Maharashtra housing law could be less stringent than Centre’s

Mumbai: While Maharashtra might be set to become the first state in the country to put in place a real estate watchdog, several of the provisions in Maharashtra Housing Act, 2011, may turn out to be less stringent than its Central counterpart.

The state Cabinet recently approved the draft of the Maharashtra Housing (Regulation and Promotion of Construction, Sale, Management and Transfer) Bill, 2011, a law meant to safeguard the interest of home buyers. The move comes two months after the Union Ministry of Housing and Urban Poverty Alleviation released its Model Real Estate (Regulation & Development) Bill, 2011, drafted to serve as a prototype for enforcing such a law at the state level.

The basic purpose of both the state and Central Bill is to bring about more transparency and accountability in the highly unregulated realty sector by way of setting up a Real Estate Regulatory Authority and an Appellate Tribunal.

However, the state Bill deviates from its Central version on several counts. To start with, unlike the Central Bill, the state law does not make it mandatory for developers to deposit 70 per cent of payment received from the buyers in a separate escrow account within 15 days of receiving the amount. The provision was inserted in the Central Bill to prevent the widely prevalent practice of diverting the money received from home buyers and pumping it into purchase of land instead of using it for timely execution of the residential project.

The Maharashtra Chamber of Housing Industry (MCHI) had, in its letter to the Central ministry, voiced its protest against this clause saying that since land cost forms a major portion of the project cost, using the money only for project completion is not possible. The state government’s Bill only requires the developers to maintain a separate account of the money received and, if required, provide details of the transactions using that money to the regulatory authority. “The regulatory authority is a quasi judicial body and is not so feeble that we need to ask developers to deposit a huge sum to ensure enforceability of its orders,” said a senior state housing department official.

Once the Bill is passed by the state legislature, the three-member Regulatory Authority followed by the Appellate Tribunal will handle all property transaction disputes, which are currently handled by the consumer and civil courts. In another departure from the Central Bill, which says that anyone who wishes to appeal against the orders of the tribunal will have to directly approach the Supreme Court, the state Act allows appeals to be entertained at the level of the High Court. The stringent Central Act states that developers could face an imprisonment for a term extending to three years in case of violations. They can also be slapped with a penalty of 10 per cent of the project cost in case they contravene the provisions of the Bill. The state Act goes softer on this front as it doesn’t have any provision for sending developers behind bars.

“Being a quasi-judicial body, the regulatory authority cannot sentence them to imprisonment and such a clause in the act can be challenged by developers in the court. The authority can, if need be, initiate criminal proceedings against developers,” said the official. The penalty that can be extracted by errant developers, under the state act, ranges from a minimum of Rs 1,000 per day to a maximum amount of Rs 1 crore.

It was Maharashtra that first mooted the idea of setting up such a real estate watchdog in 2008, which would not only look into redressal of buyer’s grievances, but also regulate prices by getting developers to disclose input costs for constructions. However, by the state housing minister’s own admission, the state continued to face pressure from the realty sector to not enforce the Bill causing major delay and, perhaps, scrapping of the clauses that allowed state to regulate prices in the private realty sector. Source>>>