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Homebuyers awaiting possession of their delayed projects have a reason to cheer. Developers in Maharashtra will now have to come clean on the project completion deadlines committed to homebuyers. For delayed projects, developers will now also need to commit to a revised completion deadline and adhere to it. Failing which, the law will catch up with them.
Rules for the implementation of the Real Estate (Regulation and Development) Act, 2016, in Maharashtra are now ready. They will be notified on Friday. Ongoing projects in the state where the occupation certificate or completion certificate is yet to arrive will come under their ambit.
All such projects – excepting those with no sale component – will need to register with the Housing Regulatory Authority, which is expected to begin functioning from May 1, within two months.
Besides public disclosures pertaining to building approvals, the rules mandate developers to disclose the original time frame for project completion that was committed to the flatbuyers while selling an apartment. “The delays (if any) and the time period in which the developer or the promoter undertakes to complete the pending project will also have to be disclosed. Action can be initiated against those failing to adhere to the revised deadline,” said a senior state official.
While the authority reserves the discretion to grant additional time to a developer for circumstances beyond his control, the government has ruled that the authority would first have to grant the flatbuyers and other interested parties an opportunity to be heard.
Delays in construction and flat possession are rampant in urban neighbourhoods in the state, especially in the commercial capital of Mumbai, where real estate prices continue to look northwards.
The government has also made it compulsory for developers of all ongoing projects to disclose the size of apartments based on carpet area (area within four walls). A senior official said the condition was applicable even for housing projects where apartments were sold on built-up area or super built-up area where built-up portions common to other homebuyers in a project are also computed.
When the draft rules were published on December 8, 2016, the government had been criticised over allegations that it had done away with some key disclosures pertaining to various building approvals obtained for a housing projects. While maintaining that the criticism was unfounded, Gautam Chatterjee, who has been appointed as the interim housing regulator for now, said the final rules have clarified that the developers would have to disclose all details regarding a housing project while registering it with the authority. These would include details pertaining to the title of the land. All such disclosures would be available for the public on the authority’s website, which will be rolled out on April 24. Developers will also have to share complete details regarding projects executed by them over the past five years. “We have also incorporated certain changes to the model form of sale agreement. Earlier there was some criticism that it had been worded in favour of developers. It is more balanced now,” said Chatterjee.
Developers will now be barred from advertising or selling flats without registration with the authority. Those failing to comply with the authority’s directive stand to face action too. Errant developers could face imprisonment or could be fined anywhere between 5 per cent to 10 per cent of the project’s cost. In extreme cases, the registration of a project can be revoked disallowing a developer to take further part in its completion or selling of the apartments. “Before the revocation of a project, the flatbuyers and lending institutions will be given a hearing for a solution on how to take the project forward,” an official said.
While the draft rules had pegged the registration fee at Rs 1,000 or less, the government has now revised it upwards to a minimum of Rs 50,000, after facing some criticism in this regard.
The government has also newly introduced the anti-discrimination clause, asking developers not to discriminate against buyers on grounds of religion, sex, or dietary preferences. While the draft rules had provided for termination of the sale agreement with a buyer on any default of payments, the final rules state such action can be taken only after three such defaults.
But while ruling that at least 70 per cent of receivables from flatbuyers should be parked in an escrow account and utilised for the same project’s completion, the state has retained the dilution in the form of inclusions permitted for computing the land cost. Apart from the cost of buying or acquiring the development rights for the piece of land, it has included charges payable by the developer for securing various building permits, obtaining additional building rights, premiums payable to government agencies, loans and interests payable to lending institutions for project work, legal expenses and overhead costs in the land cost component. Since most of these are incurred upfront, sceptics remain wary that the developers will be able to withdraw most funds from the escrow account at the initial stage itself. The rules also recognise a builder’s right to sell covered parking spaces.
Within three months of 51% buyers booking apartments, a developer will now have to form a cooperative society or apex body of allotees, and convey the plot’s title to them within three months of receiving occupation certificate or full payment of full consideration amount.