COMMENT-Mamata's HIRA is a poor copy of Modi's RERA and shortchanges homebuyers

A rare good development for genuine real estate players and homebuyers was the introduction of Real Estate (Regulation and Development) Act (RERA), which became a law two years ago.

Apart from other benefits, RERA has helped plug the generation of unaccounted cash from the sector. The real estate sector has had the unenviable distinction of being among the highest generators of cash in the economy. Apart from bringing the sector into the mainstream, RERA has been credited for making builders accountable to buyers.

Recent changes in the Insolvency and Bankruptcy Code (IBC) have put buyers at the same level with institution lenders in case the builder files for bankruptcy.

There is still room for tightening the screws but some state governments want to go back to the old system where the builders and property developers called the shots.

After sitting on the decision to introduce RERA in West Bengal for nearly two years, the Mamata Banerjee-led Trinamool Congress (TMC) decided not to implement it and has instead come out with its own law. Though RERA is not binding on state governments and each state is allowed to tweak the rules as per ground realities, most states have brought in stricter laws to curb builders' powers and give more protection to the homebuyer.

West Bengal, on the other hand, has decided to press the rewind button by coming out with a watered-down version of RERA. The builder lobby in Bengal is naturally happy with the new law and has noted that the West Bengal Housing Industry Regulation Act (HIRA) makes only small changes to RERA. If that is the case, then why was Mamata Banerjee sitting on implementing RERA and secondly why need a new act when the present one allows for tweaking?

The fact is that HIRA is a watered down version of RERA. News reports point out two changes that have been incorporated in HIRA.

One key complaint amongst homebuyers was that builders were not delivering projects on time. RERA ensured that the builder sticks to a declared delivery schedule and any delay should be penalized. HIRA has done away with it by diluting the force majeure clause or rather making it meaningless.

The report says under RERA, developers can invoke the clause only in case of war, drought, flood, earthquake, fire or any other calamity caused by nature, affecting the regular development of real estate projects. But HIRA has added a point to the above-mentioned reasons saying force majeure can be declared for “any other circumstances as may be prescribed". This gives the state government the power to declare under what condition the force majeure clause can be invoked. Even the silliest of reasons can be declared by a builder-friendly government as a reason for delay.

The second clause concerns selling of open and uncovered space as ‘garage’ space. Uncovered parking slots were sold by builders as ‘garages’ but RERA made it clear that only an enclosed space with a roof and three walls could be termed a garage. RERA clearly mentions that garage doesn’t include ‘unenclosed or uncovered’ parking space.

Given the rate at which parking spaces are sold in metro cities, builders in Bengal are going to earn bumper profits. The open space that a builder provides gives him extra FSI (floor space index) to build more flats. This open space is generally for garden or simply vacant space. A builder in West Bengal can not only use the vacant space to sell it as a ‘garage’ without providing necessary infrastructure, but also add a few more flats to the building complex.

Not only has Banerjee deprived the homebuyer in her state of a strong Act to take on the builder lobby, she has also played into their hands by clearing legislation which changes little from how they were operating earlier.