RERA norms: No ads of realty projects without registering with new regulator

Clearing the air on real estate developers issuing advertisements, the government has said no ongoing or future projects can be advertised without registering them first with the new regulator.

The clarification is likely to further dampen the already subdued real estate market that has seen no real appreciation in value of property or sales growth during the last few years.

The Real Estate (Regulation and Development) Act was passed last year to regulate the sector, eliminate fly-by- night operators and protect buyers’ interest. The Act came into force from May this year.

Realtors’ body NAREDCO had submitted a representation to Ministry of Housing and Urban Poverty Alleviation seeking clarity on advertisement and sale of the ongoing projects amid conflicting reports and interpretation on the issue.

“Section 3 (1) of the Act prohibits advertisements for all projects (ongoing/future) without registration with the real estate regulator. This provision has come into effect from May 1, 2017,” the ministry said, while responding to the NAREDCO’s letter.

NAREDCO President Parveen Jain said the prohibition on advertisements and sale in the ongoing projects will hit the industry.

As per the Act, Section 3 (1) specifies that “no promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building…,in any real estate project or part of it, in any planning area, without registering the real estate project with the Real Estate Regulatory Authority established under this Act.”

For the ongoing projects, this section provides that the promoter should make an application to the authority for registration of the project within a period of three months from the date of commencement of this Act.

rel estate

Ending the 9-year long wait, the real estate law, which will regulate the realty sector involving over 76,000 companies, came into force from May 1, 2017.

With all the 92 Sections of the Act coming into effect, developers are required to get all the ongoing projects that have not received completion certificate and the new projects registered with regulatory authorities within three months, ending July.

This would enable the buyers to enforce their rights and seek redressal of grievances after such registration.


SEBI eases norms to buy stressed assets

Acquirers to be exempt from making open offers

As part of the larger attempts of the government to resolve the massive bad debt issue, the Securities and Exchange Board of India (SEBI) on Wednesday relaxed norms for investors acquiring assets in companies with stressed assets and facing bankruptcy proceedings.

The board of the capital markets regulator has decided to exempt the acquirers from making open offers after buying stakes from lenders while including checks such as a three-year lock-in for new investors and mandating that such relaxation would have to be approved by a special resolution.

This would come as a big relief to both lenders and acquirers concerned about a possible open offer since sizeable stakes could change hands.

“It has been represented to SEBI that where the lenders have acquired and propose to divest the same to a new investor, they are facing difficulties as the new investor would need to make a mandatory open offer which would reduce the funds available for investment in the company,” said a statement by the SEBI.

The regulator has decided to provide a similar exemption for acquisitions post the resolution plans approved by National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code 2016.

Stringent PN norms

SEBI has decided to levy a ‘Regulatory Fee’ of $1,000 on each subscriber of offshore derivative instrument (ODI), which will have to be collected by the registered foreign portfolio investor (FPI) that issues the ODIs.

The regulator had recently floated a consultation paper to further tighten the norms for issuance of ODIs. It has also decided to “prohibit ODIs from being issued against derivatives except on those that are used for hedging purposes.”

SEBI Chairman Ajay Tyagi, however, clarified that the regulator did not intend to ban PNs, but would want the instrument to be used only to “test the waters” and long-term investors should prefer the FPI route.

Meanwhile, the regulator would soon float a consultation paper on easing investment norms for FPIs by expanding the list of eligible jurisdictions for grant of FPI registration and simplification of broad-based requirements and ‘fit and proper’ criteria.

Forensic audit

The regulator is in the process of appointing a forensic auditor to look into the co-location matter of the National Stock Exchange (NSE), wherein it is alleged that certain brokers got preferential access to the exchange systems for trade execution.

The regulator is examining whether there was any connivance between NSE staffers and brokers. Interestingly, the regulatory move comes after NSE conducted its own forensic audit by Deloitte.

“Deloitte did not go in depth on the connivance issue. We are examining if unfair gains were made by brokers. It needs to be done comprehensively. We are personally engaging a forensic auditor and are in the process of appointing (the auditor),” said Mr. Tyagi.

Equity derivatives

The regulator will also float a consultation paper on the equity derivatives segment to get market feedback on product suitability and the kind of investors participating in the derivatives space.

Incidentally, the cash to derivatives ratio in the Indian market is among the highest globally and the regulator in the past had expressed its concerns especially with retail investors getting into the segment.

“It is a subject worth debating. Retail investors are not completely aware of the risks,” said Mr. Tyagi, who was appointed the SEBI Chairman in March 2017.