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Are Online Housing Portals Real Estate Agents Under RERA?

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 reads as:
10. Functions of real estate agents:
Every real estate agent registered under section 9 shall:
  1. 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;
  2. Maintain and preserve such books of account, records and documents as may be prescribed;
  3. Not involve himself in any unfair trade practices, namely:
    1. the practice of making any statement, whether orally or in writing or by visible representation which:
      1. falsely represents that the services are of a particular standard or grade;
      2. represents that the promoter or himself has approval or affiliation which such promoter or himself does not have;
      3. makes a false or misleading representation concerning the services;
    2. permitting the publication of any advertisement whether in any newspaper or otherwise of services that are not intended to be offered.
  4. 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;
  5. 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.


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