RERA is on our doorstep now and it is going to be a reality of the realty estate. I can seek a pride in the fact that I am the one who was closely associated with the development of this Bill and almost drafted about 40% of the bill myself. But then this is also a fact that this Bill was duly vetted by various developers before it became a reality of real estate. I remember the names of like Sh. Lalit Jain, Sh. Naveen Raheja, Sh. Rajeev Talwar, Sh. Shekhar Reddy, and many more that I have met during my many visits to the Ministry of HUPA and other government functions. They had a huge influence over the ministry and would have close door meetings with the Ministers. In the end, although the consumers had won the battle of enacting a law for the protection of their investments but this is also a fact that thanks to those various closed door meetings between the Ministers and the Developers, the RERA bill is a bargained version of what we had proposed. There are flaws, shortcomings and ambiguities that exists in the Bill and would continue to itch the consumers in the future. I am highlighting here only two of the larger problems that exists in the Bill and unless and until the government agencies take a serious look into it and make appropriate amendments to it, the current Bill may cause more damage than good to the consumers in the longer run.
First : Section 3(c) "For the purpose of this section, where the real estate project is to be developed in phases, every such phase shall be considered as a stand alone real estate project, and the promoter shall obtain registration under the Act for each phase separately". and
The definition of Common Area under : Section 2 (n) (i) : the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase;
The Select Committee of Rajya Sabha MPs had suggested as "the part of the plot or site not occupied by the building". This definition was tweaked after the recommendation by the Rajya Sabha Committee was tabled before the Hon'ble Cabinet Minister Sh. Naidu. There is nothing in the Rajya Sabha Committee recommendation that suggests change in the definition of the common area related to the land. It was purposefully inserted in the final version that was passed by the legislatures. The purpose was to allow developer declare land per phase. Nobody in the Ministry thought this is fundamentally wrong to allow developer to declare land on the basis of each phase. This is against the basic tenets of a "group housing" or the "common interest" property as it is recognized in the western land. The land in the case of the Group Housing system has to remain undivided among all the allottees / occupants but if the developers are allowed to declare land on the basis of per phase then the allottees would have undivided proportionate ownership over the land that is declared by the developer for that particular phase only. This would lead to many illegalities, like :
i) The developers would develop the site in a way that would allow them to enjoy the development rights for posterity.
ii) There would be multiple independent maintenance societies / RWAs inhibiting one Group Housing Complex.
iii) There would be dispute among the independent Societies related to distribution of common infrastructure facilities and Common Expenses.
iv) It would be at the whims and fancie of the developer to declare proportion of land per phase. In most likelihood the developers would only declare land "underneath the building" as land per phase and retaining the ownership rights over the rest.
v) Any future increase in FAR would be retained by the developer leading way to construction activities at the site for posterity.
vi) There are good chances that the obligation of developing Community and Commercial facilities which are necessary infrastructure facilities required to be developed in the ratio of the population of the entire project would largely get compromised.
This clause is absolutely illegal and an handiwork of developer tweaking the Act to their advantage. The legislature should change the clause to read " the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the proportionate land for that phase;
Second big tinkering has happened in the Bill under section 4(l)(d) : ) that seventy per cent. of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.
In my opinion this does not serve any purpose because the developer is allowed to withdraw the money for the cost of the land as well. It is absolutely reasonable to allow the developer to withdraw the money from these separate account for the cost of the land also because in places like Mumbai, the proportion of land cost to the total cost is usually more than 70%. The question than arises is then why not the entire installments should be maintained in separate accounts and let there be complete transparency. It is a part of the Act that the developer cannot raise successive installments unless and until a specific milestone has been achieved and certified by Professional Architect and Accountant. This itself is a wholesome clause to cap the diversion of funds by the developers.
There are various other tweakings in the Bill which requires some attention of authorities and may require some deliberation of thoughts.
Will get back soon.
First : Section 3(c) "For the purpose of this section, where the real estate project is to be developed in phases, every such phase shall be considered as a stand alone real estate project, and the promoter shall obtain registration under the Act for each phase separately". and
The definition of Common Area under : Section 2 (n) (i) : the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase;
The Select Committee of Rajya Sabha MPs had suggested as "the part of the plot or site not occupied by the building". This definition was tweaked after the recommendation by the Rajya Sabha Committee was tabled before the Hon'ble Cabinet Minister Sh. Naidu. There is nothing in the Rajya Sabha Committee recommendation that suggests change in the definition of the common area related to the land. It was purposefully inserted in the final version that was passed by the legislatures. The purpose was to allow developer declare land per phase. Nobody in the Ministry thought this is fundamentally wrong to allow developer to declare land on the basis of each phase. This is against the basic tenets of a "group housing" or the "common interest" property as it is recognized in the western land. The land in the case of the Group Housing system has to remain undivided among all the allottees / occupants but if the developers are allowed to declare land on the basis of per phase then the allottees would have undivided proportionate ownership over the land that is declared by the developer for that particular phase only. This would lead to many illegalities, like :
i) The developers would develop the site in a way that would allow them to enjoy the development rights for posterity.
ii) There would be multiple independent maintenance societies / RWAs inhibiting one Group Housing Complex.
iii) There would be dispute among the independent Societies related to distribution of common infrastructure facilities and Common Expenses.
iv) It would be at the whims and fancie of the developer to declare proportion of land per phase. In most likelihood the developers would only declare land "underneath the building" as land per phase and retaining the ownership rights over the rest.
v) Any future increase in FAR would be retained by the developer leading way to construction activities at the site for posterity.
vi) There are good chances that the obligation of developing Community and Commercial facilities which are necessary infrastructure facilities required to be developed in the ratio of the population of the entire project would largely get compromised.
This clause is absolutely illegal and an handiwork of developer tweaking the Act to their advantage. The legislature should change the clause to read " the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the proportionate land for that phase;
Second big tinkering has happened in the Bill under section 4(l)(d) : ) that seventy per cent. of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.
In my opinion this does not serve any purpose because the developer is allowed to withdraw the money for the cost of the land as well. It is absolutely reasonable to allow the developer to withdraw the money from these separate account for the cost of the land also because in places like Mumbai, the proportion of land cost to the total cost is usually more than 70%. The question than arises is then why not the entire installments should be maintained in separate accounts and let there be complete transparency. It is a part of the Act that the developer cannot raise successive installments unless and until a specific milestone has been achieved and certified by Professional Architect and Accountant. This itself is a wholesome clause to cap the diversion of funds by the developers.
There are various other tweakings in the Bill which requires some attention of authorities and may require some deliberation of thoughts.
Will get back soon.
No comments:
Post a Comment