A homebuyers association in Noida have approached the Allahabad High Court challenging the Uttar Pradesh RERA rules, claiming that the provisions have been diluted. The petitioners have called for amendments and proper implementation of the rules as per the Central RERA Act.
The Noida Extension Flat Owners Welfare Association (NEFOWA) have filed a writ petition in the High Court challenging the rules stating it is diluted to exclude existing projects, putting majority of homebuyers in a bind.
“We are where we were before RERA was introduced in the state,” says Indrish Gupta of NEFOWA.
The petition filed by the homebuyers association contend that the definition of ongoing projects in the state act is different from the Central Act. It states that builders who have received or applied for occupation certificate or completion certificate on or before October 27, 2016, are out of the ambit of UP RERA Act.
It further states, the definition of common area has been changed in the state act. In case of delay in possession under the central RERA, the builder is liable to pay 10 percent of the total cost of the project as penalty but this provision has also been diluted in the state rules, says the petition.
“Nearly 2.5 lakh buyers have been impacted by project delays in Noida and Greater Noida. They had booked the residential units way back in 2010-2011. Even after implementation of the RERA Act if they do not get their homes or relief under RERA, and if the state RERA rules keep such projects outside the ambit of RERA, it is serious injustice for homebuyers,” it says.
Thousands of homebuyers had fought for the passage of the regulatory bill in the hope that they will get their homes and in case of late delivery adequate compensation will be paid to them. The previous government made changes to the Act in the month of October 2016 and the same have been approved by the present government, the petitioner says.
The writ also states that the builders have pushed back the date of delivery of flats to buyers by several months and even years as a result of the new real estate law in the state to allow themselves a buffer in case projects get delayed for some reasons.
Here are some major dilutions in the UP RERA:
The main contention of petitioner is that “Uttar Pradesh excludes projects for which completion certificate has been applied for.”
The UP government has inserted a clause that seeks to exclude projects that have applied for (but not received) completion certificates, projects where conveyance deed has been executed with 60 percent buyers and incomplete projects where maintenance has been handed over to association of allottees. The UP RERA rules have to be read in concurrence with amendments to the Apartment Act – both being equally important public policies. The Uttar Pradesh Apartment Act 2010 is unique minus the amendments (of 2016).
Pre Scenario of UP RERA Rules
According to the Uttar Pradesh Apartment Act 2010, units in UP had to be delivered within two years (24 months) and buyers compensated for delays under Section 4(4) and 4(5). It had also specified that plans once sanctioned could not be changed, laying down jail terms for violations. Read with conjunction to RERA rules, UP would have perhaps been the safest place to invest in real estate. But these very sections have now been diluted.
Post Scenario of UP RERA Rules
Under the amended Uttar Pradesh Construction, Ownership and Maintenance Amendment Act 2016, there is no control or restriction over the completion time of a project and the changes a builder can make. Instead of the specified 24 months, a builder can take up to seven or eight years to complete the project. No assurance is required, everything is flexible. The amended Act provides that once a completion certificate has been received by the developer, he cannot make any amendment to a project.
“The inference one can draw from this is that a builder can make changes in the original project plan till he decides to apply for a completion certificate. What this means is that the maximum number of projects will now be out of RERA, especially those who have applied for completion certificates,” says SK Pal, a Supreme Court lawyer.
It also states that if 60 percent of sale or lease deed has been executed then the builder will be out of RERA or if maintenance of common areas has been assigned to RWAs then the project will be out of the ambit of RERA. In most of these common areas are not complete.
The petitions make a note that several imprisonment clauses have been made into compounding clauses (where money is paid in lieu of actual punishment). The offences and penalties chapter states that upon payment of a certain sum of money, “any person in custody in connection with that offence shall be set at liberty and no proceedings shall be instituted or continued against such a person.”
The after effect of this is that if compounding option is available to developers, they will have nothing to fear as they will avoid punishment for any fault by just paying a simple fine. The rules also mention that the money to be paid for compounding shall be proportionate to the term of imprisonment subject to a maximum of 10 percent of the estimated cost of the real estate project for three years. Since the minimum is not specified it could be nil or a nominal Rs 1, say legal experts.
UP rules do not have any reference to the rate of interest at which the money has to be refunded to homebuyers as against the central RERA Act under which developers will now be required to refund or pay compensation to the allottees with an interest rate of the State Bank of India’s highest marginal cost of lending rate plus 2 percent within 45 days.