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Tuesday, October 21, 2008

New ordinance raises debate

Sadat Hossain Salim, managing director of Rupayan, focuses on downside of the proposed law

It is a matter of heated debate that the recently proposed ordinance on the real estate contains controversial provisions which, if enforced, could land developers in jail in non-bailable cases.
Sadat Hossain Salim, managing director of Rupayan, a leading housing developer in the country, says: “We often face delays in implementing projects because of the lapses of Rajuk officials. Now, developers will face punishment in case of failure to hand over the apartment in time, regardless of the reason behind the delay.”
“The government and its officials are protected under the proposed law and as per the ordinance, developers cannot file any case against those government officials who are responsible for supervising the activities," Salim clarifies the reasons behind the disputes.
"Yet any official from the developer's side can be fined or jailed for violating any clause of the ordinance," Salim says in an exclusive interview with The Daily Star.
“This is highly immoral and contrary to ethical norms."
“We often fail to deliver the flat or plot because of the land owners and government officials, who conceal disputes that may be associated with the land and delay approving files," he says.
Focusing on "Bangladesh Real Estate Management Ordinance 2008" that created widespread debate, Salim has supported the fact that law is necessary for control of fraudulent acts, but there must be a balance.
Allegations of fraud and deception in handing over plots or flats and illegal encroachment of private and public land are rife against a section of real estate companies.
Many innocent people are often lured by false assurances of hole-in-the-wall housing companies due to the lax monitoring of the sector. Malpractices prompted the government to initiate the move to bring the fast-growing sector under a stringent law.
Currently, the law ministry is reviewing the draft for vetting. The draft regulation stipulates jail terms and financial penalties for delinquent developers.
The government and the developers are apparently at loggerhead over the enactment of the draft ordinance. The government has formulated the law without consultation with the sector people, the realtors claimed.
The Real Estate and Housing Association of Bangladesh (REHAB) submitted a set of recommendations to the government for incorporating the suggestions in the ordinance.
After the draft ordinance came out, it was seen that the recommendations were left out. REHAB quickly came up with a notice that if the ordinance is implemented, it will destroy the real estate sector.
While the government is justifying the ordinance by saying that it is necessary to protect client's interests, developers say it will cut their rights.
“Both parties are right on their respective stances,” Salim says.
In the past, many hit-and-run companies have cheated consumers and failed to hand over the due flats or plots even after years of taking the money. They also use low-quality building materials to stretch the dollar and to bag more profits at the cost of buyers, Salim admits.
“No doubt laws are required to protect the consumers,” he says. On the other hand, the real estate, which accounts for over 8 percent of the country's $78 billion GDP, should not go out of the market over the fear of the provision of severe punishment in the proposed ordinance.
The sector has generated a lot of jobs in the country and genuine businessmen have invested crores of taka, by both equity and bank borrowing, he says.
“If the law comes through, there is a possibility that many genuine businesses will withdraw their investments," he fears.
The companies, wary of "unavoidable circumstances", fear that even lapses of errant government officials or clients may lead them to punishment. Errant officials can escape punishment, according to the proposed laws, Salim says.
He speculates that a new breed of 'tout class' may be born to cash in on the opportunities. “The tout class may try to blackmail the developers in the name of the buyers,” he says.
Dishonest bureaucrats will also try to abuse the law, he alleges.
“We have raised our concerns at different levels including the chief adviser,” Salim says. "He assured us that there would be a balance."
Salim states that a realtor would be punished with five years in jail if he uses low-quality materials. “On what basis will the quality of the materials be classified? We use low-quality materials for low-priced flats,” he adds.
He also criticises the government for terming the offence as 'criminal', instead of 'civil'. “A violation of contract cannot be a criminal offence,” he notes.
But Salim backs the provision for after-sales service. “The service may be for a maximum of one year instead of the proposed two after sales.”
According to a study, Salim says, housing in the capital city will grow until the year 2015. Still the government and the private sector have miles to go in making the city livable. Some 60 percent of Dhaka residents are tenants.
Salim says the sector has boomed mainly because of the large number of people wishing to make Dhaka their home, scarcity of land and the use of black money. These issues have caused for dramatic rises in the price of spaces in the city.
Salim, a campaigner in the housing industry, says there are no housing zones or satellite cities surrounding Dhaka. Now space has become a big constraint for the sector. Industries have grabbed almost all the land surrounding the city.
He also criticises the present REHAB leaders for their failure to uphold the interests of the industry.
“The current leadership is weak and they cannot bargain with the government. They have failed,” he adds.
The proposed law suggested that real-estate companies must obtain registration from the related authorities and get project designs approved under the Private Housing Project Land Development Rules-2004. An occupancy certificate is a must to hand over any plot or flat. The companies must clearly state in their prospectuses the consequences of failure to pay the installments by the buyers, and they must not sell out the flats of defaulters to third parties within 90 days of notification.
The draft law stipulates that real-estate companies will have to return the entire sum of money along with interest to the buyers in three months' time in case of missing handover deadlines.
The developers have to take initiatives to ensure utility services in the project areas. If it is found that any company starts the project work without permission, the company will be fined up to a sum of Tk 10 lakh and its executives may be punished with three years of imprisonment.
It also imposes a bar on the mortgage of any plot or flat before it is handed over to its owner. Developers will be fined for failing to inform its client beforehand about the mortgage of any complete or under-construction land, apartment or space.
Besides, there will be penalties for not using agreed materials in construction and suspending a project without consulting clients.
(The Daily Star-21.10.2008)

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