Builders move court over RERA on existing projects
UNCONSTITUTIONAL? Retrospective application challenged, courts ask Centre to respond
Real estate developers have moved courts to challenge a landmark law that seeks to protect homebuyers, ostensibly in an attempt to stall its implementation a week before a key deadline.
The housing sector in India has for years been beset by problems, the most stark of which are the cases with hundreds of thousands of mostly middle class homebuyers who have made significant payments but are yet to receive possession of their houses.
Parliament last year passed a law to regulate the sector, empowering states to set up a real estate regulatory authority (RERA) for disputes in new and existing incomplete projects, but the legislation has been under strain with a number of states watering down the provisions and some others yet to complete formalities required for its implementation.
The legal challenge, the first since the law was passed in March 2016, now threatens to derail its implementation. Two separate groups of builders moved high courts in Maharashtra and Madhya Pradesh, challenging parts of the legislation such as Section 3 that makes it mandatory for ongoing projects — started before the law was enacted but are yet to get completion certificates — to register with the regulator.
Both courts asked the central government to respond to the petitions. In Maharashtra, the Bombay bench of the HC listed the case for hearing on July 26.
Builders have till July 31 to register ongoing projects, or they would be liable to a fine equal to 10% of the project’s cost. If they do not register, they will not be allowed to sell flats in those projects.
“Builders are trying to buy time. If there is a regulator in place, even if it is an interim one, what is preventing developers from registering their project? Section 3 of the RERA Act was made consciously as at present a large number of ongoing projects are stuck. In Delhi-NCR, for example, big builders like Unitech have taken 90% of the money but have not started work. For a buyer who has put in his life’s saving in a flat, every single day of delay means more suffering,” said ML Lahoty, senior advocate who has fought several cases for homebuyers.
The builders have said Section 3 violates constitutional safeguards for being applied retrospectively. They have also challenged Section 59, which defines penalties for violations.
In the petition filed in the Bombay court, the developers called provisions of the Act “most arbitrary and draconian.” “The penal provisions… are made applicable to ongoing projects ignoring the settled legal principle that penal provisions can never have retrospective operation,” the petition says.
In Madhya Pradesh, petitioner Builder and Developer Welfare Association — which represents a group of developers —challenged the “impracticability” of depositing 70% of the amount collected from buyers in a separate account, the power of Centre to enact law on land issues (which is a state subject), in addition to the section on ongoing projects.
Housing is a sector that states need to regulate individually, with each required to draw up rules with the central law as a template and set up the regulator.
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