Real Estate (Regulation and Development) Bill 2013: House panel pushes for law to jail errant builders

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Updated: July 3, 2015 7:57:22 AM

Seeks stringent provisions in new law, says financial penalty is no deterrent since burden passed on to buyers.

real estate billParliamentary Select Committee for the Real Estate (Regulation and Development) Bill 2013 is likely to push for more stringent clauses that may lead to imprisonment of builders if they do not fulfill their obligations to home-buyers. (Reuters)

The Parliamentary Select Committee for the Real Estate (Regulation and Development) Bill 2013 is likely to push for more stringent clauses that may lead to imprisonment of builders if they do not fulfill their obligations to home-buyers.

After holding public consultations across the country, several members of the panel are of the opinion that provisions for prosecution and imprisonment should be added in most cases where builders “fail to discharge their duties and functions”, sources said.

“Financial penalties alone won’t work since private developers will simply factor in the cost of these penalties in their projects and pass it on to home-buyers. This is largely the feedback we have received from housing and consumer groups,” said sources.

The final report of the Select Committee of the Rajya Sabha is still under preparation and will be tabled before the upcoming monsoon session.

In the current version of the bill, punitive action for various offences is mostly restricted to financial penalties. There is a provision for imprisonment of up to three years or a fine extending up to 10 per cent of the project cost or a combination of the two, but only in cases where developers repeatedly fail to register their projects with the regulatory authority or do not comply with orders for registration.

“There are many builders who have to be reined in and the current punitive measures may not work as a sufficient deterrent,” said Rajeev Chandrasekhar, who is part of the 21-member committee of MPs headed by BJP’s Anil Madhav Dave.

“Among the main objectives of the committee is to see how best we can protect the interests of vulnerable consumers from the high-handedness of powerful, unscrupulous builders,” said NCP’s Majeed Memon, another member.

The existing version of the bill provides for setting up state-level housing regulatory authorities and tribunals, and includes all residential and commercial projects over a certain area under its purview.

Some of its key provisions related to the obligation of builders:

* Developers have to submit details of their projects, such as layout plan, apartment size, completion schedule and approvals received, on the regulatory authority’s website and update it on a quarterly basis.

* Any substantial change from the original schedule, specifications or structural design in what is finally delivered to home-buyers is considered as a breach of obligation by the builder.

* Under the existing version of the bill, the regulatory authority can impose a penalty that can go up to only five per cent of the project cost in case of any contravention of norms.

Sources said that in addition to introducing stringent punitive clauses, the panel is also considering strengthening the provision that ensures that money collected by builders for construction is not diverted elsewhere.

The 2013 bill had specified that 70 per cent of the amount received from buyers must be kept in a separate account before an April 2015 amendment reduced it to 50 per cent.

“States are allowed to further reduce this amount as they deem fit. Members feel that this should not be allowed,” said sources.

The Parliamentary panel has held nation-wide consultations with several stakeholders including residents’ welfare associations, consumer groups, property lawyers and activists, private builders, financial institutions, insurance companies and state governments. These meetings were held at Kolkata, Bangalore, Mumbai, Shimla with the last such consultation scheduled to be held in Delhi next week.

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