Will Penalties Be Enough For Non-Complying Developers?

Homebuyers and real estate developers have been raising objections about the penalty clause in Real Estate (Regulatory & Development) Act, 2016. While buyers have been protesting with respect to penalties as monetary compensation for flouting the rules which would be too easy for the developers, the act has a very rare mention of imprisonment which may or may not be justified in case of non-compliance of rules and regulations as it could be too harsh for their offence.

Several consumer activist groups have been quoted in media reports raising a valid point as “How tough it would be for a developer to spare few thousand rupees as a penalty for not complying with the rules?” PropTiger reached out to RERA authorities for more clarity.  

During an interaction with Anthony de Sa, Chairman, Madhya Pradesh Real Estate Regulatory Authority said, “The Central act has mentioned penalty for different kind of offences. For complaints such as delayed delivery and quality failure, the penalty is paid to the home buyer whereas for not registering with the authority or related offences, the penalty goes to the government coffers. So far, the real estate gazette does not mention imprisonment except under grim circumstances like for those who refuse to register with the authority or are repeat offenders or are not adhering to the rules. The maximum jail term is three years.” However, some states have diluted the provisions of offence to avoid imprisonment of the developers.

According to de Sa, the imprisonment clause is not very clear in the Real Estate Gazette and needs more clarity to understand as to under what conditions could a real estate developer be jailed. For now, a real estate regulatory authority cannot send the developers to jail. The appellate tribunal needs to appeal to the civil court which will take over the proceedings and would take its own good time to fulfill the procedure. “The act is at the very initial stage and currently we are working on the basis of assumption only,” added de Sa.               

Above all, The Real Estate Gazette might not be clear with respect to imprisonment of promoters and developers for multiple offences but for homebuyers, section 68 is an unpleasant truth. The act says, “If any allottee, who fails to comply with, or contravenes any of the orders or directions of the Appellate Tribunal, as the case may be, he shall be punishable with imprisonment for a term which may extend up to one year or with fine for every day during which such default continues, which may cumulatively extend up to ten per cent of the plot, apartment or building cost, as the case may be, or with both.”

Though several state draft rules have mentioned jail term but with little details on the type of offence. As the home buyers and investors are joyous about the onset of the RERA regime and the regulatory framework so formed to keep track of the activities in real estate arena, industry experts are hopeful for a more organised real estate sector in times to come.