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There is already an older Act (MOFA) which lays down the basic regulations elaborated in the new realty Bill. Sources explains their common ground

The much-awaited Real Estate (Regulation and Development) Bill has got the home buyers as well as the real industry excited. People are hoping that the Bill will radically change the way real estate projects are developed and sold in the country. The Bill is likely to be presented in the parliament soon. In the mean time, it is pertinent to note that a similar legislation is already in place in Maharashtra for nearly 50 years now. The Maharashtra Ownership of Flats Act, 1963 (MOFA) was enacted in 1963, with the view to regulate the promotion, construction, sale, management and transfer of flats taken on ownership basis in the state. Under the Act, responsibilities are cast upon the promoters with respect to the flats constructed and sold by them and rights are conferred upon flat buyers. Here’s a look at some of the key provisions of this Act, many of which are similar to those proposed in the new Bill and which safeguard the interests of the buyers.


Under Section 4 of the MOFA Act, the developer cannot take any advance payment, earnest money or deposit from the flat purchase, equal to or exceeding 20 per cent of the sale value of the flat, without first executing a written agreement (in the format prescribed under the Act) and getting the same registered.DISCLOSURES 

Section 4 of the Act further states that such an agreement should inter alia contain:

The date by which the possession of the flat will be handed over to the purchaser.
The extent of the carpet area of the flat, with the area of the balcony shown separately.

The price of the flat, including the proportionate price of the common areas and facilities, to be paid by the flat purchaser and the intervals at which installments are to be paid.  The nature of the organisation (cooperative society, company, condominium, etc.) of the flat purchasers to be formed.

The nature, extent and description of the common areas and facilities. Property card or extract or any other document showing the nature of the title of the developer to the land on which the flats are to be constructed. Plans and specifications of the flat as approved by the concerned local authority.


Section 3, which deals with the general liabilities of a promoter (developer) states that when flats are advertised for sale, the developer shall disclose, inter alia, in the advertisement the following particulars:

The extent of the carpet area of the flat, including the area of the balconies, which should be shown separately. The price of the flat, including the proportionate price of the common areas and facilities (which should be shown separately), to be paid by the flat purchaser and the intervals at which the installments thereof may be paid.

The nature, extent and description of common areas and facilities.


Under Section 5 of the Act, the developer is required to maintain a separate bank account for sums taken as advance or deposit from the flat buyer, including the amount taken towards share capital for the formation of the cooperative society as well as towards outgoings (advance maintenance, taxes, etc.) and needs to utilise the same for the purpose for which it was collected.


After the plans and specifications of the building, as approved by the concerned local authority are disclosed or furnished to the flat buyer, the developer shall not make:

Any alterations in the structure of the flat(s) which are agreed upon, without the previous consent of the buyer.

Any alterations or additions in the structure of the building without the previous consent of all the persons who have agreed to take flats in such a building.

Further, if there is any defect in the building or material used or, if there is any unauthorised change in construction and the same is brought to the notice of the developer, within three years from the date of handing over the possession, the developer must rectify the same at his own cost or compensate for the same.


Under Section 10, no developer shall, after he executes any agreement to sell any flat, mortgage or create a charge on the flat or the land without the previous consent of the flat buyer. If any such mortgage or charge is created, it shall not affect the right or interest of the flat buyer.


Under Section 10 of the Act, once the minimum number of persons required for forming the cooperative society (60 per cent of the total flats) has purchased the flats, the developer is required to make an application to the registrar for the registration of the society. If the developer fails to make the application within the prescribed time period, the flat owners themselves may directly apply to the registrar for such registration.


Under Section 11, the developer has to take all the necessary steps to convey to the organisation of flat owners (society, company, etc.), his right, title and interest in the land and building within the time specified in the purchase agreement. If no time is specified in the purchase agreement, the same shall be done within the prescribed time. If the developer fails to execute the conveyance in favour of the cooperative society (or company or association, as the case may be) within the prescribed time, the cooperative society may directly apply to the competent authority for unilateral deemed conveyance to be executed in their favour.


Any promoter who, without reasonable excuse, fails to comply with or contravenes the provisions of Section 3 (general liabilities of the promoter), Section 4 (disclosure), Section 5 (separate bank account), Section 10 (formation of the society) or Section 11 (conveyance), shall on conviction, be punished with an imprisonment of upto three years or fine or both. The penalty for contravening any other provisions of the Act, on conviction, is imprisonment of upto one year and/or fine of upto Rs 50,000. Further, when any promoter is convicted of any offence under this Act, such a promoter shall be disqualified from undertaking the construction of any new project for a period of five years.

The competent authority, may direct the local authority not to give any permission to the convicted promoter, for the construction of any flat during such period. As can be seen from the above, MOFA is a very powerful Act which contains many stringent provisions for safeguarding the interest of the flat buyers. However, despite this, it has been seen that its implementation has not been effective. This is mainly because of the fact that there is not much awareness among flat buyers about their rights and developers’ duties under the MOFA. Another reason why MOFA has failed in its objectives is the legal and administrative hurdles in implementing the various provisions. For example, while MOFA empowers the property buyers to bypass the developer and directly apply for deemed conveyance in case the developer fails to do so within the prescribed time, in reality it has been observed that it is nearly impossible to get deemed conveyance. Let us hope that the proposed Real Estate Bill has more teeth and does not end up merely as lip service to the flat buyers.


Category : Flatons Advisors Blog



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