Shri. Sachin. Ahir., Minister of State for Housing, had reintroduced "The Bill", along with the recommendations given by the 19-member committee, in the legislative assembly on Monday the 16th July 2012. After discussions finally the Bill has been passed by both houses of the Maharashtra Legislative Assembly and was supported by the opposition, however only a handful of legislators were present in the House when the bill was approved. As the Bill involves punitive actions like imprisonment, hence the bill will have to be sent for the President’s assent.
The Law, once implemented, will replace the Maharashtra Ownership Flats (Regulations of Promotion of Construction, Sale, Management, and Transfer) Act that has been in force since 1963. However as on today it’s still far from the reality as it will take atleast more than a year to frame the rules, implement the provisions of this new Act & making the necessary infrastructure available for setting up the Housing Regulatory Authority (HRA) & Housing Appellate Tribunal (HAT).
Adv. R. P. Rathod. says that this is just one of the efforts made by the State government to revive the stagnant property market. If you look at the Bill you will realize that it is nothing but the government's way of decorating the trap set by the builders to catch the innocent property buyers. An effort to make the scared property buyers feel safe to “give away their hard earned money” for free to finance the builder's business.
He further adds that the said Bill is nothing but Government's contribution towards promoting the idea of “booking a flat” and helping the builders to take prisoners and further assisting the hungry housing finance companies to convert the property buyers into their slaves for life. To trap the vulnerable property buyers who are threatened by the irrational property price rise and are desperate to own a home at any cost. It is well evident to the general public that the builder lobby is highly influential lobby and no government can sustain without a support from them, you can count it as a gift or an effort to pay back to all its partners, the “builders & banks” for the revenue it earns from the Stamp Duty, Registrations Charges & VAT from the property buyers.
So, now, there would be a 'Housing Regulatory Authority' and a 'Housing Appellate Tribunal'. In case of a dispute with the builder, a flat owner can go to the tribunal. If the builder is found guilty, he can face 3 years imprisonment, but this provision of 3 years imprisonment exist even in the Maharashtra Ownership Flats Act 1963. But till date, how many builders can you name who are imprisoned? Very few! Because regulating the real estate industry is just a farce, main motto of the government is to promote the idea of booking flats and to assure uninterrupted supply of interest free funds from the property buyers to the builders.
Schedule I of the Bill speaks about safety of the Building. According to the Bill the promoter, the architect and the engineer engaged by the promoter, should comply with the measures for safe construction and protection of properties against natural calamities, as per the building bye-law and local code.
The Promoter will have to promote energy efficient or Green building concept and also ensure that the provisions of the National building code and other standards and such other measures specified by the state government are complied with.
The State in the bill has stated that for the purpose of compliance with the measures, the promoter must enter into separate agreements and engage the services of an architect and an engineer and inform the concerned housing regulatory authority about the same. Further if for any reasons, there is a change of architect or engineer during construction of the building or flats, the promoters should immediately inform the concerned housing regulatory authority about the same. Further the bill stipulates a responsibility on the builder to obtain an insurance policy or policies to cover the liability of any loss of life and injuries suffered by persons, workers and labourers residing or working on the property.
1. (a) The builder cannot make any alteration to a flat once it is sold, without the flat purchaser's consent. (b) The builder cannot add a floor or a wing to a building, without the flat purchaser's consent. (c) The builder cannot make changes to recreation facilities such as a garden without the consent of the property buyers. Similar provision already exists even in the MOFA, so there is nothing new to it. What if the Flat purchasers refuse the permission? In the course of construction the builders plan for a 22 storey tower, get the plans approved for say 15 floors & later buy additional TDR and directly approach the Municipal Corporation, and get the CC amended. Hence necessary corresponding amendments will have to be made even in the respective Municipal Laws and the directions will have to be issued to the respective Town Development Departments to not to approve any amendments without all flat purchasers consent. But the big question will soon arise as to how to implement this? Who will decide the matter, when the flat purchasers will refuse to give their consent? The builders in such a scenario will approach either the HRA or file appeal before the Court of Law and in the litigation the project might get delayed. Further the flat purchasers will have to incur the costs to defend themselves, this thought itself might dissuade the flat purchasers in refusing their consent.
2. If the builder fails to give possession of a flat within the promised period or abandons a project, he will not only have to refund the amount with 15% interest, but will also have to pay a penalty of Rs. 10,000/- per day of non compliance or Rs. 50 lakhs, whichever is lower. Only time shall tell as to how effective this provision spans out favouring the buyers. As on today there are many such judgments favouring buyers, which have not been executed till date.
3. Developers will have to mandatorily register themselves with a three-member Housing Regulatory Authority (HRA) headed by a retired government official of the rank of principal secretary, with maximum age of 68 years. Developers will have to post complete details of their projects on the HRA’s website. Advertisements for sale or transfer of flats can be issued only after acquiring a registration code from the authority. This is just another mere formality, currently as per the Municipal rules the developers have to post this information on their respective sites now this will have to be posted even on a website. Why this lengthy process, instead why not adopt a shortcut and issue a direction to the respective Town Development Departments to post all such information, after the project is approved by them on their respective websites & link the same to the HRA website.
4. In case a developer fails to keep his promise, flat buyers can approach the HRA, which can slap a fine of Rs 10 lakhs on the builder or the promoter or prosecute him for an offence attracting imprisonment for three years or both. For this necessary powers of the Judicial Magistrate will have to be delegated to the HRA & only time will tell as to how effective this provision will turn out. At present under the MOFA 1963 an aggrieved buyer can directly approach the Civil/ Criminal Court and can initiate a separate Criminal proceedings against a builder apart from the Civil action but this would change after this Act gets repealed and the only option left with the buyer will be to approach the HRA. Further once the act comes into force and the HRA & HAT is constituted, the Consumer Courts, Civil Courts will be left with very lesser powers & will hesitate to admit cases relating to the reality sector and would rather insist the aggrieved persons to approach the HRA & HAT as under the new Act only these authorities would vest with all the special powers with regards to the reality sector.
5. If the HRA is satisfied that the builder is unable to complete a project, the regulator will form a Legal entity consisting of 60% of the property buyers who will be treated as escrow agent. The retained flats will be transferred in the name of this legal entity. This entity will have the authority to come together and appoint contractors, consultants & other agencies required to complete construction of the project & obtain OC. Now even if this is implemented, which buyer has time & expertise to construct a building and if the buyers have this much time & capability, why would they go for the booking, at first place when they themselves can form a group and build adobe for themselves. Further What about the money paid by the purchasers to the builders till date? What if one purchaser has paid 10% of the cost of Flat to the builders and another has paid 50%? How will the purchasers contribute/ finance towards the remaining costs of constructions? What if there arises a dispute between the buyers themselves? What if there are big Statutory Compliances pending like drainage line, NOC from forest department, Heritage committee, etc.? There are some costs involved in a project like laying of drainage lines, developing approach roads, infrastructures, etc which may run into more than 40-50 Cr., who will finance for the same, the banks/ financing institutions will back-off immediately after you throw the builders/ promoters out? What if this constituted Legal entity sell these retained flats, will it attract Income Tax? Likewise there are several such issues like, VAT, Service tax, Municipal clearances, which novice persons can never deal with. Ultimately the Legal entity so formed by the HRA will become a scapegoat for all the wrong doings of the builders & there would be no takers for such half-way abandoned projects.
6. A flat purchaser can demand rectification of any structural or exterior flaws in the building within a defect liability period of five years of the purchase. There is nothing new in this provision as the same already exists even in the MOFA 1963, the only difference is that this defect liability here is enhanced by another 2 years, but there are many judgments already, which have held that the builders are liable for periods even beyond this limit.
7. The authority will also have powers to deregister the developer and bar him from taking up new projects. However, such a step can be taken only after granting the developer a hearing. The panel will also have the authority to judge a case if a flat buyer defaults on payments. Its orders can be challenged before an appellate tribunal (HAT), which will be led by a retired High Court Judge. Again builders will find ways to tackle this situation, generally the builders/ developers are comprised of a Partnership Firm or a Private Limited company, if one Firm/ Company is debarred they would be free to form another and continue their business.
8. The Tribunal will have to hear the appeals which will be equivalent to the Civil Court and give their decision within three months, which can be further be challenged in the High Court. Such provisions already exist in many laws, but the Tribunals & Courts escape by saying that they are over burdened or under staffed. Further normally in every suits adjournment under natural justification are granted the HAT cannot overrule the same. Further in every suit there are stages which are to be followed as per the established Civil Procedure, so only time will show How decision can come out within three months period?
9. Preserving open space is mandatory; it cannot be used as a parking lot. Corresponding provision already exists in the local Municipal rules, so there is really nothing new to it.
10. Fire Safety Systems in High rise buildings will be mandatory. This is already a norm & the Municipal Corporation does not issue OC without complying with the same & obtaining Fire NOC.
11. If the purchaser fails to pay any outgoings for over three months, the builder can cut off essential services - like water, power and gas - only after the matter is heard by a competent authority. This provision would be generally ineffective, because the builders already take advance maintenance from buyers for periods ranging 1 to 2 years. What if there is dispute in charging of Maintenance? and which law shall govern the levy/ charging of Maintenance Charges? What if the flat buyers don’t need certain amenity?
12. To discourage the tendency of leaving a project midway, the builder cannot sell 10 per cent of the built-up area till Occupation Certificate is obtained. These flats will be retained by housing regulatory body till the completion & Occupation Certificate is obtained by the builder. The list of these 10 per cent flats will be displayed on the government website so that no property buyer will buy them. What if the builder violates this provision and sells these flats or creates a third party rights? In current scenario I have seen in lots of cases where infact the builder sells/ allots the same flat to two or more persons & then vanishes. Further the direct result of blocking of 10% of the flats in each project will be that the builder/ promoter will get 10% lesser finance from the financing agencies, this will indeed put additional burden on the builders & this can further delay the project.
13. No Pre-launch bookings! as per The Bill, the builder cannot sell the flats, accept the bookings, before the plans are approved by the authority. What if the builder violates the same or collects money from the prospective buyers by offering them some lucrative scheme and puts it in an escrow account, which normally happens?
14. Provisions to facilitate deemed conveyance in layouts involving two or more buildings. This provision already exists in the rules governing Deemed Conveyance, so I find there is nothing new in the same.
So on & so forth. In short, it's not about a Maharashtra Housing (Regulation and Development) Bill 2012 or about a good builder and a bad builder. It's all about the way you buy the property. When you book a flat, you buy a concept on paper. While implementing that concept, anything can happen. Sometimes, may be because of genuine & valid reasons but for sure mostly, at your costs. Even if, your builder is sent to jail, practically he gets out the very next day. But you suffer throughout your life as you have not only blocked all your hard earned capital but have also subjected yourselves as the slaves to the financial institutions. The builders may abscond but you cannot leave your family and will continue to pay EMI even if you still haven’t got possession of your flat.
So, Adv. R. P. Rathod. concludes with that “don't get trapped” Let the builder build & complete the project and obtain the Completion & Occupation Certificate, and send a limousine for you!