Billed to protect home buyers

Once limited to the cities, the culture of high rise apartment has quickly spread to semi-urban and rural areas. Economic liberalisation, the influx of foreign remittances, promotional lending policies of banks, rebates offered for income tax computation, etc. quickened the process. The builders too found a great opportunity here.

The business grew sky high in the recent past and being an unregulated sector disputes too increased. According to the minister who piloted the Kerala Real Estate (Regulation and Development) Bill 2015 in the Assembly, the government was forced to bring out such legislation in the wake of large-scale malpractices.

It is true that though many promoters in the sector desire to uphold business ethics, the prevailing system does not allow that always.

Unaccounted money changes hands at every step; for obtaining the permit for excavation or filling, getting the approval of the plan by the local body, environment clearance, revenue documentations, registration of deeds, pollution control, town planning permits, safety permissions, electricity connections, water connections and even to pacify local goons.

Many of these “expenses” cannot be accounted for, but ultimately have to be passed on to the customers somehow. It is in this background the Bill is to be examined.

It provides for establishing a Real Estate Regulatory Authority and an Appellate Tribunal.  All housing projects are to be registered with the Regulatory Authority.

However this registration is not applicable to projects where the land area is less than 1,000 square meters, or the number of units does not exceed twelve.

So also projects where the promoter has received all the requisite permits and approvals before the commencement of the Bill are exempted from registration.

While registering, the promoter has to submit, among other things, the layout plan, building permit, proforma of the agreements to be signed with the allottees, number and carpet area of the apartments for sale, and also details of real estate agents, contractors, structural engineers and architects involved.

He is also required to furnish a declaration regarding title to the land and app-roximate period within which he undertakes to complete the project.

The most remar-kable condition for registration is that seventy percent of the amount reali-sed from the allottees from time to time shall be deposited in a separate bank account within a period of 15 days of its realisation. This ensures that the promoter does not divert the amount collected for one project for any other purpose.

The Regulatory Authority is bestowed with the powers to engage independent observers for verifying and reporting the factual accuracy of the information furnished by the promoter.

If the promoter violates any of the terms and conditions of the approval of registration or if he makes wilful default in doing anything required of him under the provisions of the bill or the rules or the regulations made thereunder the registration can be revoked. So also, the registration is revocable if the promoter is involved in any unfair practice or irregularities.

As per the explanation provided under this section of revocation, unfair practice shall include making any statement oral, written or by visible representation that falsely represents that the services are of a particular standard or grade; represents that the promoter has approval that he does not have or makes a false or misleading representation concerning the services.

Publication of any advertisement or prospectus of services that are not intended to be offered is also classified as unfair practice qualifying for revocation of registration. On revocation of registration, the Real Estate Authority can take necessary steps to get the project completed. The Bill also provides for registration of real estate agents and associations of allottees with the Authority.

Promoter’s statutory duties include furnishing information like layout plans, specifications, and stage-wise schedule of completion including provisions of water supply, electricity and sanitation to the customers beforehand.

He is bound to provide the details of registration with the Real Estate Authority along with the website details in his advertisements and prospectus. Promoters cannot accept a sum more than ten percent cost of building without entering into a written agreement.

Any defect in building or materials if brought to the notice of the builder by the allottee or the association of allottees within two years of completion, the promoter is bound to rectify the same.

If there is a delay in giving possession of the building to the allottee, there is provision for refund of the investor’s money with interest. There are also specific rules prescribing penalties for the promoter’s defaults that include imprisonment and fine.

A few more provisions could have gone a long way in protecting the interests of the investors further. The specified bank account where the customers’ payments are deposited should have been an escrow account with the Authority as one of the escrow beneficiaries.

Also, there should have been a provision to bring in the ongoing projects too under the purview of the Bill. Price is the most unpleasant point of dispute between the promoters and the buyers and the major drawback in this bill is the absence of a mechanism to fix a fair price.

The promoters should have been made liable to render accounts of individual projects to the Authority so that the price is more realistic and undue profits are not reaped.

The effectiveness of TRAI and State Electricity Regulatory Commissions is primarily because of its powers to fix rates. Some imaginative provisions too could have been included to control the flow of black money into the sector though it may be difficult to eliminate it totally without intervention by central agencies.

The eligibility condition for chairperson and members of the Authority should have been more stringent to exclude immediately retired government officials from the purview.

(The author is a practicing advocate and ex-member Kerala State Electricity Regulatory Commission)

 

 

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