Maharashtra Housing And Development Bill 2012 – How Will It Affect Indian Real Estate Market

Maharashtra Housing Regulatory Bill

The Maharashtra Housing (Regulation & Development) Bill, 2012, is the first step in the right direction since it makes a beginning in regulating the hitherto unregulated but crucial real estate sector and protecting the interests of the buyers and sellers.
Pankaj Kapoor, managing director of realty research firm Liases Foras, spoke on the likely changes in the real estate market due to the regulatory bill. Mr Kapoor took the audience through the current state of the realty market and liquidity condition and whether real estate prices would undergo any correction. Mr Vinod C Sampat, advocate and expert on property matters spoke on the legal aspects of the bill in detail.
Mr Kapoor said that that unnecessary ‘loading’ done by the developers would reduce due to mandatory disclosure of the area and its distribution. Sales would be only on carpet area and terms like “super built up” used by developers to charge for additional area would no longer be used. Mr Kapoor explained this in detail by giving examples of how loading was exploited in the market.
With regard to the mandatory registration on receiving greater than 20% of the value of the flats, Mr Kapoor said that this could reduce investor participation and the flow of black money could increase.
The Bill also seeks to ensure that developers make their promises realistic and deliver projects on time. It also imposes penalties and fines on those who fail to comply with the various provisions such as failure to give possession within the period mentioned in the agreement between the buyer and builder. The regulator can also impose a fine of up to Rs10,000 for each day of delay. However, this may be of no use as developers can choose their time frame and could choose a much longer time frame to suit their needs and avoid penalty.
But some developers say that imposing a penalty on the developer isn’t fair because in some cases the delay could be due to reasons beyond their control. They are dependent on banks, government policies and even customers to develop and deliver a project.
Mr Kapoor also pointed out that the market is generating 38% less money than that is required to deliver the projects on time and delays are on the rise. The flow of money is reducing and non-performing asset of the sector is increasing, according to RBI data. This puts further pressure on the asset quality in the near term.
Mr Kapoor who had earlier spoken at a workshop on real estate prices conducted by Moneylife Foundation said that the market would remain in hibernation for a couple of years and there could be a price correction.
On 16th July, the Maharashtra Legislative Assembly cleared the Housing (Regulation and Development) Bill, 2012, which aims to regulate and promote construction, sale, management and transfer of flats on ownership basis and to establish the Housing Regulatory Authority (HRA) and Housing Appellate Tribunal (HRT).
The Bill mandates that builders make complete disclosure regarding housing projects they are developing and provide details of ownership of land where required. They would also have to disclose the number of flats going to be built and the floor space index (FSI) applicable for a particular housing project. All these details have to be published by the regulator on its website before giving approval to a project.
However many activists have been against the bill saying the new Housing Bill would take away the rights and benefits that are available to buyers and housing societies under the earlier Maharashtra Ownership Flats (Regulation of the Promotion, Construction, Sale, Management and Transfer) Act, 1963 (MOFA). They have also said the bill has left many grey areas.
Activists and citizens have been demanding that the government shelve the new Bill and strengthen MOFA instead.
Imprisonment for serious offences of builders, which existed in MOFA have been dropped in the new Bill and after lot of pressure, the government has agreed to provide imprisonment of up to three years that too only in case of non-compliance of the orders of the HRA or the HRT.
Source-Moneylife

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