Despite favourable rulings, flat buyers continue to suffer; they also pitch for forensic audit of escrow accounts to check diversion of funds
Developers often take advantage of time-consuming compliance processes to arrange for funds or complete the project
Amid a growing number of flat buyers moving MahaRERA for interest for delayed housing projects, there are concerns over poor implementation of its orders. While some experts say stringent action should be taken against erring developers, others feel a forensic audit of escrow accounts is the need of the hour.
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Advocate Akash Menon, who practises in RERA, said, Section 40 of the RERA Act says that if a developer fails to comply with its order, then the amount “shall be recoverable from such developer in such manner as may be prescribed as arrears of land revenue”. He said, “In such cases, RERA issues a recovery certificate in favour of the allottee and directs the tehsildar to commence recovery proceedings against the developer. Additionally, the promoter is also liable to a penalty for every day during which such default continues which may cumulatively extend up to 5 per cent of the estimated cost of the real estate project as determined by the authority.”
Menon says enforcement proceedings are time consuming and builders take advantage of it to arrange for liquidity or complete their projects. “Most developers are not swindlers, they are merely trying to make the best given the market forces and industry compulsions at play,” he said.
Ramesh Prabhu, a CA and founder of MahaSEWA, said, “With less than 10 percent of MahaRERA recovery procedures being implemented, many flat buyers continue to suffer. The power of recovery is given to the Collector’s office, but due to delay in the recovery process, thousands of MahaRERA orders are pending even today.”
Prabhu said, “Since MahaRERA came into existence over three years ago, 13,878 complaints have been registered with it. Of these 13,098 complaints were against MahaRERA registered projects and 780 were against unregistered projects. In all, MahaRERA has passed 9,194 orders [8,442 orders in case of registered projects and 752 in case of unregistered projects]. Nearly 80 percent of the 9,194 orders directing developers to pay interest for delayed possession or recovery directives under section 40 of MahaRERA, which need to be implemented by the Collector office.”
Prabhu added, “The purpose of the act (RERA) is to help common man, but unfortunately MahaRERA is yet to take over stalled projects under the competent authority or association of allottees, irrespective of the act providing such a provision. We are hopeful that the newly appointed MahaRERA chairman will address this key area.”
RERA should not end up becoming a “paper tiger”, feels Senior Advocate Vinod Sampat. “A message should go to all cheat builders that the days of fooling the flat buyers are over. The best way for RERA is to stall the project and blacklist the builder. Such projects should be allotted to other RERA-empanelled builders if the existing flat buyers are not able to appoint a developer within three months. Instead of merely passing orders, RERA should focus more on implementation of orders and improve its image.”
Sampat pitched for a standard guideline book to display prominent defaults of builders and the line of action taken by RERA that can be made known to builders and flat buyers in advance. "RERA should also regularly display a list of all developers against whom complaints are being received, particularly developers against whom more than one per cent of flat purchasers have complained. Also, if more than ten RERA orders are passed against a particular developer, then the same should be displayed on RERA's official website," he said, adding that RERA portal should be more user friendly.
"In fact, every letter or email addressed by flat buyers, should be responded to by RERA and a book of the normal complaints and emails received by RERA should also be displayed on its website," suggested Sampat.
Advocate Godfrey Pimenta, who also practises in RERA, said, “If RERA finds consistency in failure in adhering to its order by a particular developer for a particular project then it may impose maximum penalty u/s 65 of RERA Act, and recover the same as arrears of land revenue. This will send a strong signal to the defaulting developers.”
However, Pimenta says blacklisting a project would be disastrous for a project and the crisis-ridden real estate sector as RERA’s aim is to push developers to stick to their promises.
Pimenta said the new RERA chairman should call for random forensic audit of escrow accounts. “RERA has not checked the mandatory 70 per cent fund reserve in escrow accounts before the project is commenced and one of the reasons for the liquidity crunch faced by developers is that there is no mandate on auditing of escrow funds. Such auditing would ensure that developers with wrongful intent do not divert the escrow funds from one project to another.”
9,194
No. of orders passed by RERA till date
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