Existing laws enough to check dishonest builders

With federation of real estate buyers association, there are plans to study, analyse and rate builders; help home buyers make informed decisions

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Puja Bhattacharjee | November 3, 2014


Amit Jain, real estate activist
Amit Jain, real estate activist

Amit Jain was just another young Indian, working in an IT firm in the millennium city – Gurgaon – who dreamt of a decent life and sought a house for himself. And that decision – to buy a house – turned his life upside down. In 2010, Jain, then in his late 30s, waged a battle against “corrupt developers” after his apartment was “wrongfully” cancelled by DLF.

A year ago, when Governance Now had met him, he was confidently and enthusiastically pursuing the welfare of other flat buyers. A year on, Jain has mellowed down. He appears tired of the continuing fight with the real estate giant. He has moved on from the federation of apartment owners association (FAOA) to start a new body called the federation of real estate buyers association (FOREBA).

Here he holds forth on real estate regulation, the existing laws to curb the whims and fancies of developers who leave buyers in a lurch, and how he intends to contribute to make the real estate sector more transparent.

What is the role of a real estate regulator in India? Do we need a separate regulatory authority?
The role of the regulator is the most important part of the existing infrastructure system in real estate in India. Without a regulator you cannot regulate private colonisers, especially group housing societies. There is a regulator in every state but I feel the role of a regulator in India has over the years been largely downplayed by our politicians, many of whom are in cahoots with builders. Otherwise, law has provided them (regulators) enough power and authority to keep the private licensees in control.

By going through various Acts, FAOA has realised that in every state the regulators have enough teeth to regulate private colonisers (developers). We do not actually need a real estate regulatory bill if the authorities start exercising the powers already bestowed on them by (existing) laws. The only advantage of the real estate regulatory bill is that there will be a separate domain for addressing problems related to real estate. So when you have a problem with a builder, you can go straight to the regulator. There are innumerable forums an aggrieved consumer can approach right now – civil courts, national consumer disputes redressal commission, the state consumer commission, the high court – which is confusing for the common man.

In your fight against unscrupulous builders, what kind of corruption have you come across?
A builder pays an interest rate of 24-36 percent to his investors. You can imagine the margins they are working on if a company or a business can pay an interest of 36 percent for funds. No business can survive on a 70-100 percent margin if they are not cheating.

Builders are selling balconies at the rate of Rs10,000 per square feet (in most urban areas in metro cities now). It is an obvious fact that 20 percent of the covered area a consumer buys in a project comprises balconies. Every builder makes a cut from that. The builder charges preferred location charges for common area also.

I also want to highlight some shortcomings in the Maharashtra Housing and Regulation Act, 2012. Every possible clause that we had fought for in the real estate regulation bill has been circumvented in this Act. There is nothing for the consumer in it. FOREBA will file a PIL in the supreme court against this Act. The legislators of Maharashtra have cheated the consumers (in passing the bill in its current form).

Each and every possible clause which was safeguarding consumers’ interests in the real estate bill brought by the centre has been circumvented through this Act. The real estate bill has not seen the light of the day but so much alacrity was shown to pass that Act (in Maharashtra). It was just a sham to woo the middle class voters.
 
In this context how will the real estate regulation bill help curb corruption?
The real estate regulation bill will only play a role if people carrying out those functions have some integrity and adequate freedom to make it work. At the end of the day, consumers want clean, transparent deals for their investment. They are investing hard-earned money and buying a house is once-in-a-lifetime decision for most people. But if a person has booked a flat worth Rs 50 lakh, he/she doesn’t know that this house is going to cost much more because the builder would increase the area, sell a lot of additional things by default, and charge him/her extra. The person does not know that even if he buys the house he will not own a part of the land, as it will remain with the builder.

This situation will arise because the buyer believes that everything has been licensed by the government, and that the government has gone through the condition of the licences and would ensure the licensee will abide by each clause and condition. All that, of course, does not happen.

The supreme court can do wonders here by giving clear orders.

For now, the real estate bill has been shelved. The new government is channelising all its energy through the urban development ministry into the concept and project of smart cities. (But) we will see to it that the real estate regulatory bill gets activated again.

What kind of work are you doing at FOREBA and how is it different from FAOA?

The FAOA is primarily meant to serve the interests and purposes of residents’ welfare associations (RWAs), which run the show in group housing societies. The FOREBA, on the other hand, is more interested in the real estate regulation bill, in regulators who are to ensure that builders comply with national building by-laws.

FOREBA’s objective is to undertake those exercises for real estate buyers, not apartment owners. When you have moved into an apartment and want to form an RWA, you should go to FAOA. But if you need any guidance or assistance before that – be it while buying the property or selecting it, or if you get into trouble with the builder in terms of the super area, etc – you should approach FOREBA. FAOA can help you as a RWA, not as a buyer.

There are a lot of people who can take FAOA forward. My experience has allowed me to start FOREBA – I have acquired knowledge of the laws that prevail on the builders, and that can help other consumers. With time, FOREBA would push for the real estate regulatory bill and transparency in realty dealings. We will have a database of what was sanctioned by a particular builder and what he is providing; what he can sell you and what he can’t; what are the judgments that are there in place that the buyers can use to prepare certain drafts for the builder and ask him these questions while soliciting a monetary refund.

We will also rate builders and their projects. We will have a compliance report and every project will be analysed based on that compliance report. It will be both builder- and project-specific. All services provided by FOREBA will be paid for – it is a federation but the service is not free. It is an NGO where every position is held by people who serve the community. We are still compiling the data and building it up and will put them up on the website very soon.

There are other organisations which give ratings to builders but the parameters on which we will rate are very different. We are looking at the background of builders, their compliance with the law, and how many projects each has delivered till date. We will give the buyer actual site surveys and scientific reports, and we will prepare the report only when an individual or a group commissions us.

Do you feel your work has made a dent on the policies being framed by the government?

Our hard work has been recognised to an extent – FAOA was part of the standing committee that had looked into the real estate regulatory bill recommendations (that were placed before the Rajya Sabha). We had made our recommendations to Ajay Maken, then the housing and poverty alleviation minister. A lot of our recommendations were incorporated by the committee, headed by JD(U) MP Sharad Yadav.

Are you still pursuing the fight for justice against DLF?
After being repeatedly let down by the courts, I stepped down as the director general of FAOA. I have pursued this fight for four years, having given up my job and my career. I do not want to end my life with hopelessness. Earlier, I had a lot of angst against DLF because they thought they could run away with my '50 lakh – that was money I had earned through hard work. I had tried brokering a deal between DLF and other anguished customers (but) DLF stayed adamant. They said they have full faith in the judiciary. But it is no longer a judicial case – it is now a case of humanity.

I have foregone my property in Belaire (the DLF housing complex in Gurgaon he had bought a flat in) and I am no longer pursuing any case against the DLF. I have realised that this is about the real estate industry as a whole, and not only about DLF. I have acquired a lot of knowledge about the real estate industry over these years and I have decided to help people who are going to buy property.

The interview appeared in November 1-15, 2014 issue

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