There are quite a few positives to be found in the Maharashtra
Real Estate (Regulation and Development) Act, 2016
(RERA) draft.
For instance, all under-construction projects, irrespective of
whether some of their individual towers/phases have received OC, have been
covered under the Act. Full project-level disclosures have been mandated.
Even
older sales of units need to be disclosed in terms of monies received, and the
area basis – read carpet area, super built-up, etc. – needs to be disclosed in
full.
Also, all information for 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 the engineer and developer’s chartered accountant. The
developer must also provide a certificate from a Chartered Accountant clearly
mentioning the balance amount of receivables 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 the Act, and
cannot market or sell units if, after 90 days, the new phase has not been
registered under the Act.
Before money can be withdrawn from the escrow amount, the
developer must furnish certificates from the project’s architect, engineer and
chartered accountant must be furnished with regards to the cost incurred in
construction and cost of project and land.
The chartered accountant will also
need to certify the proportion of the cost incurred on construction and land
cost to the total estimated cost of the project. The total estimated cost of
the project multiplied by such proportion will determine the maximum amount
which can be withdrawn by the developer from the escrow account.
In the current draft, the amount of money to be deposited in
escrow has been kept at 70% of the monies received from buyers. If the amount
to be collected from allottees is lower than the cost of construction, the
entire amount must be kept in escrow.
The developer must make an application to form the
cooperative society or any required legal body within 2 months from receipt of the occupation
certificate (OC), or if 60% of allottees have taken possession after payment of
the full consideration, whichever is earlier.
This clears up a major area of
ambiguity which has so far been a real challenge for residential property
buyers in Maharashtra, and clearly puts their interests first.
Another very progressive provision in this draft is that under the
Act, a model Agreement to Sale will need to be followed for all sales, and the
developer cannot change any clauses in it.
Though Maharashtra missed the 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 of the issues of trust deficit have
historically arisen.
However, it stays quiet on projects where possession is
already offered or 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% 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 FSI/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.
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