26, July, 2017
As the Real Estate Regulation and Development Act, 2016, crossed the Rubicon on May 1, it is going to change the way India invests into the real estate sector. Being a consumer-centric law, it is undoubtedly a delightful scenario for buyers. But there is one more dimension to it - jail term for a home buyer for up to a year if he fails to obey the orders of the regulatory authorities or the appellate tribunal.
Section 68 of the Act says: “If any allottee, who fails to comply with, or contravenes any of the orders or directions of the Appellate Tribunal, as the case may be, he shall be punishable with imprisonment for a term which may extend up to one year or with fine for every day during which such default continues, which may cumulatively extend up to ten per cent of the plot, apartment or building cost, as the case may be, or with both.”
Now, sample this:
Twenty-eight-year-old Sumit Sehrawat, a resident of Old Gurgaon, bought a flat in Dharuhera. When his gang of four friends came to know about it, they too applied for flats in the same project. Owing to fund crunch, they decided to give up their flats. They approached the developer and sought their money back. Upon refusal, they manhandled the small-time developer and the staff and threatened to lodge a false complaint.
Cases such as these are faced by developers, especially small builders, who have been held to ransom by certain crafty buyers.
Trashing the provision in the Act, Abhay Upadhyay, who is spearheading the campaign Fight for RERA, says: “The clause was not required at all. No country in the world makes rules for specific instances. There may hardly be any cases where a builder has filed a case against a consumer. Since the Act had to be balanced, the clause has been incorporated. In my opinion, it will not be invoked in the next 100 years.”
But developers highlight that any Act having no control over the buyers would have been meaningless. Even buyers need to be disciplined.
“The initial reaction post-RERA is ‘advantage-buyer’ to the extent that we may see it becoming ‘disadvantage real estate developer’. Let the law be balanced and fair to both the sides,” maintains Niranjan Hiranandani, Hiranandani Group Chairman.
Manoj Chaudhary, MD, Airwil Infra Ltd, says, “We have had multiple instances where buyers have harassed developers on illicit grounds to make way for their petty profits.” Adding to this, Prithvi Raj Kasana, MD, Morpheus Group, says, “Buyers forcing developers to alter project details other than the one approved just because a majority of them want the change should also be considered by the tribunal.” He maintains that developing projects over a span of three – four years requires a lot of financial planning and in case there are stuck payments from the buyer’s end all these planning may go for a toss. But Fight for RERA’s Upadhyay highlights that 90% of home buyers avail of home loans to buy a house. “So the question of them faulting on paying money to the builder does not arise. They may fault on the timely payment of their EMI which is already covered under the relevant provisions of the existing laws.
“It makes sense that developers should be protected from buyers who renege on a contract, just as buyers are protected from any untoward action or lack of action from developers,” says JLL India CEO & Country Head Ramesh Nair. The company’s chairman, Anuj Puri, adds that the Act was not put together and rolled out as a one-sided punitive tool for developers alone. “In the past, developers have also had their issues with buyers, and any fair and just legislation must take a balanced view. This is why RERA will also hold buyers accountable,” maintains Puri.
However, other experts point out that such a provision will hardly be used against a buyer.
Sudip Mullick, partner, Khaitan and Co, says: “The only scope I see is if the buyer does not take possession or stops paying maintenance. If he does not take possession then that would lead to the termination of the contract or his money would be forfeited.” He further adds that there may be cases where a troublemaker buyer may want to burden the court with frivolous litigations but “getting a jail term for any of the above acts is a far-fetched situation. I don’t see any other reason why a buyer would breach the contract and end up in jail.”
“If someone is a genuine buyer, such an issue would never crop up,” says Pune-based property consultant Rani Wilfred.
Notwithstanding the fact that it’s for the courts to award punishments to the erring parties, developers have been lamenting that they might be axed for the delay on the part of government agencies. What about accountability of the government departments? The Act fails to talk about the liability of the babus.
“Government departments are not covered specifically and delays caused due to red-tape and long-drawn local procedures should not be attributed to the developers and result in unjustified action against them,” says Puri.
“It is doubtful whether the authority can direct government agencies or bureaucrats to carry out a task. There may be provisions which may be helpful to authorities to appropriately take steps or even on an application recommend the government agency to expedite. It may not be binding on the department concerned but they can be asked to do so” explains Mullick.He further adds that the government bodies are also involved in residential and commercial real estate business and will come under the purview of RERA. “So, it is not that only developers will suffer, the government will also suffer,” sums up Mullick.