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Maharashtra Did It, But...

Monday, March 03, 2014
By Mayura Shanbaug

Maharashtra Housing Regulation and Development Act 2012

With the Maharashtra Housing Regulation and Development Act 2012 for the real estate sector being implemented, Maharashtra has surged ahead of all states and even the centre, in regulating  the largely unregulated sector so far. Yet, there are a lots of ifs and buts regarding the effective implementation of the act. But  all said and done, nobody is denying the fact that it is a step in the right direction.... 

Accountability And Transparency...
“The introduction of the Maharashtra Housing (Regulation and Promotion of Construction, Sale, Management and Transfer) Act can potentially have a very positive impact. It is certainly a concept whose time has come,” says Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India.

Puri says the biggest advantage that it offers to buyers as industry stakeholders is that there will be an arbitrating body available to attend to their grievances and redressals. “There has to be accountability at all levels of the approval process, and it needs to include all stakeholders involved with real estate - including the architect, the contractor and the developer. The housing regulator can potentially benefit buyers as well as all other stakeholders,” says Puri.

As of today, the real estate industry faces issues in terms of insufficient transparency over cost and time-frames and also lacks sufficient depth when it comes to credible developers.

“Hopefully, the State-level housing regulator will implement systems which will mitigate risks and increase accountability. It can potentially boost transparency by standardizing practices, streamlining procedure systems and attending to consumer grievances in a decisive and timely manner,” Puri adds .  
Pankaj Srivastava, COO, Maitreya Realtors & Construction feels that this act will provide a level playing field for all players, and also give the buyers a realistic view of what they are paying for and will get finally, as this was an ambiguous area so far.

The bill seeks regulating and promoting the construction, sale, management and transfer of flats on an ownership basis, and also for the first time in India, a two-tier regulatory and appeal mechanism in the realty sector. “The proposed act, is a step in the right direction, it could have been further strengthened by providing more stringent provisions to curb prevalent malpractices. However, the proposed Act still encourages the scope for transparent practices in the real estate market,” says Srivastava.

However, he feels that to make the provisions of the act truly effective and bringing in transparency it needs to be supported by an effective judicial and administrative mechanism.

Tanveer Shaikh, Principal Consultant, Acumen Business Consulting also agrees that regulatory bodies in all other sectors have helped the sector to become more organised, thereby enabling that industry to grow. “The case in point is the telecom sector. We all have witnessed the tremendous growth, that this sector has seen post the regulatory bodies came into picture,” says Shaikh.

Contrary to the popular view, Lalitkumar Jain,CMD, Kumar Urban Development Ltd (KUL) and Chairman, CREDAI says that capturing economic data (numbers, built up area, category of accommodation, consumption pattern) will be perfect but possibility of corruption in registration formality is very high.

“The regulator is merely consumer redressal forum and not a comprehensive authority,” complains Jain. “There should have been regulator having authority to direct all stake holders if needed to achieve regulation of the sector,” he says.

Jain complains that maximum delays occur due to the regulator. “It has to have  comprehensive powers to govern all the stake holders where by issues of delay in possession due to delay of approvals and funding can be addressed,” he says.  

Jain further explains that the regulator has to have teeth, “in the sense that it should have been able to direct other government agencies and taken into account other stakeholders that actually cause delay in project delivery such as the environment approval body, high-rise committee, financial institutions,” adds Jain.

Pricing...
According to critics, the regulators will have no control over pricing, which is a major issue with the buyers especially in Mumbai. This might be the reason for home buyers having to pay extra money,” says Laitkumar Jain.

“With government agencies getting to control the registration process, there are chances of corruption. If the developer gives into them, he might pass on the cost to a home buyer,” he says. “If registration becomes an online process, without the involvement of any human interface, - who is a plough in the hands of the government to extort money from developers- only then will the regulator become truly meaningful,” explains Jain.

“Pricing is going to remain a concern,” feels Tanveer Shaikh. “There can’t be regulations on the procurement price of land. And since it is scarce in supply, basic economics will play a role,” he says.  

Shaikh feels that with the SRA and Redevelopment rules, some amount of indirect price controls may be brought in. “But it is going to be difficult to implement direct control on prices with the kind of risks involved in real estate development. If there is a guarantee of more streamlined process of approvals, then real estate developers may consider more transparency in pricing as well,” he adds.

However, Pankaj Srivastava feels that the ready reckoner rates fixed by the government to certain extend does take care of this, “but as the land supply is limited due to the geographical layout, this is an issue,” he says.

“If the correct processes are followed as outlined, developers will benefit as much as buyers,” says Anuj Puri.

Then there are other Loopholes. “As things stand today, developers have to go through very tedious, time-consuming and indefinite approval procedures. While it is not certain whether the Act will provide single-window clearance of projects, it would be ideal if such a system were also introduced,” explains Puri. 

There is however another criticism that the act covers only new projects (projects yet to receive occupation certificates or re-development projects that will market or offer for sale new flats or buildings in the open market).

“Another Deficiency is that the act excludes from its purview Maharashtra Housing Area Development Authority (MHADA) and boards established under the MHADA Act, 1976,” says Srivastava.

Impact
Maharashtra will become the first state to have a regulator.
Builders will have to disclose titles, layouts, construction schedule and date of possession.
Builders will have to make all the details available on the Regulator’s website.
Developers will be reprimanded for false or misleading claims.
The developer will have to take flat owners consent before doing any alterations in the plan.
In case of delay in completion of the project ...regulators can take over the project and give to any competent body for completion.
Developers can face up to 1 crore fines or imprisonment for 3 years in case of non compliance with the rules laid out by the regulators.     

Criticism
New regulations has similar features as Maharashtra Ownership of Flats Act 
No control on pricing of Flats
Sale component of redevelopment project is not included.
No criminal proceedings  against erring builders ..prison term only in case of non-compliance

Builders say
Why have separate state law when there is going to be a central regulator body soon

The regulator is merely consumer redressal forum and not a comprehensive authority.

Civil and consumer courts are capable of handling cases or litigation.

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