Home buyers struggling against developers for justice can expect to get greater protection as the Consumer Protection Bill, 2015, becomes reality in budget session
The position of the home buyer vis-à-vis the builder is becoming stronger with new policy decisions by the central government in the past couple of years.
The Real Estate (Regulation and Development) Act (RERD), 2016, offers protection to the buyer against the builder. Several provisions in the Consumer Protection Bill, 2015, will also help protect home buyer interest. The bill is already introduced in Parliament and is expected to become a reality in the budget session.
Relevance of consumer protection Act after RERA
“The Real Estate Regulatory Authorities (RERA), to be set up at the state level, will handle only real estate related matters. So, for the home buyer, this will speed up the process to get justice against builders. But only new projects and those under construction that have not received a completion certificate before May 1, 2016, will be covered under the Act,” says Ajay Jagga, a Chandigarh-based advocate and social activist.
Under provisions of RERD, no registration of the real estate project with RERA shall be required - (a) where the area of land proposed to be developed does not exceed 500 square metres or the number of apartments proposed to be developed does not exceed eight inclusive of all phases. Such cases will be out of the purview of RERA. “For home buyers struggling to get redressal of their complaints against builders (in older projects with completion certificates), or in cases where exemptions are provided under the RERD, the new provisions under the Consumer Protection Bill, 2015, will be of help,” says Jagga.
What’s new in Consumer Protection Bill, 2015
The Bill seeks to replace the 30-year-old Consumer Protection Act, 1986, and proposes setting up a regulatory authority to curb unfair trade practices, known as the Consumer Protection Authority. The bill seeks to, for the first time in the country, set up mediation cells for complaints. It brings cases of misleading ads by celebrities under the purview.
The new bill proposes to establish a Consumer Protection Authority to promote, protect and enforce rights of consumers. It shall investigate consumer protection issues to prevent unfair trade practices and pass orders against misleading advertisements. To inquire suo motu into violations of consumer rights enumerated in this Act, it shall launch prosecution in an appropriate court or the district, state or national commission to order withdrawal of misleading advertisements and direct issuance of corrective advertisements, wherever necessary; and to declare as null and void, terms of contracts found to be unfair to the consumer.
The central authority shall be headed by a commissioner who shall be an officer of the level of secretary to the Government of India and five deputy commissioners to assist him in the functioning of the authority.
Mediation means the process by which a mediator is appointed by the national or state or district commission, as the case may be, mediates the dispute between the parties to the complaint and in particular, by facilitating discussion between parties directly or by communicating with each other through the mediator, by assisting parties in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise, generating options in an attempt to solve the dispute and emphasising that it is the parties’ own responsibility for making decisions which affect them. The state government shall establish, for the purposes of this Act, by notification a district consumer mediation cell attached to the district commission in each district of the state and a consumer mediation cell attached to the state commission.
The central government shall, establish for the purposes of this Act, by notification a national consumer mediation cell attached to the national commission. A consumer mediation cell shall consist of such persons as may be prescribed by the central or state Government. Every mediation cell shall — (a) maintain the list of empanelled trained mediators; (b) maintain data on a daily basis and submit a report on a monthly basis to the state or central government.
The bill allows for terming a contract as unfair. The standing committee has recommended that the Bill lay down principles that widen its scope to determine whether the contract term is unfair. It classifies six contract terms as unfair, which includes: (i) payment of excessive security deposits; (ii) disproportionate penalty for a breach; (iii) unilateral termination without cause; (iv) one which puts the consumer at a disadvantage; and (v) wrong contracts can also be challenged in consumer complaint.
Finally, though the 1986 Act has adequate provisions for action against misleading ads which are deemed to be unfair trade practices, the Act has been ineffective in dealing with misleading ads. “The Lok Sabha standing committee suggested a fine of lakh or an imprisonment of two years or both, to deter such advertisements. It also suggested that these penalties be applicable to the persons who endorse the products in advertisements. In 2015, charges were levied against Amitabh Bachchan and Madhuri Dixit, who endorsed Maggi noodles that was found violating food standards. The matter is now before the Supreme Court. Whether or not there is a jail term for celebrities, the law will be strong enough to deter advertisers from releasing misleading ads,” says Jagga.
The Bill also stipulates that every complaint shall be disposed of expeditiously and an endeavour shall be made to decide on the complaint within three months from the date of receipt of notice by the opposite party. In the event of a complaint being disposed of after the specified period, the district commission shall record the reasons in writing at the time of disposing the complaint. The National Real Estate Development Council (Naredco), an apex body under the aegis of ministry of housing and urban poverty alleviation, Government of India, has urged the Centre to introduce reforms in the Union Budget to revive the real estate sector, which is facing a slowdown because of delayed and unsold properties.
In its demand to the government, the industry representative body has asked the government to award infrastructure status to housing, particularly to cover low and middle income group category housing units.
“For the sake of convenience and uniformity in law, the built-up area in the income tax Act should be replaced by the carpet area as defined in the Real Estate (Regulation and Development) Act 2016,” says Naredco president Praveen Jain. As the Government is moving towards implementing the goods and services tax (GST) in the country, Naredco suggested that real estate should be brought under its purview, merging all taxes, duties, charges, and cess vis-àvis land use conversion charges (agriculture to non-agriculture and from one land use to other land use), development charges, and subsequent possessionrelated charges.
The industry body has suggested a number of taxationrelated incentives to embolden purchasing power of buyers. Naredco’s memorandum suggests that the sealing of lakh u/s 80C be increased to
lakh and lakh out of that be exclusively reserved for payment of principal borrowed for the purchase of a house.
It has suggested that the deduction on account of interest paid on home loans under Section 24(b) should be made applicable from the year in which the capital was borrowed as for principal u/s 80C, and should be to the extent of full interest paid, at least in respect of one house. In case this is not agreed, at least the limit of lakh should be raised to lakh for owneroccupied houses.