Dealing with real property in India is akin to playing with fire. The real estate sector is faced with numerous problems with the customers crying foul due to the misdeeds committed by the developers. The major concerns of the customers include non-delivery of the project as per the agreed timelines, delay in construction, absence of a formal documentation between the customer...
Dealing with real property in India is akin to playing with fire. The real estate sector is faced with numerous problems with the customers crying foul due to the misdeeds committed by the developers.
The major concerns of the customers include non-delivery of the project as per the agreed timelines, delay in construction, absence of a formal documentation between the customer and the developer and absence of transparency in sharing of information by the developer. To make matters worse, there is a plethora of misleading advertisements by developers, which lure buyers with the prospects of lucrative returns. It is common in India to sight an advertisement either in print media or displayed by way of hoardings, which contains tall claims by the developers, which is nothing more than a pack of lies, with regard to the project, containing statements like the development of a worldclass township having international standards, and so on and so forth.
However, in the absence of a regulatory authority to screen the advertisements, before they are made public, lead to the innocent public being duped by the developers. The advent of internet has made it even more difficult to keep a tab on the advertisements being circulated via the electronic media. Though the Consumer Protection Act, 1986 classifies misleading advertisements as 'unfair trade practise' an increasing need has been felt to specifically guard the real estate sector against misleading advertisements.
Developers can also be prosecuted under the Indian Penal Code 1860, for the display or publication of misleading advertisements for criminal breach of trust, cheating and dishonestly inducing the delivery of the property. There has been an increasing demand raised by the masses for putting in place a system for the protection of consumer interest by providing a mechanism for prescreening of the advertisements, specifically in relation to the real estate sector.
Taking heed to the growing need, the Ministry of Housing and Urban Poverty Alleviation is in the process of drafting a Model Act for the purposes of regulation and development of the real estate sector in India. The main objective of the Model Act will be to establish a regulatory authority and an appellate tribunal to promote a planned, healthy, transparent development of the real estate market with a view to protect consumer interest, by making it mandatory on part of the developer to register the real estate project.
Amongst various other measures, the Model Act also provides with a mechanism to guard against misleading advertisements. As per the Model Act, a developer is not permitted to issue or publish an advertisement or prospectus, or invite any member of the public to buy or book plots or space in the building or make advances or deposits without registering with the regulatory authority, and without first filing a copy of the advertisement or prospectus with the regulatory authority.
Hence, the enactment of the Model Act shall ensure that all sorts of claims made by the developer are authenticated before being advertised. Further it is pertinent to note that a directive issued by the Reserve Bank of India requires the developers to disclose in all pamphlets/ brochures, and all advertisements relating to the project, the names of the banks to which the land has been mortgaged.
Generally in all the major jurisdictions including India, the law postulates penalty for the display or publication of misleading advertisements that defraud or deceive the public. The proposal for the screening of advertisements by the developers by a real estate regulatory authority before being displayed or the published and prescribing a heavy penalty for any violation, is certainly a step in the right direction, as investing in real estate involves huge investments, where in people put in their life earnings for that 'dream home'.