In order to standardise the real estate project allotment process in the state, the Maharashtra Real Estate Regulatory Authority (MahaRERA) has drafted a format of model allotment letters that will have to be followed by realtors while booking every unit of property.
What does the allotment letter format say?
MahaRERA has gone into specific details developers are supposed to mention while issuing allotment letters to buyers. This includes details such as date of possession, carpet area and total value of the booked unit. The format also goes into minute details; for instance, the booking amount also has to be mentioned while issuing the allotment letter and it cannot be more than 10% of the total value of the property unit.
The format also details the allotment of garage parking and mandates that open parking spaces have to be allotted without any consideration.
MahaRERA has also specified that a developer cannot charge more than 2%, in case there is cancellation after issuance of the allotment letter. It said that no cancellation charge should be levied if there is a cancellation within 15 days of booking, 1% will be charged in case of cancellation between the 16th to the 30th day, 1.5% up to 60 days, and the maximum of 2% in the event of cancellation 61 days after issuing the allotment letter.
Is the allotment letter model format mandatory?
In its circular issued in this connection, MahaRERA has stated that the proforma of the allotment letter, in line with its format, has to be uploaded along with the application for registration of the project. The issuance of this allotment letter is mandatory whenever a buyer pays a sum of not more than 10% of the cost of the apartment, plot or building as the case may be, as a deposit or advance.
Under which provisions of the law has MahaRERA issued the letter?
According to the circular, MahaRERA, under Section 37 and regulation 38 of the RERA Act, is vested with power to issue directions to promoters, real estate agents and allottees from time to time as it may consider necessary.
Why is the absence of a standard format an issue?
“Every builder issues allotment letters in their respective formats and they draft a format suitable to them. The format does not have adequate information many times, and due to this buyers are not informed fully. The draft or format issued by MahaRERA makes several things clear, like booking amount, cancellation amount, date of possession, when the sale agreement will be signed… and this was needed,” said Vijay Satbir Singh, Member, MahaRERA.
Legal experts practising with RERA say the allotment letter format was required because there is no standard format currently for booking acknowledgment, cancellation charges etc.
“Section 13 of RERA does state that no promoter can demand more than 10% of the total value of property without entering into a written agreement, but this required validation in the form of a model allotment letter. The mention by MahaRERA will make buyers aware of it, and further, the bigger step is in stating how much the developer can deduct in case of a cancellation of a booking,” said Nilesh Gala, a lawyer practicing with MahaRERA.
Gala added: “The allotment letter format very clearly says it (cancellation charges) cannot be more than 2%. Further, allotment letters are generally silent on the date of possession, carpet area, how many floors etc. The onus is now on the developer to declare the true picture, starting from the booking amount that he will accept from buyers.”
Why is a standard format critical?
According to experts, in several cases before MahaRERA, even one missing word can make a lot of difference. Now, with the authority drafting the format for an allotment letter, the developer is bound to follow it. However, MahaRERA has also given developers freedom to add clauses in their allotment letters by highlighting them in different colors.
“MahaRera’s model allotment letter is a progressive step towards standardising key legal documentation. This allotment letter, along with the detailed cancellation clause, is the first step towards empowerment of the consumer to transact in property with confidence and trust,” said Arvind Singhatiya, Founder & CEO, LegalKart. “I think it was required because the younger generation nowadays might not be aware about each and every thing about a property transaction. They might be the best in their own field but not necessarily in real estate transactions, wherein if one word goes missing from the documentation, it can make a lot of difference."
He added: “The order by MahaRERA specifies terms and conditions during the booking of the property, and in general there might be lacunae (in general) and people will find ways to escape. But RERA is a very young law. Also, considering the age of this law, the evolution of the RERA Act has been the fastest. This is all happening for the betterment of the real estate sector, and will bring more transparency into dealings.”
According to real estate developers, the standard format of the allotment letter is enough to ensure that litigation between buyers and developers is minimal.
“Standardisation of the allotment letter by MahaRERA will lower the likelihood of litigation. Even in the case of litigation, the standard format of documents will help in dealing with cases at a much faster pace. I believe the aim is to bring down litigation and on the lines of a model agreement, a model allotment letter will make sense and will benefit the real estate market,” said Dhaval Ajmera, Director, Ajmera Realty infra India Pvt Ltd.
Ajmera added: “There are chances of amendments being called for, including but not limited to developers saying deduction of only 2% in the case of cancellation is very less. However, this whole process of issuing a standard allotment letter is a welcome move by MahaRERA.”
What is MahaRERA’s track record in registering projects and handling plaints?
Five years after it was formed in May 2017, MahaRERA data show it has registered more than 36,000 projects and more than 17,000 complaints have been disposed of by the Authority. In all, registrations of more than 4,500 projects have lapsed in Maharashtra.
Model format of the allotment letter drafted by MahaRERA:
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
