Draft real estate Bill ‘essential and overdue’, say consumer bodies

Business Line, November 14, 2011

New Delhi, Nov. 13: The draft real estate Bill seems to have touched a chord with the home buyers and consumer forums, even though builders have labelled its provisions as being ‘too harsh’.

Flat-owners and consumer groups say that the legislation is essential and overdue in a sector ridded with malpractices such as ‘pre-launches’, misleading advertisements and unexplained delays in project handover.

“It is a must for a sector that has so far been largely unregulated,” says Mr Harsh Sehgal, President of Park Place residents’ welfare association.

Park Place residents’ welfare association along with flat-owners of Belaire housing complex have been involved in a skirmish with DLF over prolonged delays in their project and alleged ‘one-sided contract clauses’.

Earlier this week, DLF got a stay on the Rs 630-crore penalty imposed on it by the Competition Commission of India (CCI), in the same case.

The tribunal will hear the final argument in the case in the second week of February.


“In general, if you look at the real estate sector, consumers are at the receiving end with little remedy…There are instances where people have not got possession of the flats they booked years ago,” said Mr Sehgal.

The draft Bill, which released on Friday, prescribes up to three years imprisonment or a fine up to 10 per cent of the project cost, if a builder constructs projects without first registering it with the proposed sector regulator.


Builders would also have to commit a time-frame for completion of each project.

Further 70 per cent of the amount taken from allottees from time to time will have to be deposited in a separate account and can be utilised only for that particular project. Asked if he thought the clause pertaining to imprisonment was ‘too harsh’, Mr Sehgal disagreed.

“Such provisions will be effective in cases where a builder starts to collect money without even having the approvals,” he said.

Mr Pradeep Mehta, Secretary General of Consumer Unity and Trust Society (CUTS International), feels that the Bill will strengthen the hands of consumers, who are not in a bargaining position while entering into a sales agreement with builders. “In fact, it would be desirable for the proposed regulator to also vet the sales agreement of the builder, to ensure that terms and conditions are not one-sided…after all, every consumer is not familiar with legally clauses,” said Mr Mehta.

But he felt that imprisonment is warranted only where there is a clear case of fraud or cheating.

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