The real estate sector is valued at around US$120 billion and is a crucial driver of growth in the economy. However, many considered that the balance of power between property developers and promoters on the one hand, and buyers of property, developments and projects on the other had moved too far in favour of the former. On 15 March 2016, parliament passed the Real Estate (Regulation & Development) Act (RERA) to better regulate the industry, to establish the Real Estate Regulatory Authority and to give greater rights to end purchasers of property.
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The state of West Bengal, however, after much deliberation, came up with its own real estate regulation act, the West Bengal Housing Industry Regulatory Act (WBHIRA) establishing the West Bengal Housing Industry Regulatory Authority, a state-specific body, which came into being on 1 June 2018. The constitutional validity of the passing of the WBHIRA is currently being challenged before the Supreme Court mainly on the grounds that the president did not assent to the act under article 254(2) of the constitution. The following is a comparative analysis of the WBHIRA and RERA.
The WBHIRA is almost identical to the RERA passed by parliament, with two notable exceptions:
1) Definition of garage.
Section 2(y) of RERA defines a garage as “a place within a project having a roof and walls on three sides for parking any vehicle, but does not include an unenclosed or uncovered parking space such as an open parking area.”
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This definition supported by the judgment of the Supreme Court in the case of Nahalchand Laloochand Pvt Ltd v Panchali Co-operative Housing Society Ltd prohibiting builders from selling stilt parking and open spaces is expected to clamp down on the practice of builders selling open spaces as garages in all states where RERA is applicable.
The WBHIRA defines a garage under section 2(x) as a “garage and parking space as sanctioned by the competent authority”.
The definition under WBHIRA, in our opinion, may defeat the entire purpose of defining the meaning of a garage under RERA since it keeps open the possibility of the authority classifying as garages such spaces that otherwise would not have been so classified under RERA. This altered definition of a garage has been seen by many as favourable for developers and builders.
2) Force majeure.
Force majeure is a term used commonly in legal language to denote some external unforeseen events (natural or otherwise) that result in a party to a contract being freed of their contractual obligations. The Supreme Court has conclusively held in Union of India (UOI) v Prabhakaran Vijaya Kumar & Ors that unforeseen and inevitable accidents will be considered as exceptions to the principle of strict liability binding on a party to a contract. The difference between RERA and the WBHIRA in the context of force majeure comes from the respective definitions of the term in the acts.
Section 6 of RERA defines force majeure as “a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project”.
Section 6 of WBHIRA on the other hand defines force majeure as “a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the regular development of the real estate project or any other circumstances as may be prescribed”.
In our opinion, the definition under RERA is the conclusive explanation of the term and clearly establishes the conditions under which the exclusionary effect of force majeure may be invoked, unlike the situation under the WBHIRA. The definition under WBHIRA is viewed as a builder-friendly change as it leaves open the possibility of unwarranted extensions being granted.
In summary, the WBHIRA may be looked on as a diluted version of RERA with the potential to make acquiring properties cumbersome and more expensive for buyers. On the other hand, it may be viewed as legislation allowing more flexibility and leaving the way open for the government or any other competent authority to make changes as and when required. Let us not forget that the fate of the WBHIRA lies with the decision in the case before the Supreme Court. In the event that the WBHIRA continues to exist in an unchanged form, it may turn out to be either a boon or a bane for the real estate industry depending on how flexibly the government or any other competent authority acts and reacts.
Vikram Wadehra is a partner and head of the Kolkata office of Vidhii Partners. Vidushi Chokhani is an associate.
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