Real Estate Law: Cracking Down on Dodgy Developers

 Ramesh Nair, COO – Business & International Director, JLL India

In recent times, the Indian real estate developer community has been in the news for all the wrong reasons. The good news is that the ‘black sheep’ of this family are being brought to book, simultaneously increasing the contrast between unscrupulous operators and transparent, honest builders who have hard-won reputations to protect. The fact that the law is coming down heavily on unreliable builders is very positive, as it prevents the entire community from getting maligned. Also, consumers now know that their grievances will be heard and acted upon.

In a significant ruling, a consumer disputes redressal forum has held a builder in Mumbai guilty of non-compliance of an order passed nine years ago. He has been sentenced to two years imprisonment. The forum chief found that the builder had failed to hand over the flat within the promised time, despite receiving the entire sum. Based on the buyer’s complaint of deficiency in service, the forum had directed the builder to hand over the flat with all the amenities, along with compensation for delay and litigation expenses, within two months. However, even after all these years, the buyer’s wait for possession did not end, leading to the imprisonment decision.

Apart from delay in possession, exploitation of FSI by stepping beyond permissible limits was an issue leading to another case in Mumbai. Such breach of entitlement is a serious legal offence. In yet another case, upon not completing the redevelopment project of an old building within the stipulated period, the builder threatened the buyers with cancellation of alternative accommodation payment, and was seen forcing the residents to accept possession in the absence of occupancy certificate. A complaint was filed against him by the members, and the case is currently under hearing. Going by the pro-consumer stance that the Indian legal system has now taken, it can be assumed that they will see justice being served.

Failure to comply with the directives of consumer forum or commission rulings resulting in prison time is a rarity. However, when this does happen, it serves as a warning to builders to get their act together and toe the line. At the same time, it assures the consumer that there is a forum to address their grievances, and that this forum is empowered to pursue a harsh course, when required.

Underperformance by a realty major in Gurgaon brought to light an interesting case wherein an erring developer was able to make amends with irate consumers. Innumerable consumer complaints due to non-fulfilment of obligations, diverting assigned funds to other projects and business requirements and delayed delivery of the project indicated a possible business failure attributable to faulty management at the builder’s end. However, the developer reassured the consumer by setting up a system of periodic review, ensuring faster completion and delivery of his projects. This helped him regain customer trust and settled the dust.

Very often, under-construction projects fail to meet the obligations of the existing regulators. As a major relief to homebuyers as well as developers, the Real Estate Regulatory Act (RERA) – due for nation-wide implementation in May this year – will ease most consumer concerns such as delayed delivery and change in project layout, among many others. Penalty clauses often push a good cause, and we are likely to see more of this as RERA gets implemented. Higher transparency and accountability will also improve institutional fund flow into the sector.

Without a doubt, the Indian real estate sector is set to become far more transparent, competitive, hassle-free and consumer-focused in the future. And that is a win-win proposition for everyone – except for crooked, dodgy operators, whose days of free reign and client victimization are definitely marked now.