Veteran property lawyer Parimal Shroff speaks on the two real estate regulation Bills
“We can’t really say how effective laws will be by analysing drafts. We must look at legal interpretations of housing regulation rules to see how they will affect the people concerned,” said Parimal Shroff, an eminent property lawyer. He was speaking at a seminar organised by Moneylife Foundation at the Royal Yacht Club on 25th January, on whether the housing regulations will benefit the customers.
Mr Shroff gave a brief outline of the two impending Bills on real estate regulations: the Draft Real Estate (Regulation & Development) Bill, 2011 at the Centre and the Maharashtra (Regulation and Promotion of Construction, Sale, Management, and Transfer) Act. The Maharashtra Act, which has been already passed by the state Cabinet, will replace Maharashtra Ownership Flats Act, 1963 (MOFA).
Mr Shroff pointed out that the Central Act is “too ambitious”. “It proposes that all permissions, information, online declarations and registration are to be validated before the project starts. The penalties for failing to comply are too severe. Then, it requires that the plans and designs to be put up online—this gives rise to problems related to protection of intellectual property and security,” said Mr Shroff. The Maharashtra Bill, which has the stringent provisions largely diluted, he said, is less ambitious, and would be a better bet.
However, he pointed out, the effect of rules and regulations pertaining to real estate have always been subject to legal interpretations. “Regulators become pro-active with passage of time. You cannot really say how the laws will affect you until it is interpreted by the court. Subject to interpretations, amendments will also be made,” he said. He gave example of the Nahalchand Laloochand case. In 2010, the Supreme Court gave a landmark (and much discussed) judgment on whether parking spaces can be sold by builders. The court, by interpreting MOFA, defined the term ‘flat’, which is basically an enclosure whose construction approved by authorities. Parking spaces, are amenities, and can’t be seen as part of ‘flat’, hence can’t be sold.
“While initially, buyers were happy that builders couldn’t sell parking places, things turned bad afterwards. Now, every year, societies auction or arrange lotteries for allotment of parking spaces—which is very inconvenient. Also, considering the friction between society members, it has become a problem,” said Mr Shroff. The Maharashtra Act, attempts to resolve the issue by allowing the sale of car parking area. The Maharashtra Act also talks about compulsory transfer to the society.
There is likely to be friction between the state and the Central laws, because real estate/land issues are a subject on which both the Centre and the state can make laws. “In case of conflict between the two, there will be no resolution. But ultimately, the local law will prevail, because the Central law cannot replace it,” Mr Shroff said while answering a question. A question was asked on what effect the new law will have on societies that are formed earlier. “Of course, it wouldn’t affect old societies, unless there is some retrospective amendment to the existing law. However, in case a dispute arises, the new law will apply,” he said. However, it will be a different case when there is a legal interpretation by a court. “When you interpret, you are not changing the law. So the things implied in the interpretation will apply from the time the law was passed. Old contracts then will be re-evaluated,” he said.
A member of the audience suggested that sale plans may be certified by authorities so that the builders cannot vacillate between super-built up area and carpet area at will. Mr Shroff said that it is difficult to convince any authority to take this responsibility, or for builders to publish interior plans.
Answering a question on whether deemed conveyance is required by every member of society, he said, “When you become a part of society, what the society agrees upon will prevail.” However, he agreed that deemed conveyance has been largely ineffective, and prevailing corruption has made it almost impossible to get a deemed conveyance.
When asked about what rate (prevailing or new) should stamp duty be paid by society in case of deemed conveyance, Mr Shroff said, “In case members have been mistreated by the builders, the government will give conveyance, but you have to pay. Under the Stamp Act, if all members have paid stamp duty at time of purchase, they will be granted exemption from paying again at time of conveyance. However, if a society has some members who have not paid stamp duty till date, the society has to pay according to the current rates. But people who have not paid till date are not likely to pay, and then, good luck for resolving it.” Mr Shroff also said that forming a co-operative society is a better option, because then, the builder ceases to have any control over matters.
According to Deepak Fertilisers, profitability was affected by a weak rupee
Pune-based Deepak Fertilisers and Petrochemicals Corporation said its net profit rose by 23% to Rs49.65 crore in the quarter ended 31 December 2011, but profitability was affected by a weak rupee.
The company had reported a net profit of Rs40.26 crore for the corresponding period last fiscal, it said in a statement. "Profitability was impacted adversely to the extent of Rs22 crore by rupee depreciation," the company said.
Total income of the company grew by 60% to Rs601.49 crore in the third quarter of the current fiscal from Rs375.03 crore in the same quarter of the previous fiscal, it said.
The rise in income was driven by the strong increase in both self-manufactured fertilisers and chemicals, the statement added.
The manufacturer of complex fertilisers, Deepak Fertilisers also produces speciality chemicals and bio-fertilisers, among other products.
Deepak Fertilisers closed at Rs140.60 per share on the Bombay Stock Exchange, 1.44% up from the previous close.
REC has declared an interim dividend of Rs5 per share for FY11-12
Rural Electrification Corporation (REC), which provides loans to the power sector, reported net profit of Rs769.51 crore for the three months ended December 2011.
The company had net profit of Rs664.09 crore in the corresponding period last fiscal, it said in a filing to the Bombay Stock Exchange (BSE).
In Q3 FY11-12, the company's total income rose to Rs2,699.12 crore from Rs2,175.41 crore in the year-ago period.
"Due to change in accounting policy, the profit before tax for the quarter and nine months ended 31 December 2011 is higher by Rs197.65 crore. The amount remaining to be amortised in Foreign Currency Monetary Item Translation Difference Account is Rs197.65 crore," the filing said. REC has declared an interim dividend of Rs5 per share for FY11-12.
"This interim dividend on equity shares, subject to the provisions of Section 206A of the Companies Act, 1956, will be paid on February 7, 2012," the filing noted.
REC closed at Rs198.25 per share on the Bombay Stock Exchange, 0.46% up from the previous close.