8 Key Regulations Every Real Estate Broker in India Should Know

Every real estate broker should be well-versed in critical regulations of the real estate Indian market. These key regulations ensure ethical business practices, protecting real estate agents and property buyers. For instance, if any novice client comes to a real estate broker all confused with the queries related to real estate, that person expects a simplified explanation from the broker. Therefore, every real estate broker must be familiar with every key regulation in India.

But why are real estate regulations important?

Well, the regulations exist for the following reasons:

• To regulate property dealings
• To safeguard real estate brokers’ and clients’ interests
• To promote transparency in the real estate business
• To bring accountability & originality to the real estate sector

Now, here are a few regulations every real estate broker in India should know!

The Real Estate (Regulations and Development) Act, 2016

The real estate industry ranks third among the 14 major sectors and is the second-highest employment generator in India. 

But this potentially lucrative sector lacked prominence in terms of disciplinary paperwork. Being cognizant of this, the government enforced The Real Estate (Regulations and Development) Act on 1st May 2016 with 59 of 92 sections. The remaining provisions came into effect on 1st May 2017. These acts implemented an organized process to ensure smooth real estate proceedings for the property dealers in Indian territory.

Every real estate broker must comply with the RERA Act 2016 with the appropriate authority in their respective locality. The formal registration process requires submitting an application and other documents to verify the broker’s identity. Also, it involves paying a necessary amount.

Any non-compliance with the registration will lead to penalties. Any sale of real estate property will not be facilitated by the broker or on behalf of him/her. If the broker is found guilty, the penalty can lead to the complete debarred from the practice.

For detailed information on RERA, visit our blog, Understanding RERA Compliance for Real Estate Brokers.

Consumer Protection Act, 2019

The Indian Government understands the grievances faced by its citizens due to real estate conflicts. Therefore, the government introduced the Consumer Protection Act of 2019. This Act protects citizens’ rights in various sectors, including the real estate sector. Under this act, real estate brokers must ensure fair practices, real estate business transparency, provide accurate real estate information and resolve their clients’ grievances.

Foreign Exchange Management Act, 1999

The Indian government also protects Non-Resident Indian (NRI) property buyers. The act’s regulations govern the purchase of immovable property in India owned by non-residents of India. Real estate brokers must comply with the FEMA (Foreign Exchange Management Act) and produce necessary information about the NRIs, like approval for real estate property transactions, repatriation of funds, etc. 

Important ministries like the Government of India, the Department of Industrial Policy and Promotion (DIPP), and the Reserve Bank of India (RBI) regulate such foreign real estate investments.

Transfer of Property Act, 1882

The Transfer of Property Act plays a crucial role in real estate transactions, and the real estate broker must remember its regulations during real estate investments. It provides a legal framework for property rights transfer ensuring fairness and transparency. The Act provides regulations for the transfer of ownership of an immovable real estate property in India. 

It focuses on different types of transfer rights, mortgage rights, leases, gift deeds, exchanges, etc. It also considers the clients’ consent at the time of property dealing. These requirements safeguard the clients from fraudulent transfers.

Income Tax Act, 1961

Income Tax Act regulations manage the taxation on income generated from property dealings. It addresses tax issues involving income from rentals, property transactions, etc. The Act requires reporting of taxable income, deductions, exemptions, etc. Every real estate broker must know about handling real estate taxation to smoothen the process and help their clients make informed decisions during real estate investments.

Indian Easement Act, 1882

The Indian Easement Act of 1882 has its relevance in real estate business transactions. This legislation provides legal recognition and protection of property owners’ rights over their immovable property like houses, land, etc., known as an easement. A real estate broker should know that this act provides the benefit of enjoyment to the owner in terms of the right to build, the right to water flow, and many more. Therefore, the broker must remain in compliance with the law to protect the owner’s rights.

Goods and Service Tax (GST)

The Goods and Service Tax is a unified tax regulation levied on India’s supply of goods and services. A real estate broker must know that GST rates differ for different real estate transactions. 

As per GST regulations (w.e.f. April 2019), residential property (affordable housing scheme) charges 1% without ITC (Input Tax Credit) on the total consideration, residential property (affordable housing scheme) charges 5% without ITC on the total consideration, while commercial properties (shops, offices, godowns) charges 5% without ITC on total consideration (Constructions in RREP) and 12% with ITC on total consideration (Constructions in REP).

Code of Ethics Act

Real estate brokers are obligated to have high moral conduct in every real estate business transaction under the Code of Ethics Act regulations. Any impartiality observed from a real estate broker will make him susceptible to a penalty from this regulatory Act. The broker must remember to follow the property dealings with utmost sincerity and honesty and treat every client equally, like a buyer, seller, or tenant.

Real estate brokers are expected to cooperate willingly with the official parties or other brokers; there shouldn’t be any concealment of influential facts towards the clients. Real estate brokers should avoid false advertising of their services or any misrepresentation of the real estate property with the hope of money extortion.

Conclusion

There’s no denying that a real estate broker’s job is tough, filled with minute documentation tasks. However, real estate brokers need to embrace these real estate regulations with utmost sincerity, dedication and have a thorough understanding to ensure compliance with the legal laws of India. A real estate broker should provide their clients with a fair real estate experience. By doing so, real estate brokers can contribute to the growth of the real estate sector in India.