Maharashtra's draft housing rules mandate greater compliance from builders

Developers asked to deposit 70% in escrow accounts for project completion

The Maharashtra government has released draft rules under the Real Estate (Regulation & Development) Act (RERA). These rules -- the Maharashtra Real Estate (Regulation and Development)(Registration of Real Estate Projects, Registration of Real Estate Agents, Rates of Interest and Disclosures on Website) Rules, 2016 --  call on real estate developers to furnish additional information regarding ongoing projects, and to deposit 70 per cent of the  money received from buyers in an escrow account. This money is to be used solely for project completion.

All under-construction projects, irrespective of whether or not any of their individual towers or phases have received occupational certificate (OC), have been covered under RERA. Full project-level disclosures have been mandated, including sales of older units with details of the monies received and basis of charge -- carpet, built-up or super built-up area. Builders and developers will now be entitled to sell parking space provided they formally disclose details of the sale.

Clean up exercise: The developer's obligation

Make all project disclosures within 90 days from RERA commencement

Apply for cooperative society formation within 2 months from getting OC, or when 60% allottees take possesssion on making full payment, whichever is earlier

Follow a model agreement to sell for all sales

Abide by time schedule for completing the project

Further, all information about under-construction phases/wings will need to include the amount of work completed and certified by the project's architect. The cost mentioned as required for completion must be backed by a certificate from an engineer and the developer's chartered accountant. The developer must also provide a CA's certificate clearly mentioning the balance amount receivable from the apartments sold or allotted for which agreements have been executed. The developer must make all project disclosures within 90 days from the commencement of RERA and cannot market or sell units if, after 90 days, the new phase has not been registered under the Act.

A state housing department official told Business Standard, "The promoter will have to disclose the land cost in the project, cost of construction and the  number of the apartments sold or allotted to the allottees. He must also mention whether such apartments are sold on carpet area basis or on other basis such as built-up area, or super built-up area for each building as per the last approved sanctioned plan. The promoter will abide by the time schedule for completing the project and handing over the apartment/plot to the allottees and the common areas to the association of the allottees after receiving the occupancy certificate or the completion certificate or both, as the case may be."

The official explained that the draft rules call upon the developer to make an application to form a cooperative society or any required legal body within 2 months from receipt of the occupation certificate (OC), or after 60 per cent of allottees have taken possession after payment of full consideration, whichever is earlier. Additionally, the developer will have to follow for all sales, a model agreement to sell. The developer will not be allowed to change such an agreement.

JLL India chairman and country head Anuj Puri said though Maharashtra missed the October 31 deadline for announcing the State’s rules for RERA, it should be commended for following the Centre’s RERA Act most closely in letter and spirit. "The draft under discussion covers all under-construction projects where most issues of trust deficit have historically arisen. However, it stays quiet on projects where possession has already been offered or for which occupation certificates have been received prior to the Act being passed. This limits the retrospective coverage for such projects. While it has maintained the previously stipulated 70 per cent escrow limit, it allows for withdrawal by the developer where the method includes land cost to be added in the project cost. In a city like Mumbai, where land cost and cost of floor space index (FSI)/transfer of development right (TDR) are a very high proportion of total project costs, developers will be able to withdraw a substantial sum before actual construction of the project has commenced. This is, however, in line with the Centre’s Act," he added.

However, the government has made some changes in the rules framed by the Centre for the implementation of RERA. In the draft rule, the government has excluded provision with regard to need for developers to make public disclosures pertaining to building approvals obtained on the website of the housing regulator. Another provision relating to disclosure by the developers of their past record has not been included.

Moreover, the government has also omitted provision that prohibits refusal to sell property to any person on the basis of his/her religion, marital status or dietery preferences.