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Richa Mishra
Moumita Bakshi Chatterjee

New Delhi, Oct 6 The Ministry of Corporate Affairs is keeping a close watch on the pre-launch announcements made by real-estate developers after it received investor complaints on the issue. A senior ministry official said, “The Ministry has been time and again receiving individual investor complaints against some of the companies in the sector. Lured by unrealistic advertisements and other pre-launch activities, the investors seem to be putting their savings into the projects, which fail to give returns.

“These activities appear to be attracting the regulations of unfair trade practices. There is thinking within the Ministry to ask the Monopolies and Restrictive Trade Practices Commission (MRTPC) also to look into the matter,” the official told Business Line. Meanwhile, the Ministry has informally asked its field offices to monitor the activities of such companies including whether they have necessary approvals in place.

Official sources, however, declined to disclose the names of the companies against which complaints have been received. As per MRTP Act, unfair trade practices cover any unfair method or deceptive practices adopted by a trade vis-À-vis the consumer. The MRTPC can inquire into any unfair trade practice upon receiving a complaint or upon reference made to it by the Central or State Government.

Sale of a flat or land before its proper launch is termed as pre-launch. Certain states like Haryana have banned pre-launch offers where builders or real-estate developers are known to have collected money even before they received requisite approvals from the State authorities. This is to ensure that developers do not make false promises, lure people to invest huge sums and then vanish, leaving investors in a lurch, said a State Government official.

According to Mr Anuj Puri, Chairman of real-estate consulting firm Jones Lang LaSalle Meghraj, the pre-launch was a norm internationally. “If a pre-launch is done with requisite approvals, it is fine, but where the builder does not have the approvals, investors run a risk. However, as long as the builder is transparent to the investor about the status of his proposed project, pre-launch should be permitted as it is a mechanism of funding,” he said.

Agrees Mr Kumar Gera, Managing Director, Gera Developments, and Chairman, CREDAI, who points out that as long as the investor and developer have a clear understanding, pre-launch offers should not be viewed negatively. “Trouble starts when the developer does not make full disclosure to the investor,” he said.

More Stories on : Investor Protection | Real Estate & Construction | IPOs

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