Maharashtra Housing Regulation and Development Bill-Will it help?

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Cidco constructed tenements in Navi Mumbai

Until now, the purchase and sale of real estate in Navi Mumbai and the rest of Maharashtra was governed by something called the MOFA (Maharashtra ownership of flats act) enacted in 1963. Just like laws in other states. But on 11th April, 2012, the Maharashtra govt introduced a new law to govern all real estate transactions in Maharashtra.
Called the Maharashtra Housing Regulation and Development bill, this bill seeks to remove the lacunae in the previous law (MOFA),and seeks to finally give flat purchasers an upper hand when dealing with builders and real estate companies. It seeks to establish a Housing Regulatory Authority (HRA) and a Housing appellate tribunal to ensure the proper implementation of the law.

The law seeks to end the countless hazards and scams facing the real estate buyer today like:

  • False commitments on delivery
  • Shoddy construction quality
  • False promises in terms of area, facilities, amenities, fsi etc
  • Utilization of funds obtained from buyers in a particular project for accumulating land parcels rather than in construction of the said building

It seeks to do this via imposition of fines ranging from Rs 1000 to Rs 1 crore.
The punishment for not registering a project with the HRA will cost the developer Rs 1000 a day, until its registered. No builder will be allowed to market a project unless he registers it after HRA approval. The approved plans will then be available on the HRA website for the general public to scrutinize. This will end the usual practice of building more than the approved plans and hence inviting problems for the end buyer at a later stage, wherein the building is not granted the occupancy certificate and in some cases, the demolition of the violation.
If the developer does not deliver as per the amenities and facilities promised, the fine can go upto Rs 50 lakhs. This will take care of the other favorite tactic of the builder, wherein glitzy brochures promise a heaven on earth but the end result is far from it.
Minister of Housing, Mr.Sachin Ahir, has promised that the law will curb the loopholes in the current law.

It helps to remember that the current law (MOFA) does contain provisions to curb malpractices by builders by imposing penalties on builders violating its conditions. eg. the MOFA specifies the exact format of a sale agreement of a flat clause-by-clause and also specifies the fines and damages to be paid for not delivering on time. But since most of these measures come into action after the violation has happened, the law does nothing to prevent the commitment of the offense and results in endless court battles, which can take years to conclude.

Although, its a good, although belated, step by the govt, it does contain certain loopholes and grey areas as below:-

  • It does not cover govt housing agencies like Mhada and MMRDA.
  • A criminal offense cannot be registered against the builder. This is contrary to the housing bill planned by the central govt.
  • It does not deal with commercial and industrial property
  • In case of non-completion of a project, the builder has to pay back the amount taken along with a 15% interest. This is an abysmally low rate of interest as the builders normally borrow funds from the market at rates far exceeding 30%-50%.In such a scenario, builders will find it convenient to ‘fund’ their projects at 15% by taking money from flat buyers and then deliberately delay the completion so that the buyers cancel their bookings and take their money back along with the 15% interest.

Although the chief minister deserves credit for coming up with this law,unless these issues are tackled aggressively, the loopholes will continue to be exploited.

By Mayur

Mayur is a real estate professional based in Navi Mumbai for the past 20 years. His expertise in real estate includes every sphere of the real estate sector from legal to Building Construction to Vastu to home interiors. When it's not real estate, its either his fight against corruption or pulling focus (film making) with his NIKON D750 that keeps him busy. With over 9 million views of his pictures on Google Maps and over 1.3 crore views of his contributions, he has been designated as a Master Photographer by Google. He can be reached on 9987452642

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