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Extending RERA deadline for real estate projects “illegal”, homebuyers write to PM Modi

Extension should only be for the actual period of the lockdown when construction was not permitted, they said  

Pointing out that extension of project timelines comes with an additional burden of EMI, rent and mental agony, homebuyers in a letter to prime minister Narendra Modi have said that the Centre’s advisory asking real-estate regulators (RERA) in states and union territories to extend by at least six months the deadline for completion of projects in the face of the coronavirus outbreak is “illegal and beyond the powers under the law.”

Homebuyers, have requested the PM to issue directions to MoHUA to modify its advisory on force majeure due to Covid-19, to be in line with section 6 of RERA, and that to only for the actual period of lockdown when construction was not permitted, without any further liberty to the authorities to extend.

“Anything other than this, is patently illegal and should not be promoted by the very custodians of the law,” the letter said.

“It has become a practice amongst the regulatory authorities to provide indiscriminate extension to real estate projects without following the requirements of the law (Section 6), which clearly stipulates that an extension can only be given ‘when there is no default on the part of developers and only on grounds of Force Majeure’.

“It is easily forgotten that every extension comes with added burden of EMI, rent, mental agony, harassment and shattered dream of having a own home by buyers and their families,” the letter written by M S Shankar, General Secretary - FPCE, said.

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The letter also noted that life savings of 10 lakh homebuyers are stuck with developers “without any fault on their part.” They have also not received any relief despite three years of implementation of RERA. They are also suffering from job losses and pay cuts on account of the coronavirus pandemic.

The letter has highlighted these problems and requested the prime minister to waive of/condone the interest amount during the moratorium period on EMIs payable by homebuyers, with a parallel recovery of the same from the respective builders who have been holding the homebuyers’ monies.

The outbreak of COVID-19, the respiratory illness caused by the coronavirus, be treated as an “act of God” and a “force majeure” event under the Real Estate Regulatory Authority (RERA) Act, the housing and urban affair ministry had said in the advisory issued on May 13.

The ministry of housing and urban affairs (MoHUA) had convened an emergency meeting of the Central Advisory Council (CAC), a body notified under the Real Estate Act (RERA), on April 29, 2020 to provide a “blanket extension” to all real estate projects across the country for 6 to 9 months, over and above the one year already provided under section 6 of RERA.

At the meeting, the FPCE, the homebuyers’ body had opposed the decision, as it is in violation of the Act, and also followed it up with an email, the letter noted.

“However, ignoring our views, that the proposed extension is illegal and beyond the powers under the law, and that the one year already provided under section 6 should be exhausted first, MoHUA issued an advisory to all states to carry out this illegal blanket extension,” the letter said.

Homebuyers, in the letter, have brought to the notice of the prime minister that in COVID-19 times, it is the homebuyers of the country who are in dire need for support from your government as they are facing unprecedented job losses and pay-cuts.

During the CAC, along with FPCE, Federation of Apartment Owners Association (FAOA) and Namma Bengaluru Foundation (NBF) representatives had requested MoHUA for providing relief to the homebuyers due to the Covid 19 impact.

“But this has not been paid heed to by your government,” the letter said.

 

Consent of homebuyers must be taken

MoHUA should also be directed to issue an advisory to the regulatory authorities to adhere to the requirements of section 6 for any project extension in normal course, and also to seek the consent of buyers prior to approving any extension. During this extension, the EMIs should be payable by the builders.

Further the builders should be directed, to suo-motu, pay the delay compensation as per section 18 as well. “This will also act as deterrent for developers from seeking unnecessary extensions and delaying project completion,” the letter said.

MoHUA should be asked to issue an advisory to all state governments and authorities under RERA, to ensure execution of orders / judgements issued by Adjudicating Officers, Authorities, Tribunal, as per the timeline mentioned in RERA.

 

Hold regular meetings

It should be directed to hold regular Central Advisory Council (CAC) meetings to address the issues faced by all stakeholders of the real estate industry, and not only to convene emergency meetings for builders’ interests.

“We need to act urgently as perception is building specially within homebuyers that RERA is failing in its intent,” the letter said.

The letter notes that despite the innumerable concessions provided to the builders’ community by the government in the last few years, there has been no recovery in the real estate sector.

“The policy prescriptions are misguided to say the least. The cause, from an all-time boom in the sector to the slowdown in the past few years, is a result of the unending greed of the builder community. If only the government had invested its policies and prescriptions in the interest of homebuyers, the situation would have been much better. Millions of homebuyers hope this time it will be different, the letter said.

 

Provide tax concessions

The letter also requests the PM to provide for a few tax concessions.

The government should consider amending Section 24(b) of the Income Tax Act, 1961 to provide for deduction of interest from ‘Income from House Property’ even after possession of the house is received from builder after more than five years, that is to remove the limitation of five years for claiming deduction under this section “since this limitation clause is punishing the honest homebuyers for no fault of theirs.”

Also, for those paying both EMI and rent and date for scheduled handover of possession has passed, there should be separate deduction for EMI paid from the total income of such assesses over and above any other deduction being currently provided.

The limit under section 10(13A) of Income Tax Act, towards House Rent Allowance needs to be enhanced to higher of ‘either the actual rent paid or the allowance received’ in order to incentivize the salaried class, who have been the most honest tax payers of the country.

The benefit of reduction in interest rate should be automatically passed on by the banks to all home loans currently ongoing, without any application or action on the part of homebuyers. “The benefit of reduced rates should not be limited only to prospective loans of homebuyers,” the letter added.
Vandana Ramnani
first published: Jun 8, 2020 10:42 am

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