The building construction sector, where deals take place without regulations and transparency, is rife with disputes and complaints. Many times, the ignorance of customers and unaccounted money transactions have prevented frauds from being brought to light. Often customers do not get basic information such as documents of the construction site, plan of the building, stages of construction, mandatory approvals needed for construction and expenditure under separate heads.
It is in this situation that the Kerala Real Estate (Regulation and Development) Ordinance, which was approved by the Kerala cabinet within days of the Union cabinet clearing a corresponding bill, should be assessed. Construction, sales and maintenance of apartment complexes, commercial buildings, offices, and buildings for the IT industry will come under the purview of this ordinance. Complexes with fewer than a dozen flats and construction in an area less than 25 cents have been excluded from this ordinance.
A real estate regulatory authority and an appellate tribunal will implement the conditions in the ordinance. The authority will have the power to settle complaints on faults in construction, violation of contracts and delays. There are conditions to impose fine on builders who fail to do things and to cancel the licence of builders for serious violations. Builders will be liable to correct all faults that come up within two years of handing over the building.
In the first week of April, the central government cleared a draft bill on this subject. If conditions in the state law contradict the central law, then the Union law will prevail. As per that, even before booking flats, the customers should be provided all information about the project. Construction should be done only as per approved plan.
Promises made in advertisements and brochures will have legal validity. There are limits on taking money in advance too. The advance should be deposited in an escrow account in a bank and a certain percentage of that amount should be spent only on the project. Builders should calculate the cost of the building only on the basis of the carpet area. The term super-built-up area, which causes confusion, will not be allowed.
Though it can be considered that these laws will solve many problems, many important issues have been left out. For example, the most important subject of dispute between builders and buyers is price. However, it does not seem that the regulatory authority has any role in determining the price. The electricity regulatory commission and the Trai were quickly accepted by consumers because their main role was to determine rates.
Many times, builders fix the price of flats without any correlation to their cost. It is not wrong to say that it will be ideal if an independent agency fixes the price as per the facilities, their cost and the location of the property. The chances of new problems cropping up when the new ordinance is implemented cannot be dismissed. There is a concern that the additional costs that builders may have to bear because of the new law may fall on customers. Similarly, it is hard to believe that these regulations will curb the flow of black money into this sector.
(The writer is a former member of the electricity regulatory commission)
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