Financial Investors in a real estate project – To be, or not to be
PUBLISHED ON: 30-06-2023
The Hon’ble Division Bench of Maharashtra Real Estate Regulatory Authority (Authority) in the matter of Rare Township Pvt Ltd vs. IIRF India Realty VIII Ltd dealt with the issue of whether the Respondent i.e. an Investor could be deemed a Promoter as per Section 2 (zk) of the Real Estate
(Regulation and Development) Act, 2016 (“Act”).
- As per the Act, a Promoter is not only a person who “constructs”, but also a person who “causes to construct”, thus the legislature has provided a wider meaning to the term ‘Promoter’ by adding the term “causes to construct” to protect the interests of home buyers.
- Even though the Investor was not a person constructing the project. However, the execution of Share Subscription and Shareholders Agreement and its addendum had put the Investor in a position where he could “cause to construct” and hence, the Investor would stand in the shoes of a Promoter.
- In the present case, since the Promoter and Investors were held to be Promoters, all liabilities arising out of a breach shall fall upon both, the Promoter and the Investor. However, how the same are to be distributed and apportioned does not concern the consumer of the Project.
- However, it was cautioned the order must not be used as a paint brush to paint every Investor into the shoes of a Promoter.
The MahaRERA Order dated June 30, 2022, can be accessed here.
