Regulating the Real Estate Sector

By Cleofato A Coutinho
11 September 2010 00:05 IST

Goa, which is the world's holiday destination, faced a real estate boom somewhere in the early nineties. Builders and Real Estate Developers started construction activity basically for residential purpose in a big way. Persons not of Goan origin started buying apartments/villas as the second holiday home in this tiny state. The nuclear family concept added to the demand of apartments and villas. Large scale shifting of persons from hinterland of Goa to the main towns basically for educational opportunities has also increased the demand for houses.

With the demand for housing increasing, the real estate sector boomed. However, for nearly two decades now, despite the boom our state has not taken initiative to legislate on apartments and villas in common areas.

An initiative by Ramakant D Khalap in 1993 brought before the Goa Legislative Assembly a bill, modeled on the lines of the Maharashtra Law. However that bill never saw the light of the day as an act. It was referred to the select committee. The said bill in the same form was again brought before the house by a private member Radharao F Gracias, but was withdrawn (private member's bill never becomes law).

For seventeen long years now we are without a legislation, despite the select committee approving the tone and tenor of the bill. Successive governments in our state have not bothered to legislate of this crucial area, which involves thousands of apartments and its owners, many of whom have put their lifetime savings. That some have invested for real estate speculative gain is a different matter. 

It is incomprehensible as to why successive governments have not thought it fit to bring apartment legislations when the real estate boom did not slump like other metropolis. The stories doing round as to how the 1993 bill was sent to the select committee would only invite breach of privilege of legislature  if the same is put in black and white.

The ownership of apartment/villa in common property, then, a new concept which came up with the building of apartments and villas in common areas. Since that concept contemplates
(i) exclusive right of occupation in respect of part of a building
(ii) use and enjoyment of common area, amenities and services
(iii)  liabilities pertaining to maintenance of common areas and services and maintenance of  building/apartments and
(iv)  undivided right in the land on which the apartments/villas stand.

These issues become extremely crucial when the buildings require repairs and/or have to be reconstructed due to natural calamities or when the buildings face natural wear and tear.

Owners of apartments/villas would get a wind fall in case the FAR/FSI in a particular areas increase and their rights would shrink in case the FAR/FSI is brought down by a planning regulation. It appears it is that windfall which is sought to be cornered by lack of legislation

Thousands of apartment owners in the state of Goa are without a valid title. They are holding on in most cases based upon agreements to sell. Many have invested their lifetime savings in buying a roof over their head, but are not owners of that roof.  That is because the apartment legislations mandating conveyance of title to individual apartment purchasers or to the Housing Cooperative Societies do not exist in our state.

Maharashtra pioneered two   legislations:
1) regulating construction and compulsorily requiring the promoters to form a housing society or a company called Maharashtra  Ownership Flats (Regulations of the Promotion of construction Sale, management and Transfer) Act 1963 and
2) passing of free and absolute title to individuals purchasers (Maharashtra apartment Ownership Act 1970).

The 1963 Act led to  a new concept which can be called ‘dual ownership' whereby  the housing societies would became the owner of the entire buildings and the land and the apartment purchasers get a share together with occupancy right in respect of their flats.

Various states have brought different laws, but some states have brought in Promoter Regulatory Acts which regulate the entire promotion, construction, sale, management and transfer under a regulatory authority and most of the states have only apartment ownership acts.  As stated earlier, Goa does not have any such legislation.

The Promoter Regulation Act deals with various aspects which could be considered as excesses committed by the Real Estate industry like:
(a) collecting huge amounts prior to even the construction proposals are approved
(b) creating mortgage on the property before or after entering into agreement of sale with third parties without letting them known of the mortgage on the land
(c) not delivering the apartments in time
(d) changing approved plans mid way
(e) not transferring the apartments to individual flat purchasers or to housing societies with the fond hope that FAR in a given area would increase and they would exploit the same
(f) collecting huge maintenance fees and frittering it as their profit

All these areas and other areas ought to be taken care of by law. The central ministry of urban development is seized with the matter and has drafted the model bill to control the excesses by promoters and to protect the interests of citizens. The model bill proposes a regulatory authority to deal with all aspects pertaining to promotion, construction, transfer and management of apartments. The regulatory authority proposed shall be in addition to the already existing authorities which exist under different laws like the local authority, planning body, revenue authority and taxing authorities.

It is a proven fact that we, in India, are unable to control our authorities. The authorities have always acted in a manner i.e. corrupt and extortionist. Power to authorities has always led to misuse of that power and the central Urban Development Ministry's proposal to have yet another regulatory authority in addition to various authorities is certainly not a welcome move. To my mind the creation of regulatory mechanism shall only make apartments costlier as the promoters shall succumb to extortionist demands and load that element on to the citizens. 

We require laws whereby the citizens have certain rights and liabilities and especially in this area of real estate, the promoters ought to be made responsible and liable, so that the excesses complained of by citizens and investors are taken care of by law administered through the courts. Somehow the regulation system has failed in our country though we are in the process of creating more and more regulators and withdraw from judicial area matters with the fond hope that litigation shall come down. In the present scenario, there is no substitute for the courts. The common man has faith in them. That faith gets shaken in certain cases is a different matter.

 

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Cleofato A Coutinho

Cleofato Almeida Coutinho is a senior lawyer and one of the constitutional expert in Goa. A member of Law Commission of Goa, he also teaches at Kare College of Law in Madgao.

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Previous Comments

wish to speak to you regarding the laws applicable to real estate sector . especially like MOFA of Maharashtra.

can a builder change plans of a project in designated free or common areas without consent of previous buyers .

- Sangeeta , Mumbai | 20 th April 2016 18:52

 

I have a draft copy of the Sale deed that I have to sign next week. In that it states that even after the society is formed, the builder has the rights to further construct and sell premises on the property

Is that legal and that the society and owners cannot do anything about it?

- DMello, Mumbai | 17 th March 2012 12:46

 

Thanks Ludovico for sharing the link. Draft looks good.

Not sure when its going to be act but its great step forward.

This act will apply to old complex where society is not formed or sale deed of flat is not executed ?

- NItesh Naik, Mapusa | 05 th October 2010 17:01

 

Hey, friends there is good news for flat/plots/apartment owners. The Law Commission headed by Adv. Ramakant Khalap has released draft law to regulate construction and development activity in Goa. The site is www.goalawcommission.gov.in and you can send your suggestions/comments

- ludovico, Old-Goa | 30 th September 2010 15:45

 

very simple Nitesh: meet a stone contractor buy some gel sticks from him, Than wait till you see your builder getting into his car as he is about to get in, light the stick and throw it in between his legs while he sits in his car........ka boom....

you won't need a sale deed or maintainenace any more the whole building is yours,be tough when the other is rough.

- massimo, emqon | 21 st September 2010 20:51

 

May be the legislation in Goa is deliberately kept pending as some of the Politicians in power are builders themselves and they are not interested to make any legislation which could hold the builder responsible in any manner!

- james silva, margao | 21 st September 2010 18:18

 

What is available option with flat owners if builder is not willing to form housing society or execute sale deed based on "undivided right of property" ?

how to force builder to form legal entity which will maintain project in log run ?

- NItesh Naik, Mapusa | 21 st September 2010 10:00

 

How to resolve this problem ? Even I am facing this problem. Its been more than 5 years I purchased flat, paid for maintenance but builder didn't provide any amenities those were promised neither maintaining project, . In agreement of sell builder had promised to form society with in 2 years, till date society is not formed neither executing sale deed

Just last month in August I have filed complaint against builder is consumer forum.

Can we file petition in High court to make is compulsory to form housing society ?

- NItesh Naik, Mapusa | 20 th September 2010 17:25

 

It is possible I suppose under "Transfer of Properties Act 1882" to transfer title. In fact Sale deeds have been done with the undivided right of property by some builders/promoters. But, as the writer says, we need specific legislation to solely address the issue. At best we could be improvising. Perhaps the Law Commission's hands are tied, it is not their brief as the writer himself is a core member of the Commission. Hopefully something forceful would be brought up.

- ludovico, Old-Goa | 20 th September 2010 16:21

 

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