Regulatory Overhaul Needed to Safeguard Flat Buyers in India
Lessons from the Campa Cola Case
The Achilles' heel of India's real estate sector has been exposed by the Campa Cola case, highlighting the urgent need for a robust regulatory mechanism. This mechanism must ensure developers cannot sell houses without obtaining legal approvals and guarantee that residential units receive rightful land ownership in cases of legal violations by developers.
Inadequacies of the Current Law
Under the Maharashtra Ownership of Flats Act (MOFA), developers are prohibited from inking sale deals until plans are approved, implying that all provisions are in place for flat-buyers. However, as witnessed in the Campa Cola case, MOFA only provides compensation for breach or refunds, lacking the authority to legitimize illegal constructions. The affected owners were left unaware of the pending approvals, assuming all was in order based on their deeds.
The Need for Legislative Revision
Citing the Campa Cola debacle, a revision of the laws is paramount to address situations where the eventual demolition of illegal constructions could strip buyers of their rights. The city civil court's upholding of the BMC's demolition orders in an ongoing suit filed by residents underscores this urgency. Furthermore, the apex court's stance that buyers of illegal flats must seek remedy through separate lawsuits against owners and developers for reimbursement, emphasizes the lack of systemic protection.
Proposed Regulatory Enhancements
To effectively protect owners, the following regulatory measures are crucial:
- Controlling Mechanism for Flat Sales: Ensure developers cannot sell units without complete legal clearances.
- Deposit of Duties with Timely Certification: Collect duties from investors, pending completion, with lawful and timely hand-over of new constructions.
- Liquidated Penalties for Delays/Defaults: Impose stringent penalties on developers for delays or defaults to ensure compliance.
Immediate Consequences of Inaction
Failure to implement these regulatory overhauls may lead to continued exploitation of flat buyers, culminating in the demolition of illegal structures without adequate recourse for those affected.
