RERA deadlock: Homebuyers in limbo as builders move court ahead of deadline for registering projects
Builders have challenged Section 3 of the landmark law, which says ongoing projects must be registered, and argue that applying it retrospectively violates constitutional safeguards.india Updated: Jul 23, 2017 00:34 IST
Real estate developers have moved courts to challenge a landmark law that seeks to protect homebuyers, ostensibly in an attempt to stall its implementation a week before a key deadline.
The housing sector in India has for years been beset by problems, the most stark of which are the cases with hundreds of thousands of homebuyers who have made significant payments but are yet to receive possession of their houses. The parliament last year passed a law to regulate the sector, setting up a real estate regulatory authority (Rera) for disputes in new and existing, incomplete projects.
Two separate groups of builders have moved the high courts in Maharashtra and Madhya Pradesh challenging the law, particularly sections that put old projects — started before the law was passed and are yet to be completed — under the ambit of the regulator.
Both courts have asked the central government to respond to the petitions, which argues that Section 3 (which says ongoing projects must be registered) is applied retrospectively and therefore violates constitutional safeguards.
The builders have also challenged Section 59, which defines penalties for violations.
“With the deadline to register ongoing projects ending in a week and the Centre unlikely to give an extension, developers are getting edgy,” said sources in the Housing and Urban affairs ministry, which piloted the law.
In the National Capital Region (NCR), for instance, around 5 lakh people are yet to receive possession of flats that developers promised to finish five years ago. The numbers of affected rises significantly when the rest of the country is taken into account.
In recent weeks, they have held protests and approached officials to put pressure on builders. Last week, buyers of Amrapali projects threatened to go on a sit-in protest if the promoters were not booked by police.
“Builders are trying to buy time. If there is a regulator in place, even if it is an interim one, what is preventing developers from registering their project? Section 3 of the RERA Act was made consciously as at present a large number of ongoing projects are stuck. In Delhi NCR for example big builders like Unitech have taken 90% of the money from buyers but not started work. For a buyer who has put in his life’s saving in a flat, every single day of delay means more suffering,” said ML Lahoty, senior advocate who has fought several cases for homebuyers.
Section 3 of the RERA Act makes it mandatory for developers of all such ongoing projects that have not received completion certificate to register with the regulator by July 31, failing which they will be liable to cough up 10% of the project cost as penalty. Without registering, a developer will not be able to sell any apartment or building in such projects.
In the petition filed in the Bombay court, four developers – Swapnil Promoters & Developers, Swapnil Associates, Sukhyog Constructions and M/s Guru Constructions – have said that the provisions of the Act are “most arbitrary and draconian.” “….the provisions of the Act are impracticable and onerous conditions have been imposed upon the promoters which cannot be fulfilled how-so-ever the promoter tries to comply with the same,” reads the petition that has been reviewed by HT.
“The penal provisions … are made applicable to ongoing projects ignoring the settled legal principle that penal provisions can never have retrospective operation,” the petition says.
In Madhya Pradesh, petitioner Builder and Developer Welfare Association — which represents a group of developers —also challenged the “impracticability” of depositing 70% of the amount collected from buyers in a separate account, in addition to the section on ongoing projects.
Ministry officials, however, said that in states where a regulator has not been set up, the builders will not be penalised for violating the provisions of the Act.
Housing is a sector that states need to regulate individually, with each required to draw up rules and set up the regulator. Of the 36 states and Union territories, 20 have notified the rules.
Geetambar Anand, the president of the Confederation of Real Estate Developers’ Association of India recently told HT, “If states have not set up a regulator, there is not much a developer can do. We are telling states to expedite the process. We don’t want any disruption in ongoing projects.”
The housing and urban affairs ministry also cannot do much except request states to speed up the process of appointing regulators. “In the absence of rules and regulatory authority/ appellate tribunal, real estate activities would be adversely affected post 31 July 2017,” former housing minister M Venkaiah Naidu had written to chief ministers of all states on June 21.