Reasons Why Haryana RERA Order On Brokerage Is Good For Property Buyers & Sellers

After suffering a blow due to Covid disruption, the real estate sector is back in business even as Haryana’s Real Estate Regulatory Authority has started cracking down on property dealers, real estate agents, and brokers who mint money by charging hefty commissions both from the property buyer and seller. In a first of its kind order, RERA last week put a cap on the commission being charged by the brokers while facilitating a land deal. Now, no real estate agent in Haryana can charge more than 0.5 per cent commission each from the buyer and the seller per deal. The Indian Express explains how this commission business thrives in property deals and how far RERA’s decision will be able to curb the malpractices.

What does the RERA’s order say?

The order reads: For real estate registered projects, RERA has decided to issue restrain orders to all promoters and brokers not to charge commission more than one per centum on agreed consideration value to be paid by the seller and purchaser of the property, that is 0.5 per cent by each of them, on finalization of the deal as per their agreement entered in the register of the dealer under the valid receipt. The one per centum commission is also defined under the Haryana Regulation of Property Dealers and Consultants Rules and under the Haryana Regulation of Property Dealers and Consultants Act.

Will this order be applicable on all the property dealers, and real estate agents?

Not exactly because a large number of property dealers, brokers and real estate agents are running the business without any valid registration. The order will be applicable only to those who are registered under the Haryana Regulation of Property Dealers and Consultants Act, 2008. Registration of the property dealer to negotiate or mediate real estate deal of a registered project is done by the RERA under Section 9 of the Real Estate (Regulation and Development) Act, 2016 and the registration is then granted subject to the condition that the agent shall not contravene the provisions of any other law for the time being as applicable to him. However, if any buyer or seller complains to RERA about an unregistered property dealer or agent or RERA finds out any unregistered person acting as an agent, the violator shall be liable for penal action.

How does the commission business take place?

In majority of the land deal cases, the commission is accepted by the property dealers and agents in “cash”. In many cases, there is no account of this commission being charged both from the buyer and the seller. The property dealers and agents seldom issue receipt for the commission that they charge. In such cases, it becomes almost impossible for RERA to detect arbitrary commission being charged. SC Kush, member RERA, says, “If the buyer, seller and property dealer all are mixed up, then what can RERA do. If they do not have any problem in exchanging money as commission that is more than permissible rate, RERA cannot do anything. But if a buyer or seller feels cheated by way of such an arbitrary commission and raise it with RERA, we definitely take action”.

Is it mandatory for a property dealer or agent to give a receipt for the commission charged?

Yes, it is. In fact, it is the right of both buyer and seller to ask property dealer to issue a receipt for the commission that they charge from either of the parties. Kush says, “If the commission is paid in cash, the receipt is mandatory and the buyer and seller both must ask for it. The property dealer cannot refuse it. In certain cases, where the commission is paid by Cheque/ Draft, then the receipt dos not matter because the bank account statement will reflect the amount paid”.

How can the unregistered property dealers be nailed?

“There are many unregistered property dealers who advertise their services. Our field units take note of such advertisements and signboards, act as decoys clients and then send us the reports. Subsequently, action is initiated,” Kush said. RERA has also asked the promoters that they must provide details of all their respective brokers in the prospectus and advertisements so that unauthorized brokers, acting on behalf of main brokers, do not indulge in malpractice and burden the buyers both with commission for the brokers and margins by the sub-brokers.

What action can be initiated against the violators?

If a real estate agent fails to comply with orders or directions of RERA, they shall be liable to a penalty for every day during which such default continues that may cumulatively extend upto five per cent of the estimated cost of plot, apartment or building as the case may be of the real estate project for which they charged the commission. If the agent fails to comply with the orders or directions of Appellate Tribunal, then he is liable for imprisonment upto one year or penalty that cumulatively can extend to 10 per cent of the estimated cost of the plot, apartment, building etc; or both. It is mandatory for the brokers to keep copy of relevant approvals, plans, specifications, brochures etc. with them in concern of those projects where deals are being facilitated by them. The property dealers who do not have the necessary documents can also be penalized including cancellation of their registration with the authority alongwith recommendation to the Deputy Commissioner for withdrawal of their license. Also, the brokers are required to maintain their cash-books and present the same to RERA, annually. “If they don’t, their registration can be cancelled. In case of any complaint or if we have sufficient reasons to suspect the dealing of a property dealer, we can summon the cash-book records at anytime during the year too,” Kush adds.

How do brokers make hefty profits in mega projects?

Builders of projects allocate units in bulk to various brokers at a pre-decided rate. The brokers further allocate the units to sub-brokers at higher rates and by the time the unit is purchased by the buyer, the unit’s price gets inflated by at least 15-20 per cent. The extra money is shared between the broker and sub-broker as part of the commission. Such a practice is illegal under The Real Estate (Regulation and Development) Act, 2016. As per the Act, the real estate project can be developed and marketed by the promoter only. In case real-estate agents also indulge in marketing, then they must first get themselves registered as promoters.

How many property dealers and real estate agents are registered in Haryana?

According to RERA’s website, there are 1,319 registered property dealers and real estate agents across the state. The registration is valid for a period of five years. After every five year, the agent is required to get his/ her registration renewed.

(Source: Indian Express)

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