This law will make the Great Indian Middle Class Dream of owning a house more achievable and will make promoters, builders and brand ambassadors liable for any defect, delays and changes
By R Venkataraman
When Indian cricket captain MS Dhoni became the brand ambassador for Amrapali Group, a real estate firm, little did he know that he would one day face a backlash and quit from the group. But that’s what happened recently when he was trolled on Twitter by residents of Sapphire Complex, a residential project of Amrapali’s in Noida and asked to dissociate himself from the builder. Some residents even asked Dhoni to tell the firm to complete their project using the hashtag “AmrapaliMisuseDhoni”. This went viral and as many as 70,000 tweets flooded social media.
It helped as Amrapali was forced to redress the grievances of the residents. The Sapphire project with 1,000 flats spread over 40,000 sqm was started way back in 2009 and customers were promised their homes within two years. Not only did that not happen, but civil and electrical works in many towers were not completed, said the residents. But the publicity garnered by Dhoni quitting saw the builder being pulled up by Noida Authority.
Welcome to the Great Indian Middle Class Dream of having a roof over its head. This dream got a shot in the arm recently with the Real Estate (Regulation and Development) Act, 2016. This Act also makes promoters, builders, agents and “brand ambassadors” liable for any defect, including non-timely delivery of flats, changing the initial plan, etc.
Hitherto, crores of home buyers, mainly middle and lower middle class with their hard-earned money and loan burdens, were made to suffer. Either their flats were not handed over in time or what was agreed as the area of the flat was, in a majority of cases, found to be less after completion. Flats were also constructed and sold in what was shown as the parking lot, lawns or common areas. Occupancy certificates were obtained without fire, environment and other clearances.
All these issues and many others are sought to be addressed by this Act, which is definitely a giant leap in this domain. Massive unrest has been witnessed in the past few years by the public who have booked flats but were made to suffer due to various lacunae.
What is of particular importance to consumers is Section 7 of RERA which stipulates that “the Authority may, on receipt of a complaint or suo motu revoke the registration… of the competent authority, revoke the registration granted under Section 5, after being satisfied that—
(a) the promoter makes default in doing anything required by or under this Act or the rules or the regulations made there under;
(b) the promoter violates any of the terms or conditions of the approval given by the competent authority;
(c) the promoter is involved in any kind of unfair practice or irregularities”.
This makes even a brand ambassador an agent and therefore, liable. The Act says: “Real estate agent is any person, who negotiates or acts on behalf of one person in a transaction of transfer of his plot, apartment or building, as the case may be, in a real estate project, by way of sale, with another person or transfer of plot, apartment or building, as the case may be, of any other person to him and receives remuneration or fees or any other charges for his services whether as commission or otherwise and includes a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation for sale or purchase of plot, apartment or building, as the case may be, and includes property dealers, brokers, middlemen by whatever name called.”
Much-Needed Reform
What you need to know in the Real Estate (Regulation and Development) Act, 2016:
Applicability: The Act is applicable to all projects where completion certificate is not issued by the respective authority for the project.
Interest for Delay: Interest for delayed possession by the builder cannot be less than the interest charged by him in case of delayed payment by the buyer.
Alteration: No alteration can be done without the written consent of two-thirds of the buyers, except minor changes. This means that a parking lot or green area/park initially shown cannot be converted into a concrete jungle.
Maximum Permissable Delay: Maximum period of 12 months delay from scheduled date of completion.
Allahabad-based lawyer Prashant Yadav, who was part of the “movement” to force the government into enact this law, said that even advertisements and publicity by way of newspaper, hoardings, CDs or websites will be part of the sale.
Alok Kumar, president of the Federation of Apartment Owners Associations, who was also instrumental in the formation of this Act, said: “The practice prevalent today is that builders publish nice brochures, CDs and hoardings and then somewhere, in very small font, write: ‘This is not part of the sale document’. Facilities and amenities too are not mentioned in the sale document and hence it becomes difficult to rely on those in courts. But after the enactment of this Act, all types of advertisements will be part of sale documents. Misrepresentation and fooling of innocent buyers will therefore be eliminated.”
He said that the strong builder lobby, which had been reaping undue benefits in the absence of regulation, opposed this bill tooth-and-nail. Hence, there was a need to bring all home buyers together under one banner to counter this lobby. We did this successfully by way of a movement called ‘Fight for Implementation of RERA’.”
Kumar said the movement now has support from across the country with active members in Mumbai, Delhi, Hyderabad, Bengaluru and Kolkata. “The entire NCR region came forward to support this movement and we are working hard to get RERA implemented in the entire country. This Act will be game-changer and bring about a revolution in the real estate industry.”
Rajeev Talwar, CEO of DLF and president of the National Association of Real Estate Development Companies (NAREDC) surprisingly welcomed this legislation. He said that it is a legislation for transparency and was mainly for buyers. “Hopefully, this will lead to nothing being sold on just paper but force the buyer to see the area, project and building before he signs on the dotted line.”
Sanjay Sawhney, a buyer of a flat in the Antriksh Group, said that even without completion and occupancy certificates, buyers had started occupying these flats as the authority had delayed the same. Buyers have to bear the burden of EMIs, he said, as well as rents for the accommodations they were staying in. He said the authority which had allotted the plot to the builder had not given any approach road. Antriksh chairman Rakesh Yadav, on his part, also welcomed this legislation and said that authorities who allotted the land would now become accountable and would have to give basic amenities like approach roads, etc, to builders.
Some of the provisions in the Act are:
-70 percent of money realized from customers needs to be kept in an Escrow account to be opened in a scheduled bank to meet construction costs. One of the root causes of delay is fund diversion, which eventually leads to cash crunch and delay in the project.
-No sale of a project can be launched till all the requisite sanctions and approvals are in place.
-Builders will be required to get their account audited to keep a check on the money withdrawn from the Escrow account for the construction purpose.
-Builders will need to give updates at regular intervals about the construction status on the regulator’s website.
-No bank loan can be taken on the sold units. Hence, incidents like Teen Kanya cannot be repeated where after the flats were ready, SBI slapped a notice saying that the flats belonged to them as the builder had taken a loan on constructed flats as well.
Kumar said: “We want to secure the future of the next generation of homebuyers. We do not want the same loot to continue. We have taken the lead and joined people from all over India to implement RERA.”
But it has to be seen whether the Act would remain just a law or whether builders would sincerely implement it.