What To Expect When Expecting Maharashtra Real Estate Rules
In a bid to create more consumer friendly, transparent and accountable real estate sector, Real Estate (Regulation and Development) Act, 2016 (“Act”) was passed by the central government. The deadline for the state government to implement provisions of the Act was October 31st 2016.
Some states and union territories were able to adhere to the stipulated deadlines. However major players in the real estate sector viz. Karnataka and Maharashtra have missed the deadline. After a long wait Housing Department of the Maharashtra government finally published the draft Maharashtra Real Estate (Regulation and Development) (Registration of Real Estate Projects, Registration of Real Estate Agents, Rates of Interest and Disclosures on Website) Rules, 2016 (“Maharashtra Rules”) on December 8th 2016.
These Maharashtra Rules have received some mixed signals. On when hand,Maharashtra Rules list out several compliances which a Promoter has to follow. On the other it dilutes several provisions of the Act and its major objective- consumer protection.
Here is the highlight of some of the important provisions of the Maharashtra Rules:
- Exorbitantly high fees for complaints: One of the major highlights of the Act was the establishment of Real Estate Regulatory Authority (“RERA”) to inter aliasafeguard theinterest of the consumers in the real estate sector. But just to lodge a mere complaint for any grievance related to a Real Estate Project the Maharashtra Rules propose a fees of Rs. 10,000/-.
- Disclosure by the Promoter about his intention of consuming the FSI: If the sanctioned FSI is different than what is proposed to be consumed by the Promoter, then the proposed FSI which the Promoter intends to consume shall be disclosed at the time of registration and as and when the FSI is sanctioned, the same is required to be uploaded on the website of the regulator by the Promoter from time to time.
- Disclosure by Promoter of ongoing Projects:As per the Act, the Promoter of an ongoing Project, in which all buildings as per sanctioned plan have not received occupation certificate or completion certificate, as the case may be, is required to submit the application for registration of such Project within a period of three months from the date of commencement of the Act. Further the status of ongoing Projects needs to be disclosed as per the last sanctioned plan. The Promoter is also required to disclose the status of development of common areas along with expected period of completion of the Project.
- Prior written consent of Allottees for change in sanctioned plans: Under the Act , the Promoter is required to seek prior written consent of least two third of the Allottees, if there is any deviation in the implementation of the proposed plans/ specifications as disclosed in agreement executed with the Allottees, prior to registration or if there is any alterations or additions or modifications in the sanctioned plans, layout plans and specifications of the buildings or common areas in the Project. However, as per the Maharashtra Rules, if any deviation, alteration or additions or modifications in these plans are required to be made by Promoter in compliance of any direction or order, etc. issued by the competent authority or statutory under any law of the state or central government, for the time being in force, then the previous written consent of least two third of the Allottees is not required.This clearly leads to dilution of the autonomy of the Allottees. There should be a provision for sending due notice, to this effect, to such Allottees
- Deposit of amount in relation of ongoing Projects: In relation to ongoing Projects in which all buildings/wings as per sanctioned plan have not received occupation certificate or the completion certificate, as the case may be, has not been issued; the Promoter is required to deposit in the separate account, seventy percent of the amount to be realized from the Allottees. Further, in the event where the estimated receivables of the ongoing Project is less than the estimated cost of completion of the Project, then the Promoter is required to deposit 100% of the amount to be realized from the Allottees in the said separate account. (Estimated cost of the Project, is disclosed by the Promoter at the time of applying for registration. The same is reflected on the website of the RERA)
- Withdrawal of sums deposited in separate account:
a. As per the Act, the Promoter must declare that 70% of the amount raised from Allottees will be deposited into a separate account in a scheduled bank to cover the construction cost of the Project and land cost. The said amount must be used only for construction of that Project and the land cost. This amount can be withdrawn by the Promoter only after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the Project.
The Maharashtra Rules further clarify that the aforementioned certificates shall be submitted by the Promoter to the scheduled bank operating the escrow/separate account. Since the certificates are to be deposited with the scheduled banks operating the escrow/separate accounts, prior to withdrawal by the Promoters, it is implied that the banks are expected to carry out due diligence w.r.t. proportion of such withdrawal.
b. The Maharashtra further lists down the responsibilities of the architect, engineer andthe chartered account:
i. The Project architect to certify the percentage of completion of construction work of each of the building / wing of the Project;
ii. Engineer to certify for the actual cost incurred on the construction work of each of the building / wing of the Project;
iii. Chartered Accountant for the cost incurred on construction cost and the land cost.
C. The Maharashtra Rules have also defined what would construe as land cost and construction cost by specifying that
i. “land cost” shall include;
- The costs incurred by the Promoter for acquisition of ownership and title of the land parcels proposed for the Project, including its lease charges, which shall also include overhead cost, marketing cost, legal cost and supervision cost;
- Premium payable to obtain development or redevelopment rights;
- Amount paid for acquisition of TDR;
- Premium for grant of FSI, including additional FSI (if any), fungible FSI; and any other instruments permissible under the Development Control Regulations;
- Consideration payable to the outgoing developer to relinquish ownership and title rights over such land parcels;
- Amounts payable to State Government or Competent Authority or any other statutory authority of the State or Central Government, towards Stamp Duty, Transfer charges, Registration fees etc; and
- Annual statement of rates linked premiums payable by any Promoter as per requirement of law, rules or regulations for obtaining right for redevelopment of lands owned by Public Authorities as per act or rules or regulations of the State or Central Government.
ii. “construction cost” shall include all such costs, incurred by the Promoter, towards the on-site and off-site expenditure for the development of the Project including payment of taxes, fees, charges, premiums, interest etc. to any competent authority or statutory authority of the Central or State Government under any laws or rules or regulations of the time being in force including principal sums and interest, paid or payable to any financial institutions including scheduled banks or non-banking financial companies etc. or money-lenders for the Project.
d. The totalestimated cost of the Project multiplied by such proportion (70%) shall determine the maximum amountwhich can be withdrawn by the Promoter from the escrow/ separate account. ThePromoter shall berequired to follow the aforesaid procedure at the time of every withdrawal from the escrow / separateaccount till occupation certificate in respect of the project is obtained. On receipt of occupationcertificate in respect of the Project the entire balance amount lying in the escrow/ separate accountcan be withdrawn by the Promoter.
- Registration of Projects:The government has clarified that the period for which registration of the Project will be valid, shall exclude such period where actual work could not be carried by the Promoter as per sanctioned plan due to specific orders relating to the Project from any Court of law, or Tribunal, Competent Authority, Statutory Authority, High Power Committee etc., or due to such mitigating circumstances as may be decided by the RERA.
- Transfer of Title: As per the Act, the Promoter has to enable formation of association, cooperative society, as the case may be, of the Allottees (within 3 months of majority of Allottees having, in the absence of local laws). The Promoter shall further execute a registered deed of conveyance of apartment, plot or building in favour of the Allottees, alongwith undivided interest in favour of the respective association. The Maharashtra Rules further jot down to role of the Promoter under Maharashtra Co-operative Societies Act, 1960 and Maharashtra Ownership Flats (Regulation of Promotion of Construction, Sale, Management and Transfer) Act, 1963, for forming the association and transferring the title.
- Agreement for sale: The government has provided a model form of agreement at annexure A of the Maharashtra Rules. However, the Promoter is permitted to modify the model form as long as the agreement is in conformity with the Section 13(2) of the Act. Further, any application letter, allotment letter or any other document signed by the Allottee, in respect of the apartment, plot or building, prior to the execution and registration of the agreement for sale for such apartment, plot or building, as the case may be, shall not be construed to limit the rights and interests of the Allottee under the agreement for sale or under the Act or Maharashtra Rules or the regulations made thereunder.
- Timelines for refund. Any refund of monies along with the applicable interest and compensation, if any, payable by the Promoter in terms of the Act or the Maharashtra Rules and regulations made thereunder, shall be payable by the Promoter to the Allottee within thirty days from the date on which such refund along with applicable interest and compensation, if any, becomes due.
- Application of other laws not barred: The Maharashtra Rules have expressly clarified under that nothing in these Rules or the regulations of the RERA shall be construed to be in derogation of, provisions of any other laws or rules for the time being in force and rules and regulations made there under.
The Maharashtra Rules are a mix of biter and sweet for the consumers. So at this time, all we hope is that the state government takes into consideration all the suggestions from the public when it revisits the draft to formalise the final rules.
Definition of the capitalised terms used herein above, as per Section 2 of the Act:
- Allottee: in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter, and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent.
- Competent Authority:the local authority or any authority created or established under any law for the time being in force by the appropriate Government which exercises authority over land under its jurisdiction, and has powers to give permission for development of such immovable property.
- Project:Any Real Estate Project.
- Real Estate Project:development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto;
i. a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or
ii. a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or
iii. any development authority or any other public body in respect of allottees of—
- buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or
- plots owned by such authority or body or placed at their disposal by the Government,
for the purpose of selling all or some of the apartments or plots; or
- an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its members or in respect of the allottees of such apartments or buildings; or
- any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or
- such other person who constructs any building or apartment for sale to the general public.
Explanation.—For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made thereunder;
Juhilata S. Puntambekar is a Manager,Corporate Legal Group, ICICI Bank Limited, Pune.
[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]
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