Interview With Madhya Pradesh RERA Chief

Jhumur: MP was the first state to constitute RERA – was it by default, by design or a little bit of both.

DeSA: Not by default at all, but certainly by design and a little bit by accident. Design because the act required us to notify the rules before October 31, 2016, I was then chief secretary and we notified the rules on October 24. I was appointed the chairman of Madhya Pradesh RERA in December 2016. So I had all the time to focus my attention on RERA. So in four months of the run-up to May 1, we prepared our software bilingually- English and in Hindi so that people could register. And this software covered everything-it covered registration of agents, projects, complaints, and other works. We were also able to conduct a series of industry consultation during that time which resulted in a revised set of rules on  May 24.

Jhumur: What is the status on registrations – projects, brokers and consumer complaints.

DeSA: In MP, we got about 1500 application out of which 1400 are for ongoing projects. Less than 100 are for new projects because builders are holding their horses and thinking to complete the current projects. The figure for state like Madhya Pradesh is extremely satisfactory and I think that represents 95 per cent of the ongoing projects. There is nothing to compare it with as this sector is so unregulated that there is no data available. We are in process of building up databases which we never had. But 1500 applications of the ongoing project is a good step. For agents, we have 250 applications and we have 300 filed complaints. We are happy with the progress.

The decision to bring all projects that were incomplete or hadn’t received the completion certificate before April 30, under the ambit of RERA, please explain the rationale especially in the context that there are states that have chosen to do things differently in this aspect.

Actually the act does not give latitude to states and we have been very careful in MP to stick with ambit of the Act. We have sympathy for all sectors of the industry be it homebuyers, builders, everybody constitutes the part of the real estate sector and it is an extremely important sector as it provides employment provides houses and is nobody interest that sector collapse and we always said in Mp that we are here not just to regulate and adjudicate but we are also here to facilitate and promote. But within the ambit of act, you can do what you have to do. But the act clearly says that if the project does not have CC as of April 30 irrespective of the fact that if the project is 70 per cent complete or 90 per cent complete, it will have to be registered. In MP, we also have a provision in the municipal act for deemed completion, which means if somebody has applied for completion certificate and there is no response within 15 days, they can take it to have deemed to have been completed, so we are permitting that but there are three conditions necessary for deemed, one is that you should have applied, second is that the Municipal Corporation concern should not have responded and third you actually on site should have completed what you have to.

Jhumur: So there are two aspects that you’ve mentioned very clearly and that’s what my take away is – you are focusing on the ease of doing business because like you said it’s important for the sector and you are also making a conscious effort to be as compliant with the central act as possible.

De Sa: it could be a completely compliant yeah on all counts.

Jhumur: So there’s another interesting thing about Madhya Pradesh RERA that I’d like you to talk about. Initially the projects which were within the 153 planned areas of the state were coming under the ambit of the Act and then it was decided that all projects all across the state will be under the Act so can you explain why this was done

De Sa: The act mandates it for the planning areas but the Act allows the RERA of states to decide in the public interest. Now we felt that it was meaningless to just pick and choose projects because one case came up before us we began hearings on the May 10 itself and one case came up where the argument put forth by the promoter was, “you see I am actually 50 meters outside the planning area so I don’t come under this.” Now we said this is extremely unfair because the act speaks about the minimum size of a project. It says eight units or five hundred square meters etc places of flow limit. Then we felt in RERA, that in Madhya Pradesh RERA that actually the kinds of protections that are given to consumers of these projects why should a consumer in a particular area get the protection and a consumer outside that area not get the protection. Even builders felt that for a level playing field so it was both for the consumers the homebuyers and for builders we felt once there is a definition of the minimum size of a project let it be across the state without any barrier planning area, non planning area.

Jhumur: I’d also like to raise some of the concerns you know that we’ve been reading about in the media and stuff like that so two aspects that they’ve mentioned when they feel that the rules do not have enough clarity is one is the payment schedule and the other is the very important escrow account so what these reports have mentioned is that you know there isn’t enough clarity as to how do I go about it how would you respond to that well

DeSa: Yes, we came across these issues also during our various stakeholder meetings that we had with them because in Madhya Pradesh we had stakeholder meetings not only in Bhopal but we went with the whole authority, myself, members we went to Indore, we went to Gwalior, we went to Jabalpur, we went to Ujjain. Now, on the first issue that we were talking about a payment schedule clearly so what we have done in Madhya Pradesh, we have put up a guideline stating these and it’s there on our website in English in Hindi. We have put a maximal cap on the amount you can accept before you actually start work on the site and the our cap is 30 per cent. After you accept 10 per cent, you have to sign an agreement and you can take another 20 per cent but we have said you can’t accept more than 30 per cent before you start work and then we have put a cap on what is the maximum you can take once building is complete before registration and we have said that cap is 90 per cent which means the balance you can ask only when you get your completion certificate and you’re willing to give you know register the property in his name then you can ask for the balance. Then we’ve said between this 30 and 90 you can schedule it depending on the kind of project you have because it may be a plotted project or it may be a multi-story project or it may be bungalows it may be whatever, so depending on the kind of project you have, you can schedule it reasonably. So we’ve given them these guidelines and I think enough. For example, in a plotted project where the guidelines are little different it says here’s 30 percent before you start but then we’ve said the moment you start your waterworks you can charge so much, when you complete your water work so much, roadworks when you start so much, when you complete road work so much, and electricity when you start so much when you complete you can start. So because these may go on and parallel in a plotted project, so we’ve given guidelines. I think there is adequate clarity now on that issue of payment schedule.

In the escrow account, in fact technically speaking it’s not an escrow account, it’s a designated account because the signature of RERA is not required to withdraw the money. But there too what we have done is we have put in the format of a Chartered Accountant’s certificate which we want people to submit and we have modified that on two occasions and the last one was two weeks ago and I think now it’s very good yeah basically we have realized two issues on that one is because the Act says you can use 70 percent of all money has to come into an account and then you can withdraw in proportion to the completion. Now we’ve tried to stay within those directives yet we have made it to a sort of concessions within the act. One is we have allowed them to book the whole cost of land on the day they start digging because we say the moment you start your project you’ve committed the land to the project. So to take proportionate or cost of the land makes no sense. But we’ve said not price of land but cost of land. There’s a difference because cost of land is what you have paid for the land, price is what you will charge. You may have bought it four years ago but you can only charge the cost, the price you can recover.

The second thing we have done is because it says that now suppose your project is fifty percent complete now what we are doing is we are saying whatever comes in from the buyers so far seventy percent will go into that then you take 50 percent of selling but that is unfair because buyers too are paying in proportion, buyers have not paid 100 percent so that that was the point which we realize 15 days ago and we modified our certificate now to say is that when you take this proportionate you count not only 70 percent of what has come in but 70 percent of receivables yet to come in against booking not against unsold property because unsold property is the property of the builder. But anything that has been committed has been booked so you take 70 percent of what is coming, 70 percent of what is due to come in and then you put your proportion of 50 percent complete on that, so that has brought a great deal of ease and I think all promoters, all builders, who are building on time find no problem now with this kind of change in draft.

Jhumur: I think that’s really great clarity because these two points have been written about and I think our viewers will find this information really useful. So there’s one more concern that has been raised about MP RERA and that is about the non-compliance aspect. So, of course, the Central Act does mandate that you know if there has been non-compliance and it has very clearly laid down how it defines non-compliance, the developer can be imprisoned. The assessment or the interpretation with MP Rera has been that with the compounding of offense clause, yes ,we are allowing him to give out monetary compensation but nothing is really being said about him being imprisoned but concern here are being raised is that just monetary compensation may not be as strong enough deterrent for him to sort of you know flout the rules. How would you respond to this point?

DeSa: Actually, there is a little bit of misunderstanding about the provision in the act. The Act provides for imprisonment only when fines are not paid. There is nowhere in the act which talks of imprisonment as the first punishment. Everywhere it says this fine for this shortcoming, this amount is the maximum amount of fine for this, for you know various things. Then it says if the promoter doesn’t pay the fine or if the promoter repeatedly commits the offense then he will be liable for imprisonment. And the imprisonment is actually recommend it only in one case by the Authority itself that is for refusing to register and in all other aspects it will be recommended by the Appellate Tribunal. So actually imprisonment is not the first resort, fine is the first resort. And fine in certain cases like for not registering that goes into the government coffers and where the fine is imposed for lack in quality or lack in timely delivery etc, it goes to the home buyer.

Jhumur: But you do believe that this will serve as a sufficient deterrent

DeSa: Yes certainly it should serve as a sufficient deterrent but what clarity needs to be brought in the act is exactly the procedure for imprisonment. The act is not clear at the moment about it so the assumption is that the rarer or the Appellate Tribunal will then have to apply to a civil court to grant this imprisonment and that procedure may take its own time and also RERA the appellate authority does not have the wherewithal to pursue the case in another court. So actually the Act needs to bring it a clarity of that issue but I suppose this will happen in time. It’s early days yet and this should happen.

Jhumur: So what we are essentially talking about is justice served. So that brings me to my last question which is about you know what we always field for and that is home buyers interests. I have heard you speak on various forums about how RERA should and it will invoke consumer homebuyers confidence. I’d like you to talk about what MP RERA is doing specifically to invoke the confidence in home buyers

DeSA: See we are doing two things in MP, on the one hand, we are dealing with the complaints that we receive in as creative way possible. For example, we’ve already received 300 completes now in MP, all complaints are filed online and when once they come to us now we don’t follow that normal procedure because what we have seen happening in consumer courts or in other civil courts that everyone actually has a right to file when the complaint is filed then a reply is filed and a counter reply is filed, and then a counter-counter reply is filed. Now we see that in the other courts what happens is that just to file these replies and to exchange documents, there are about five or six hearings. We have avoided all of that in Madhya Pradesh. What we do is we ensure that the first hearing takes place within a maximum of one-month from the filing of the complaint. The reason for one month is it takes one week for us to examine and then you have to give notice to the partners of at least two or three weeks to appear. So once that first Peshi takes place we record the email addresses of everybody and we get them to exchange it. Now we say reply to the appellate to the complaint, then the other party, the counter reply to the reply, and the counter-counter, everything has to be done online. You give it to or send it to RERA with a copy to the opposite party. So you do all this and we give them timelines. So all these parties don’t have to come to our court. They save on time, they save on expense. The only next peshi we have is for final hearing. So actually in two or three hearings we are able to dispose of cases and we allow and we’ve created conditions in such that the home buyer does not have to actually engage an advocate. Builders, of course, engage if they want to do and for them, it’s a question of time so they do that but we have created an atmosphere so homebuyers don’t have to engage advocates. When they come and they tell us we see one but we do justice. I’m not saying we do we injustice to the builder. So that is one part of it. The other part of it is a huge campaign that we have done, an awareness campaign and we prepared about over a thousand large flex posters, which we are distributing to all the Tehsil offices or block development offices or sub registrar offices all over the state so that rural areas also can see in simple Hindi showing consumers what are their rights and also telling them one thing, that don’t buy any property in a project that does not have a RERA number because we can protect you only when you do that. It’s like if you go to the market and you choose just because of some price to buy some things that doesn’t have a ISI mark and then you say it’s broken. So what we are saying is ask for a RERA number and if you want to double check just go to our website and see is this the valid number, so at least you’ll have some guarantee, its not a 100% guarantee but some guarantee that somebody has looked at the land ownership issue and the issue where the clearances have been taken or not, so there is a certain level of guarantee. Despite that if the building is not complete, builder doesn’t complete, that’s another problem but the number of defaults will come down hugely. So this is what we are trying to do with Madhya Pradesh.

Jhumur: I also read something about you know where you send out SMSs where there’s been a disposal of a complaint. I found it very interesting. Would you like to talk about it.

DeSa: As soon as complaints are lodged over here we give an SMS saying that yes, your complaint has been registered and when we fix the hearing dates we send them SMSs also, because even though people give email addresses not all of them have computers at home and they can’t keep going and checking on a computer. With mobile phone penetration is much larger, so we inform them about peshi and all by SMSs. So, we try and reduce their coming and going in their anxiety so they know that something is happening also and you know we have a help desk in our office. Of course, the help desk is for homebuyers as well as for builders. If they find a problem in filing information then the helpdesk helps them we do can do it online or we can do if they visit the office we can do it. You know in Madhya Pradesh – we have a dedicated office it’s called a RERA Bhawan.

Jhumur: What you are saying and what my takeaway key takeaway has been that you know you are gently monitoring; you are taking responses from all stakeholders and you are evolving Madhya Pradesh RERA

Thank you sir, that’s all that we have time for today. Do let us know what you thought of today’s interview. We’d love to hear from you. Watch out for space, we will be back again soon.

Thank you so much

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