RERA rules: Maharashtra govt diluted the Act to favour builders' lobby; it's grossly unfair for the buyer
The builders of ongoing projects by submitting only the last sanctioned plan for registrations as mentioned in the Maharashtra Real Estate rules are in an advantageous position
The Fight for RERA, a homebuyers’ group which campaigned for the Real Estate (Regulation and Development) Act (RERA) 2016, which came into effect yesterday (1 May, 2017) says that the Maharashtra government has diluted the Act to favour builders thus defeating the central government’s aim of making it a pro-buyers’ Act.
It is an open secret, say sources, that elections are bankrolled by builders and that the government will handle its cash cow with much reverence. There is ‘no way’, say industry observers, that builders will be sent to jail. In the government’s seemingly ‘protectionist’ policy with respect to RERA, the buyer/customer in Maharashtra is not really the king and still at the mercy of the builders.
The Indian real estate market is expected to touch $180 billion by 2020. The housing sector alone contributes 5-6 percent to the country's Gross Domestic Product (GDP), according to Indian Brand Equity Foundation (IBEF).
RERA in force
The RERA came into force in only 13 states and Union Territories on 1 May. The Ministry of Housing and Urban and Poverty Alleviation (HUPA) had last year notified the rules for five Union Territories--Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, while the Urban Development Ministry came out with such rules for the National Capital Region of Delhi.
The other states and UTs will have to come out with their own rules. Except for Orissa and Bihar, no other states have come out with rules in line with the Union Territories. The centre’s rule with the Union Territories was the best, say citizen forums, as they addressed citizens’ concerns.
Hailing RERA as a ‘great Act’ by the government, Ajay Mehta, convenor, Maharashtra Chapter – Fight for RERA concedes that not everyone can be happy with the Act.
Advocate Uday Wavikar, Vice President, consumer VP, Consumer Court Bar Association, finds the RERA ‘good’ as it gives home-buyers the much-needed security as well as transparency.
Abhay Upadhyay, National Convenor, Fight for RERA, spells out the troublesome dilutions of the provisions in the Act by the Maharashtra government which gives a huge leeway to builders.
According to RERA, projects that have not received completion certificate as on date of notification i.e. 1 May 2017, will be covered as ongoing projects. As per the Real Estate rules notified by the Ministry of HUPA for Union Territories without legislatures, the builder will have to submit all the original sanctioned plan given at the time of booking along with all the subsequent changes at the time of taking registration.
The original timeline for completion as promised to the buyers, extension of this timeline along with the future timeline he intends to complete the project will be required to be submitted at the time of registration.
The builder also needs to give a declaration that 70 percent of the amount already realised from home buyers after reduction expenses incurred on cost of construction and land will be deposited in separate accounts. The promoter should also declare size of the apartment based on carpet area even if it was earlier sold on any other basis.
According to RERA, any changes to sanctioned plan needs the consent of two-third of buyers. The builders of ongoing projects by submitting only the last sanctioned plan for registrations as mentioned in the Maharashtra Real Estate rules are in an advantageous position. This is because all the changes made in the sanctioned plan subsequent to the launch of the project will now get a legal color even without getting two-third consent thus depriving home-buyers of compensation, says Upadhyay.
What the Maharashtra government has done is change the ‘sanctioned plan’ to last sanctioned plan. With this provision, what the state government has done is make all earlier changes legal. This is a major flaw, he points out. “Maharashtra is the only state that has added this kind of a clause in the Maharashtra real estate rules,” says Upadhyay.
RERA states that the builder has to give a timeline within which a housing project would be completed. For ongoing projects, the Ministry of HUPA in their rules for Union Territories without legislature, states that the time line has to be commensurate with the pending work of the project. For instance, if a project is 20 percent incomplete and an expert’s opinion – architect or engineer – states that it will take a year to complete the project, the builder then cannot tell the regulator it will take four years. “However, if the rules do not ask what was the original timeline given at the time of booking, the builder can now get away during the time of registration by mentioning a futuristic timeline ignoring the several years of delay, thus depriving home-buyers of their compensation,” says Upadhyay.
The Maharashtra real estate rules only mandate builders to deposit 70 percent of the future receivables from home buyers in a separate bank account in sharp contrast to section 4 (2) of RERA since it does not distinguish between ongoing and new projects. This effectively means that builders should ideally deposit 70 percent of the money already realised from their customers after deducting cost of construction and cost of land which would be in line with what the Ministry of HUPA has recommended.
According to Maharashtra rules, Completion Certificate (CC) and occupation certificate (OC) are interchangeable, says Wavikar. RERA refers to completion certificate or by whatever name it is called ( because in different states different terminologies are used) with the intent being that the project has to be completed, signed and delivered with everything that was mentioned while registering the project. When CC is interchanged with OC, what the Maharashtra government has done is give the builder an upper hand in the way the project is to be completed, he says. For instance, if the builder gets part OC for a seven tower project, he will complete one tower and then that tower is out of the RERA ambit. What about the remaining towers he has promised, he asks. “RERA has to be clear that OC/CC is not interchangeable,” says Wavikar.
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