The Real Estate sector in India has witnessed a step rise in the recent years
owing to rapid urbanization which has increased the demand for housing and
commercial spaces, leading to growth in the real estate sector. Further rising
disposable incomes, particularly among the middle class, has led to an increase
in demand for quality housing and commercial spaces.
In a bid to boost the real estate sector, Indian government has implemented acts
and initiatives such as the introduction of Real Estate (Regulation and
Development) Act, 2016 and the Pradhan Mantri Awas Yojana (PMAY).
The sector has attracted significant foreign investments, particularly from
private equity firms and institutional investors and the government's focus on
infrastructure development, such as the development of smart cities, has further
boosted the real estate sector, particularly in Tier II and Tier III cities.
Also, the growth of the IT sector has led to an increase in demand for office
spaces, particularly in cities such as Bangalore, Hyderabad, and Pune.
The Real Estate (Regulation and Development) Act, passed by the parliament in
2016 has been instrumental in protecting the interests of home buyers and also
boosting investments in the real estate sector in India. Under the Act, state
governments are required to notify their own rules under, on the basis of the
model rules framed under the central Act.
The act aims to:
- Protect the interest of the allottees and ensure their responsibility
- Maintain transparency and reduce the chances of fraud
- Implement Pan-India standardization and bring about professionalism
- Enhance the flow of correct information between the home buyers and the sellers
- Impose greater responsibilities on both the builders and the investors
- Enhance the reliability of the sector and thereby increase confidence amongst the investors
The property broker segment in India, is estimated to be a Rs. 400 cr industry,
with an estimated 5,00,000 to 9,00,000 brokers. However, it has traditionally
been unorganised and unregulated. The act aims to bring a lot of
accountabilities in the industry. Now, the agents will have a much larger and
responsible role to perform, as they will have to disclose all the appropriate
information to the customer and even help them chose a RERA-compliant developer.
Functioning of the Portals and Relevant Provisions:
At present, there are various online housing portals available. These are
websites or mobile applications that provide a platform for property buyers,
sellers, agents and renters to connect with each other, and mostly work on
similar model. These portals typically list properties for sale or rent, and
allow users to search and filter properties based on various criteria such as
location, price, and amenities. Unlike the real estate brokers, the charges
levied by these platforms are not property specific rather subscription based.
Users are given option to opt for various subscription models, based on the
chosen option they can avail the respective facilities and contact a specific
number of prospective sellers or agents, as the case may be. Further, sellers of
the property also pay a specific sum as advertisement fee for their properties
and choose the plans based on specific requirement.
On close perusal of functioning, these portals seem to provide a medium of
advertisement to the parties. The term "advertisement' as defined under section
2(b) of the act means any document described or issued as advertisement through
any medium and includes any notice, circular or other documents or publicity in
any form, informing persons about a real estate project, or offering for sale of
a plot, building or apartment or inviting persons to purchase in any manner such
plot, building or apartment or to make advances or deposits for such purposes.
On the other hand, according to section 2(zm) of the act, the term "real estate
agent" means any person, who negotiates or acts on behalf of one person in a
transaction of transfer of his plot, apartment or building, as the case may be,
in a real estate project, by way of sale, with another person or transfer of
plot, apartment or building, as the case may be, of any other person to him and
receives remuneration or fees or any other charges for his services whether as a
commission or otherwise and includes a person who introduces, through any
medium, prospective buyers and sellers to each other for negotiation for sale or
purchase of plot, apartment or building, as the case may be, and includes
property dealers, brokers, middlemen by whatever name called.
Section 9 of the act lays down the procedure for the registration of real estate
agents, wherein the application has to be made to the authority after the
payment and submission of prescribed fees and the documents respectively. The
authority upon satisfying itself of the prescribed conditions shall grant a
single registration to the real estate agent along with a registration number by
the Authority, which shall be quoted by the real estate agent in every sale
facilitated by him under this Act.
Whereas section 10 of the act enlists the function of real estate agents, it
10. Functions of real estate agents:
Every real estate agent registered under section 9 shall:
- Not facilitate the sale or purchase of any plot, apartment or building, as
the case may be, in a real estate project or part of it, being sold by the
promoter in any planning area, which is not registered with the Authority;
- Maintain and preserve such books of account, records and documents as
may be prescribed;
- Not involve himself in any unfair trade practices, namely:
- the practice of making any statement, whether orally or in writing or by
visible representation which:
- falsely represents that the services are of a particular standard or
- represents that the promoter or himself has approval or affiliation
which such promoter or himself does not have;
- makes a false or misleading representation concerning the services;
- permitting the publication of any advertisement whether in any newspaper
or otherwise of services that are not intended to be offered.
- Facilitate the possession of all the information and documents, as the allottee, is entitled to, at the time of booking of any plot, apartment or
building, as the case may be;
Discharge such other functions as may be prescribed.
With regards to the ambit of the term real estate agent, with regards to his
role, it is pertinent to quote the observation of Hon'ble Delhi High Court in
the case of Association of Property Consultants versus Delhi Development
Authority (2004 SCC Online Del 136) wherein the hon'ble court has observed that:
15. His activity is quite individualistic inasmuch it is based on his personal
skill or expertise. The job of a property consultant whether he be called a
broker or a dealer or an agent is essentially to give expert advice with regard
to the sale and purchase of property.
The nature of his activities may involve the verification of title documents of
the property in question, advice in preparing the proper documentation, ensuring
that the purchaser gets the property with full title thereto and that the seller
the consideration thereof. He also provides assistance and advice with regard to
mutation, conversion from freehold to leasehold; to give expert opinion and
advice with regard to market prices of properties and trends.
The property consultant is a person who by virtue of a specialised knowledge
acquired by experience in the field aids and advises his clients in acquiring or
disposing of properties. The property consultant by himself does not buy and
sell properties. He does not stock any goods for sale. He merely offers his
services to his clients in the sale, purchase, and management of properties.
There is no investment of the property consultant in the properties which are
sold or purchased or leased by his clients. He merely renders his professional
services for which he is remunerated by way of commission. If the property,
after the purchase by his client, appreciates in value, no benefit is derived by
the property consultant. Similarly, if the property depreciates in value, no
loss is incurred by him either. Thus, unlike a businessman he does not share in
the loss or profits of the property transaction."
On conjoint reading of provisions contained in section 10, the definition of
real estate agents as per section 2(zm) of the act and above observations of
Hon'ble court with regards to its scope, it can be safely concluded that the
work of real estate agent demands specific skills and experience for
facilitating, negotiating the deals and introducing the parties for the purpose
of property transactions and further necessitates the presence of an agent,
whether actual or through some means to monitor the deal. Whereas online housing
portals working on subscription-based models can be said to function as
intermediaries as defined under section 2(w) of Information Technology Act, 2000
which reads as:
"Intermediary, with respect to any particular electronic records, means any
person who on behalf of another person receives, stores or transmits that record
or provides any service with respect to that record and includes telecom service
providers, network service providers, internet service providers, web-hosting
service providers, search engines, online payment sites, online-auction sites,
online-market places and cyber cafes"
Further these portals only provide a platform for meeting of prospective buyers,
sellers and agents. These are not themself involved in the transactions or
negotiation process and thus can't be expected to perform the functions of real
estate agents as enshrined under section 10 of the Real Estate (Regulation and
Development) Act, 2016. Rather these portals can only be regarded as a medium of
advertisement as provided under section 2(b) of the act, disseminating
information received from the individuals, builders or the agents.