase efficiency
Consolidation of sector
Corporate branding
Higher investment
Increase in organized funding
Significant buyers protection
Quality products and timely delivery
Balanced agreements and treatment
Transparency – sale based on carpet area
Safety of money and transparency on utilization

58. Tax Impact Tax Impact of RERA
Possibility of AOP exposure in the case of JDAs considering that the land owner is also considered to be a promoter
Reorganising of JDA arrangement, especially the revenue share arrangement
Tax treatment / allowability of expenditure done by a promoter during defect liability period
Tax treatment / allowability of fines, penalties and interest paid by the promoter
Treatment of expensed incurred on a project which is then taken over by the Authority in the case of lapse in registration or revocation of registration

59. HAPPY RERA Journey together ….
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