No cheer for home buyers: UP govt dilutes RERA Act, favours builders

The Central government had passed the Real Estate (Regulation & Development) Act (RERA) to offer protection to home buyers from unscrupulous developers. But the rules framed by the Uttar Pradesh government under the Act defeat the purpose, leaving the public vulnerable to exploitation by builders.

The Centre notified the rules in 2016, before passing the Act. All the states were to mandatorily frame and notify rules and implement the Act by 1 May 2017, after forming a Real Estate Regulatory Authority.

In the case of UP, the rules have been framed, but the authority is yet to be created.

The irony is that the BJP government led by Yogi Adityanath has chosen to adopt rules framed by the Akhilesh Yadav government on 27 October 2016. These rules were uploaded on the official RERA website launched in the last week of July.

Some of the rules are not only loaded heavily in favour of realtors, but are also at variance with the Central legislation.

Three key provisions in Central Act

Three provisions in the Central Act were of special interest to buyers, but the state has chosen to dilute them.

1. The Central Act, for example, makes no difference between ongoing and future projects, besides having other pro-buyer provisions like penalties for non-compliance, a clause-fixing liability on developers in case of structural defects, and payment schedule. To begin with, RERA 2016 includes all projects for which completion certificate was not given on 1 May 2017, the date of commencement of the Act, and which were ongoing on that date.

2. In case of non-compliance, the Central legislation stipulates imprisonment of up to three years or fine up to 10% of the project's estimated cost, or both.

3. On the issue of the payment schedule, the Central Act provides for 10% of advance payment to be specified in the model sale agreement, or an application fee to be charged from the buyer at the time of sale agreement. Builders are also liable to rectify free of charge any structural defect that arises within five years of handing over of possession to buyers.

The dilution

While the Central Act mandated that all ongoing projects that have not been given completion certificates have to be registered under RERA, the Samajwadi Party government diluted this rule by excluding incomplete projects from the category of “ongoing projects”.

The state government did not stop there. Projects in which maintenance of common areas and facilities had been handed over to RWAs or services had been given to local authority for maintenance were also exempted from the definition of “ongoing projects” along with those in which, after completion of development work, sale deed had been executed in 60% dwellings. The Central legislation makes no such exemption.

By not fixing any penalty for violation of rules, the state also diluted the penalty norm on compounding of offence.

PIL in Allahabad HC

As the UP government was behind the 1 May deadline for the implementation of the Act, Ghaziabad-based FedAOA, the apex body of apartment owners' associations, filed a PIL in the Allahabad High Court.

The PIL alleged that the state was yet to form a Real Estate Regulatory Authority and the Real Estate Appellate Tribunal. The PIL argued that Sections 20(1) and 43(4) of RERA stipulated that the two bodies should be formed within one year of the notification of the Central legislation.

The notification, it was argued, was issued on 1 May 2016, hence the Authority and the Tribunal ought to have been formed by 1 May 2017.

It was after the High Court enquired about the progress on the implementation of RERA that the state government launched an online site – www.up-rera.in – on 26 July, for developers to register their projects.

While the process to create a regulatory authority has been set in motion and 100 bureaucrats and lawyers have thrown their hats in the ring for the post of chairman and members, rules are yet to be notified.

Yogi's assurance

Concerned at the dilution of key provisions, a delegation of home buyers from the worst-affected areas like Noida and Greater Noida, where thousands of buyers have been waiting for their flats for years and facing cost escalation, recently met CM Adityanath, who assured them that there would be no dilution of rules.

Until the rules are redrafted in accordance with the Central Act and notified, the buyers don't have much to feel happy about.