Real Estate Regulation: Home truths

By Dr SD Israni

The proposed Bill will make builders accountable. No wonder, they are opposing it
In a vast country like India, where a large chunk of the population, even in metropolitan cities, lives in slums, there is a huge pent-up demand for housing. This has resulted in unabated construction in cities and towns all over the country. Unfortunately, for something as basic as housing, there has hardly been any regulation. This has resulted in anybody building and selling homes. People without any qualifications, money or even a plot of land, have got into construction business by co-opting the municipal authorities with them.
Knowing no better, a buyer ends up signing on the dotted line of an agreement whose contents he has not fully understood. Indeed, lack of regulation means that even a knowledgeable buyer has limited choice; no one can change the one-sided agreement which is entirely in favour of the so-called builder. Barring a few exceptions, most builders care for their customers as much as highway robbers care for passengers in a passing bus. They enjoy the support of corrupt politicians and officials to form an unholy triumvirate. Delayed delivery, sub-standard construction and poor fittings are the norm. Hapless home-buyers across the country are being cheated or taken for a ride. They hardly have any voice or effective legal recourse against unscrupulous builders. Hope has arisen in the form of the proposed Real Estate (Regulation & Development) Bill, 2011.
The Bill aims to establish a regulatory authority which will regulate, control and promote planned and healthy development of construction activity. This will include construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties. The Bill plans to provide a website containing all project details including the particulars of the promoters and other persons engaged in the development of such projects.
Registration: Currently, any person can declare himself to be a promoter; never mind his inexperience, lack of qualifications or sheer incompetence—he can still start a construction project and sell flats. Promoters are invariably confident of managing the municipal officials. The Bill proposes that every promoter, who intends to develop any immovable property or make any construction thereon, cannot do so unless he has registered the real estate project and obtained a certificate of registration from the proposed Real Estate Regulatory Authority (RERA). Similarly, development or conversion of existing undeveloped immovable property, or part of it, will also require prior registration. This is particularly relevant in the context of the re-development projects being undertaken in various parts of Mumbai and other major cities. However, no such registration is required for small projects involving a plot not exceeding 4,000sq metres or for renovation or repair which does not involve re-allotment and marketing of immovable property.
Cancellation of Registration: RERA would have the power to revoke the registration for any kind of unfair practice, including making false statements and issuing misleading advertisements, or any default. The revocation of registration may be initiated on the receipt of a complaint or suo-moto by RERA or on the recommendation of the competent authority appointed under the proposed law.
Promoters’ Obligations: The proposed law provides in detail the duties of a promoter who has been granted registration of a project and the obligations he will incur in respect of any statement made in the brochures, prospectus, agreement, etc. There is also a provision for awarding damages and interest to buyers if the promoter fails to meet his commitments.
Having been accustomed to a free run since independence, it is not surprising that the construction industry has voiced a strong protest against the proposed law that makes them accountable. For the first time, the promoters will be forced to stop obfuscating and become transparent in their dealings with buyers. Hope the proposed law will be enacted without much delay.
SD Israni is a corporate lawyer. Email: sdisrani@gmail.com
Source http://www.moneylife.in