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Maharashtra Housing (Regulation and Development) Bill, 2012- An Analysis

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Pingal Khan, pingal.khan@pxvlaw.com

The Maharashtra Housing (Regulation and development) Bill, 2012 was passed on 11 April 2012 (“Bill”). by the Maharashtra legislative assembly. The Bill proposes to repeal the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (“Act”), owing to its ineffective implementation and absence of a proper mechanism to redress the grievances of the flat purchasers (“Purchaser”).

The Bill has been passed with an objective to ‘regulate and promote the construction, sale management and transfer of flats on ownership basis in the State of  Maharashtra’. The Bill provides transparency in the construction and sale of flats, provides relief to the Purchasers from the malpractices of developers and establishes a proper mechanism for redressal of the grievances of the Purchasers. This is the first such bill to be passed by any state in India, which sets up an independent housing regulatory authority.

The Bill has much wider scope as compared to the Act. However, a few important provisions of the Act, such as the provision on the developer’s disclosure, have  been retained and incorporated in the new Bill. Under Section 3 of the Bill, the developers are responsible to disclose the following details to the Purchasers:

  • Details of the title of the property on which the housing project is to be completed.
  • The phase wise schedule for completion of the housing project.
  • Estimated time to provide essential services such as water supply, sewage, electricity supply etc.
  • The date on which possession of the flat will be handed over to the Purchaser.

The above disclosures are expected to ensure transparency. Moreover, if implemented well,  one could see a substantial  reduction in instances of   Purchasers  being  misled into buying property which does not have good title.

The most significant step that has been proposed by the Bill, is the establishment of a proper redressal mechanism. The Bill proposes the establishment of a Housing Regulatory Authority (“Regulatory Authority”) and a Housing Appellate Tribunal (“Appellate Tribunal”). The Regulatory Authority and Appellate Tribunal (“Compliance Authorities”) will be set up to ensure speedy and effective disposal of disputes arising between the Purchasers and the developers. Sections 22 to 52 of the Bill deals with the  composition, powers and functions of the Compliance Authorities.

The Regulatory Authority has wide powers and will perform administrative, advisory and  judicial functions. The Regulatory Body will consist of a chairperson and two or more members appointed by the state government. Further, the Bill provides the aggrieved person the right to approach the Appellate Tribunal for appeals against the orders of the Regulatory Authority.  The Appellate Tribunal will consist of a chairperson and a maximum of two members, who will  be appointed by the state government, in consultation with chief justice of the High court. The Bill allows for a second appeal by allowing the aggrieved person to challenge the order of the Appellate Tribunal before the High Court. In this case, the appeal needs to be filed  within thirty days from the date of the order of the Appellate Tribunal. The Compliance Authorities have the same powers as that of a civil court for discharging their respective functions.

The Bill requires the developers to register with the Regulatory Authority and display all the details of the housing project on the website of Regulatory Authority. Under Section 4  of the Bill, project details of any plan where more than four flats or land area exceeding 250 square meters is being developed, has to be updated  on Regulatory Authority website. A developer cannot commence any transaction, including sale or advertising of a project without updating the details of the project on the website of the Regulatory Authority.  This provision ensures that all the information of the project is readily available to the Purchasers and are on public record.

The Bill provides for certain penalties in case of non- compliance by any person, of the provisions of the Bill. Following are some of the important penalties provided in the Bill:

  • Under section 44 of the Bill, if the developer fails to register on the Regulatory Authority website, he will be liable to pay upto thousand rupees per day for every day of such default.
  • Under section 45, if the developer fails to upload required information on the Regulatory Authority website, fails to refund the money to the Purchaser on account of delay/ non-compliance with the agreement to sell, according to the terms of Section 16 of the Bill, or mortgages/ creates a charge on the flat without prior permission of the Purchaser after execution of the agreement to sell, he shall be liable to pay a penalty of ten thousand rupees for each day of non-compliance or fifty lakhs rupees, whichever is lower.
  • Under section 46 of the Bill, if the Purchaser contravenes, the provisions of the agreement for sale executed by him with the developer for purchase of the flat, he shall pay a penalty which may extend to rupees ten thousand or one percent of the sale price of the flat, whichever is higher. Under the Act, for the same offence, a penalty of upto two thousand rupees could be levied for such contravention.
  • Under section 47 of the Bill, if any person who wilfully  fails to comply with the orders of the Compliance Authorities, he shall be liable to pay the penalty up to  ten lakhs rupees.
    • Under section 48 of the Bill, if any person, other than the developer, contravenes any provision of the Bill or fails to pay the penalty imposed by the Regulatory Authority, he shall be liable to pay upto  fifty thousand rupees as penalty.
    • Under section 49(1) of the Bill, if any developer fails to register the sale agreement after receiving twenty percent advance payment or fails to maintain building wise separate account or makes any alteration in the housing project after the plans are disclosed to the Purchaser or fails to form a co-operative society or an apex body, he shall be liable to pay a penalty which may extend to one crore rupees. Under the Act, for all such contraventions except formation of co-operative society or Apex Body, a punishment of up to three years imprisonment with fine is provided.
    • Under Section 49(2), if any developer contravenes any of the provisions of the Bill, whose contravention  does not already attract a separate penalty or fails to pay the penalty imposed by the Regulatory Authority, he shall be liable to pay a penalty which may extend to ten lakhs rupees.

Under section 11 of the Bill, the developer’s responsibilities with respect to housing projects have been specifically stated. Some of the important responsibilities of the developers under the Bill are as follows:

  • To refrain from misleading advertising and misrepresentation. If any Purchaser is adversely affected by any such misrepresentation, the developer must refund the money invested by the Purchaser along with interest of up to fifteen percent per annum.
  • To undertake all measures (as provided in Schedule I to the Bill) for the protection and safety of the buildings of the housing project.
  • To obtain the occupation certificate or building completion certificate and to provide a copy of the same to the Purchasers.
  • To ensure that essential services such as water supply, electricity, light in passages and staircase, lift and sanitary services are provided in the housing project. The details of all such services shall be maintained by the developer and made available to the Purchaser.

The Bill brings clarity on the developer’s duties and responsibilities towards the Purchaser. These duties and responsibilities of the developers are not covered under the Act.

One of the main objectives of the Bill is to ensure that the Purchaser gets possession of the flat on time. In case of delay in completion of project, the developer is liable to refund the entire money paid by the Purchaser with interest. Under Section 16 of the Bill, the developer can be made liable to pay interest upto fifteen percent per annum on the amount which is to be refunded by him.

The Bill proposes to check misinterpretation of terms commonly used in the housing sector  such as ‘utility area’, ‘parking space’, ‘compulsory open space’, ‘common areas and amenities and facilities’, ‘independent areas’, ‘advertisement ’, ‘marketing’, and  ‘conveyance’, by clearly defining these  terms under Section 2. These definitions were not provided under the Act.

The Bill requires the developers to form a co-operative society for each building of the housing project. Under section 18 (1) and 18 (2) (a), the developer is required to apply for registration of such co-operative society within four months of obtaining the occupation certificate or when sixty percent of the Purchasers in a building have taken possession of their flats or the promoter has received full consideration for the same, whichever is earlier. Under the Act, a co-operative society has to be formed once the number of members required to form a co-operative society or company have taken possession of flats in the housing project.

Further under section 18 2(b), the Bill proposes the establishment of an Apex Body, consisting of all the co-operative societies established for each building or wing of the housing project. Such Apex Body will administer and maintain common areas, amenities and facilities provided in the housing project. The Apex Body is responsible to monitor the entire housing project, however, the members of such bodies shall independently retain control of the internal affairs and administration in respect of its own building. Under the  Act, there was no provision for establishment of an Apex Body.

The Bill is a step towards regularising the real estate housing sector and is expected to bring in transparency in residential property transactions. Meaningful orders from the Regulatory Authority on issues lacking clarity in the Bill will benefit the industry and help regulating the sector, which in turn can only result in  introduction of best practices and impetus to growth in the sector.

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