After a long delay, the Maharashtra government on Thursday published draft rules to set up a real-estate regulator in the state. The new draft rules increase the number of mandatory disclosures for builders but reduce penalties for builders, allottees and real estate agents.
The state government will accept suggestions and objections to the draft rules – based on the Union government’s model rules under the Real Estate (Regulation and Development) Act, 2016 – until December 23.
Under the centre’s rules, the penalty for offences by builders has been fixed at 10% of the estimated project cost. These offences include not registering a project or failing to comply with the orders of the real estate appellate tribunal. In case an allottee or a real estate agent fails to comply with the orders of the tribunal, he or she will have to pay 10% of the cost of the apartment or building.
The state government, however, propose reducing the penalty on builders who don’t register a project to between 2% and 10% of the project’s cost, and to 5% to 10% of the project cost for builders who fail to comply with the real estate appellate tribunal’s orders. Similarly, if allottees or real estate agents fail to comply with the tribunal’s orders, they will have to pay between 5% and 10% of the cost of the flat or building.
The exact amount will be left to the discretion of the housing regulatory authority.
An official from the state housing department said, “We have kept the penalties variable as we think this is a more pragmatic approach. A developer will come to the table to negotiate, pay and move forward only if the amount is reasonable. Our intention is to ensure that the project does not get stuck and buyers are not left in a loop.”
However, urban planner Sulakshana Mahajan said the penalties should have remained high for them to serve as a deterrent. “It is a deterrent if the compounding of the offence is at a flat 10%. Also, it is much better to have a fixed penalty than a discretionary one.”
The state government has also proposed drastically reducing the registration fees for builders as compared with the centre’s rules.
While the centre’s rules call for a registration fee of Rs 10 per square metre for residential projects for land less than 1,000 square metres, and Rs 20 per square metre for projects spread over more than 1,000 square metres, the state government has proposed to reduce these to Re1 and Rs 2, respectively. While the centre’s rules call for a rate of Rs 50 per square metre for land under 1,000 square metres and Rs 100 per square metre for land over 1,000 square metres for commercial projects, the state’s rules do not specify different rates for residential and commercial projects.
Mahajan said, “The registration fee is peanuts, especially for projects in major cities such as Mumbai and Pune. Here, the rules should have been different for A, B and C-class cities of Maharashtra.”
The state’s draft rules, however, tighten the centre’s model rules in several places, mandating developers to state their land costs, cost of construction and total completion cost of the project separately. Maharashtra’s rules also more clearly define components within the land cost and cost of construction, open areas and parking spaces. They also specify timelines for the registration of ongoing projects and put curbs on developers looking to create third-party interests.