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Maharashtra’s Real Estate Regulatory Act draft rules favour developers, say activists




This is one among several controversial clauses in Maharashtra’s draft Real Estate (Regulation & Development) Act 2016 (RERA) rules notified last week.

MUMBAI: A builder can terminate a flat purchase agreement by giving just a week’s notice on email to the buyer who defaults on an installment. But the developer can refund the money without interest to the purchaser at leisure, within six months.

This is one among several controversial clauses in Maharashtra’s draft Real Estate(Regulation & Development) Act 2016 (RERA) rules notified last week. On the other hand, RERA rules framed by the Centre say the builder must refund the money within 45 days (with or without interest, depending on the situation) and does not stipulate cancelling the agreement within seven days in case of default. Many such loopholes in the state draft have been culled out by the city-based consumer rights’ group, Mumbai Grahak Panchayat (MGP).

Housing experts and groups like the MGP have accused the state government of diluting provisions of the stringent Act, which they said now favour the  industry . The state has allowed only 15 days for the public to file objections suggestions on the draft instead of the mandatory 30 days. The state’s draft RERA Act has several controversial clauses that favour builders, said housing experts.MGP chairman Shirish Deshpande said the earlier state law, MOFA, permitted the developer to cancel the agreement after giving a 15 days’ notice, and the builder could resell the flat only after refunding money to the original buyer. “Under the new draft rules, a builder can immediately sell the flat after terminating the agreement,’ he said.

The state draft has also proposed to increase the burden on flat purchasers; it says a buyer must pay 30% of the total cost while signing the agreement and 45% when the plinth of the building is constructed. The earlier state law stipulated 20% payment when the agreement is signed with the developer. The Centre’s rules do not stipulate any payment schedule; it left it to the states to formulate it.

The state draft says builders can pay for the registration fee at Re 1per square metre, which means for a 1,00,000 square feet project, he has to pay approximately Rs 10,000.However, the Central rules prescribed fees of between Rs 5lakh to Rs 10 lakh for residential and commercial projects.

Central rules proposed a fee of Rs 1,000 for filing complaints before housing authority; the state draft has proposed to hike this fee to Rs 10,000.

“This clearly shows that the state draft RERA rules are biased towards the builder and are diametrically opposite to the very essence of the act where the buyer was supposed to be king,“ said Pankaj Kapoor, MD of Liases Foras, a real estate research firm.

“RERA at the Centre aimed at transparency by including a fair share of disclosures. But the Maharashtra notification has eliminated most of these clauses,“ said Kapoor. According to him, key disclosures under Section 4 (2)and Rule 3 (2) have been excluded to be put up on the website of the Authority . These include carpet area of flat, encumbrance certificate (this would have disclosed encumbrances in respect of the land where the real estate project is proposed to be undertaken), copy of the legal title report and sanctioned plan of the building.

“The lack of transparency and exclusion of disclosures have left enough room for corruption. The buyer will not be privy to information about the project, and it will be easier for builders to manage higher authorities and change the plan as per their convenience,“ said Kapoor.

The Central rule requires a builder to submit an annual report including profit and loss account, balance sheet, cash flow statement, directors’ report and auditors’ report for the preceding three fi nancial years, among other things. However, the Maharashtra draft rule is silent on such a requirement. Sudip Mullick, partner in the law firm Khaitan & Co, said one should not make a “big fuss“ over this. “Does this mean that if a builder is a new entrant not backed by a parent entity, such a promoter cannot develop or do business under RERA? According to me, one must look at the present financial capabilities of a promoter to undertake a project and its tie-up with the concerned financial institutions,“ he said. Mullick added, “I don’t think there has necessarily been any dilution of the provisions of RERA Act by such rules. Whatever dilutions have been provided, cannot be read in isolation but will have to be read keeping in mind the scenario prevailing in the state.“

A prominent builder, who did not wish to be identified, said although he had not studied the draft rules, he thought the law was already tough. “Any more and it would be strangulatory ,“ he said. Builder Rajan Bandalkar, state vice-president of NAREDCO, a body representing developers, said the new law is for “black sheep“ in the industry .“It should ease problems of the industry , not hinder it,“ he said. He supported the state’s draft rule, which does not make it mandatory for builders to submit I-T returns. “Why should it be made public? It can be misused,“ he said.


The loopholes pointed out by housing experts in the draft rules make it evident that the state is more concerned about safeguarding the interests of the building industry rather than flat purchasers. RERA was meant to protect consumers, but the new draft is littered with gaps which will make it smoother for builders to circumvent the law. The Fadnavis government plug them immediately.

Source : Economictimes


373 Maharashtra Cities To Fall Under PMAY Scheme




The state of Maharashtra has added 232 cities to the existing 142 which makes it 373 cities under the Pradhan Mantri Awas Yojana Scheme (PMAY).

The officials at the housing department feel that this step will aid the government take up more projects under the PMAY scheme.

Sachin Kulkarni, Builder shared his concerns over the lack of coordination between the department in executing PMAY projects. He said, “This is a good sign. However, the PMO’s seriousness in promoting HFA is diluted by the time it reaches the authorities. Apart from collecting application from interested beneficiaries, nothing has moved on the ground in urban centres. I hope that this initiative moves on fast track”.

Maharashtra CM Devendra Fadnavis recently states that the in order to create more housing stock the state’s Slum Rehabilitation Authority scheme be brought under PMAY so that it can receive the subsidy to create more affordable housing. He clearly mentioned that the government intends to create more housing stock and it was taking various initiatives and making policy changes for it.

Also Read- Affordable Housing To Get A Boost With PMAY’s Scope To Be Extended To Private Lands

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Real Estate Sector May Fall Under GST What Does It Mean For Buyers?




One after the other the real estate sector has witnessed massive policy and law changes in its systems. Nonetheless, the tide has not passed yet. The GST council will take up a proposal to bring it under the uniform nationwide levy.

As the industry is still recovering from the RERA Act, the finance minister, Arun Jaitley said that there is a strong case to include real estate in the new indirect tax regime. He said this last week and also mentioned that GST Council will discuss it in November.

At present, the home buyers are paying 12 percent GST on under-construction properties. This percentage includes two taxes which are stamp duty and registration. The rate of which varies in each state but GST will make them uniform.

Santosh Dalvi, KPMG India partner (indirect tax) said, “If the entire real estate is brought under GST, they would have to abolish the stamp duty and we don’t know how the government plans to compensate the states for their loss.”

The stamp duty with registration and GST comes to approximately 18 percent for under construction properties. He further said, “So, it’s important to look at what rate it will be taxed at. We can then look at consumer prices”.

While agreeing, Bipin Sapra, EY partner (indirect tax), added, “It’s going to be a test for the government”.

Developers also pay taxes on raw materials. However, unlike other businesses, they don’t get any tax refunds through input credit. GST taxes every stage of the business activity to better compliance and compensates for it by permitting refunds.

Anuj Puri, Anarock Property Consultants chairman, said “By including real estate under GST, builders can get a fair amount of input credit, helping bring down costs,” He added that it would make homes cheaper for buyers.

According to Sapra, it will depend on the tax rate applicable.

Niranjan Hiranandani, co-founder of Hiranandani Group said, “Real estate under GST ambit means consumers will only have to pay one final tax.” He stated that with the commencement of RERA it brings transparency and GST would reduce the burden in terms of taxes payable while buying the home. He concluded, “Not only will this create positive sentiment but it should also boost actual sales”.

Also Read: Affordable Housing Is The Changing Face Of Indian Real Estate

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Home Buyers Will Be Covered Against Builders Who Are Going Bankrupt




In a move to protect home buyers from builders declaring their bankruptcy, the Insolvency & Bankruptcy Board of India (IBBI) has amended rules which make it necessary for any company to showcase how they have dealt with interests of all stakeholders. This is directed towards companies like Jaypee Infratech and some of the entities of Amrapali Group.

The regulator has informed about the revised rules last week. This will ensure that banks and other creditors do not get away by protecting their interests at the expense of others who are impacted by the action.  Banks are part of the creditors’ committee. They become an important decision-making body after a company is admitted for bankruptcy.

An expert bankruptcy lawyer said, “The change in the rules has plugged a gap as flat buyers are of the view that there is nothing to protect their interests.”

According to the new law that was enacted last year intends to speed up the resolution process in a period of 180 days, with a possible extension of 90 days. This will be done by appointing insolvency resolution professionals who will take charge of the company’s operations and prepare a plan. As per the law, an information memorandum will be finalized if the creditor’s committee is willing to take applications from other interested companies to take over the company.

The insolvency experts say that the law providing for the plan binds corporate debtor (the company) and its members, employees, guarantors, and creditors, other stakeholders involved in the resolution plan. However, there are no obligations mentioned in the rule to give any treatment to the stakeholders other than the financial creditors (banks) and operational creditors, which includes vendors and others who may have dues.

The National Company Law Tribunal, based on the comfort provided by the revised rules, will choose the final resolution plan based on bids that are received. The lawyer further said, “The tribunal will not clear the resolution plan without giving notice to all stakeholders and the flat buyers can raise objections at that point of time.”

Also Read: Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

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