Economy

Bengal opts out of RERA, passes own diluted law

Abhishek Law Pratim Ranjan Bose Kolkata | Updated on June 03, 2018 Published on June 03, 2018

Common space, force majeure clauses tweaked to favour builders over buyers

Exactly two years after the Real Estate (Regulation and Development) Act was promulgated by the Centre, the West Bengal government has finally decided not to implement it.

The State government notified its own Act, the West Bengal Housing Industry Regulation Act (HIRA), on June 1, diluting at least two key provisions of RERA, with regard to common space and force majeure, in a way that favours developers.

Controversial decision

West Bengal Housing Minister Sovon Chatterjee did not respond to queries from BusinessLine. However, sources say that the State notification came on the back of a renewed attempt by the Centre to convince the West Bengal government to notify RERA rules. On May 14, the central advisory committee under the Ministry of Housing and Urban Affairs in Delhi formed a sub-committee to pave the way for implementation of RERA in Bengal.

Against buyers’ interests

West Bengal, which has historically been lax in protecting the interests of home buyers, drafted new rules as early as in January 2017 before deciding to have its own Act (HIRA).

According to Sushil Mohta, a prominent Kolkata-based developer and vice-president of Confederation of the Real Estate Developers of India (Credai), HIRA is a replica of RERA with only minor changes to suit local conditions.

Mohta insists that HIRA has not not diluted any RERA provision. If that is so, it has prompted many to wonder why the State needed a separate Act.

“It is not clear what new perspective was added by HIRA, which couldn’t be addressed under RERA, which passed several layers of scrutiny,” said Abhay Upadhyay, president of the Forum for People’s Collective Effort (FPCE).

Key differences

The Bengal Act has diluted at least two key RERA provisions that protect home buyers’ interest.

It is common for builders to sell uncovered parking space in the common area as ‘garage’ space.

RERA plugged this loophole by defining ‘garage’ as an enclosed space with a roof and three walls.

It further clarified that ‘garage’ doesn’t include “unenclosed or uncovered” parking space.

But HIRA defines ‘garage’ as “garage and parking space, as sanctioned by the competent authority,” thus compromising buyers’ interests.

Force majeure clause

The most crucial dilution relates to the force majeure clause, which may be invoked to bypass the strict delivery schedule.

Under RERA, developers can invoke the clause only in case of war, drought, flood, earthquake, fire or any other calamity caused by nature, affecting the regular development of real estate projects.

The clause was cleared by the Bombay High Court in letter and spirit, ignoring opposition from the builders. But according to the Bengal Act, over and above the conditions listed by RERA, force majeure can be declared for “any other circumstances as may be prescribed.”

Under this provision, home buyers in Bengal may be deprived of delivery even in case of a sharp rise in crude prices in the global market, if the State authorities so decide.

Published on June 03, 2018
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