There have been many anti developer views on the Maharashtra Housing (regulation and development) bill 2012 published over the past few days that makes it seem like the bill is one sided and anti-consumer. Fortunately, this is far from the truth. Yes there are provisions that bring in liabilities for the purchaser as well, however, there are sound reasons for the same and some of these are elaborated in this article.
The most important aspect is the fact that the new Act introduces the concept of a regulator (Housing Regulatory Authority) as well as a Housing Appellate Tribunal. These bodies have sweeping powers and willful disregard of the orders of the Authority/Tribunal call for imprisonment of upto 3 years. This provision, some would argue can be extreme for a civil offense. The other game changer in this Act requires developers to earmark 10% of the area of the phase being developed as retained flats. These retained flats can only be sold by the developers after obtaining the occupancy certificate. Depending on the location and other factors, this 10% could end up being as high as half of the profits of the project. This clause will ensure that developers complete projects AND obtain the occupancy certificate - This is something that many consumers and consumer forums are bitterly complaining about.
Developers will now need to register their projects with the Regulator and cannot sell apartments before sanctions are obtained from the local authority. Earlier, some developers used the route of pre-sales as a way of getting early commitments from customers in return offering them attractive rates, this clause now precludes this from happening.
Fines of upto Rs. one crore have now been prescribed for numerous offenses. For many small projects in areas where rates are below Rs. 4000 per sq ft, one crore rupees can purchase an area of over 25,000 sq. ft. This means the fine for one of the violations can be equivalent to as many as 25 apartments of 1000 sq. ft each. This is an extremely hefty fine and could act as a deterrent for many developers.
In addition to this, the Act now calls for an extremely high level of disclosure by the developers to the customers, and permits the developers freedom to operate within the boundaries of the disclosures made in the agreements with the customers. This essentially means that the customers must go through the agreements and only purchase if they are satisfied with the conditions that have been put in the agreement by the developers. The government has created an opportunity for the customer to act based on the concept of knowledge and transparency (just as in the case of public offerings, the promoter of a company is required to submit the Red Herring prospectus and customers are required to have access to the same so as to be able to make an informed decision).
Hopefully, the customer will respond by going through the flat purchase agreement before purchasing a property and not sign the agreement blindly.
The most important aspect is the fact that the new Act introduces the concept of a regulator (Housing Regulatory Authority) as well as a Housing Appellate Tribunal. These bodies have sweeping powers and willful disregard of the orders of the Authority/Tribunal call for imprisonment of upto 3 years. This provision, some would argue can be extreme for a civil offense. The other game changer in this Act requires developers to earmark 10% of the area of the phase being developed as retained flats. These retained flats can only be sold by the developers after obtaining the occupancy certificate. Depending on the location and other factors, this 10% could end up being as high as half of the profits of the project. This clause will ensure that developers complete projects AND obtain the occupancy certificate - This is something that many consumers and consumer forums are bitterly complaining about.
Developers will now need to register their projects with the Regulator and cannot sell apartments before sanctions are obtained from the local authority. Earlier, some developers used the route of pre-sales as a way of getting early commitments from customers in return offering them attractive rates, this clause now precludes this from happening.
Fines of upto Rs. one crore have now been prescribed for numerous offenses. For many small projects in areas where rates are below Rs. 4000 per sq ft, one crore rupees can purchase an area of over 25,000 sq. ft. This means the fine for one of the violations can be equivalent to as many as 25 apartments of 1000 sq. ft each. This is an extremely hefty fine and could act as a deterrent for many developers.
In addition to this, the Act now calls for an extremely high level of disclosure by the developers to the customers, and permits the developers freedom to operate within the boundaries of the disclosures made in the agreements with the customers. This essentially means that the customers must go through the agreements and only purchase if they are satisfied with the conditions that have been put in the agreement by the developers. The government has created an opportunity for the customer to act based on the concept of knowledge and transparency (just as in the case of public offerings, the promoter of a company is required to submit the Red Herring prospectus and customers are required to have access to the same so as to be able to make an informed decision).
Hopefully, the customer will respond by going through the flat purchase agreement before purchasing a property and not sign the agreement blindly.
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