Realty Bill: Parliamentary panel keen on jail term for errant builders

Are you a home buyer facing the brunt of project completion delays by your builder? Or an investor in an under-construction project that is way past its completion deadline but nowhere near completion. Don't despair. Help may soon be close at hand for the lakhs of such end users and realty investors suffering at the hands of errant developers.

In its ongoing deliberations over the proposed Real Estate (Regulation and Development) bill 2013, the 21-member Parliamentary Select Committee headed by the BJP's Anil Madhav Dave is said to keen on incorporating stringent clauses that may witness dubious developers facing a stiff jail term for not fulfilling their promises to home buyers.

In the aftermath of several public discussions held across the country, several members of the Parliamentary Committee are convinced on the need to incorporate strict provisions that entail the prosecution and imprisonment of builders who have violated the trust of their customers by not adhering to the promises made to with regard to specific projects.

The Committee is said to have held wide-ranging discussions on the proposed Realty Bill with the relevant stakeholders across Kolkata, Bengaluru, Mumbai and Shimla. A list that included several residents' welfare associations, consumer groups, property lawyers and activists, private builders, financial institutions, insurance companies and state governments.

Based on the feedback received from various consumer protection groups, the committee was of the view that financial penalties alone were not a strong enough deterrent to stop unfair trade practices since in a majority of cases they are simply passed on to home buyers in the final cost of the property.

According to informed sources, the move if implemented is expected to go a long way in protecting the rights of property buyers, since the bill in its current form has no such provision, with punitive actions mostly limited to financial penalties that have little effect.

A closer look at the existing bill does reveal a provision for a jail term of up to three years or a fine of up to five percent of the project cost, and in some cases a combination of the two. However this is applicable only in specific cases wherein a developer may have failed repeatedly to register his project with the regulatory authority or has simply not obeyed orders to register the same.

Members of the committee have since conveyed their support to incorporate harsher penalties including a jail term citing the ineffectiveness of the existing cash penalties and the need to protect vulnerable buyers from the clutches of unscrupulous builders.

The final report of the Select Committee of the Rajya Sabha is still under preparation and is likely to be put before the House in the upcoming monsoon session.

Some of the important provisions in the current Bill of specific interest to developers include: 

• Builders are required to submit all relevant details of their projects to the regulatory authority's website and also update it on a quarterly basis.
• The list of details to be submitted include: the layout plan, unit sizes, project completion schedule and status of mandatory approvals.
• Any major changes from the original schedule, design or specifications in the final product handed over to buyers will be considered as a breach of obligation by the builder.
• In the existing Bill, the realty regulatory authority can impose a financial penalty that not exceeding five percent of the project if any norms are breached.