While RERA or Real Estate (Regulation and Amendment) Act, 2016, will slowly change the way the real estate industry operates in India, the Act has also thrown open a few aspects that need extensive deliberation.
One such issue is the liability of developers to provide for workmanship for structural defects for a period of five years.
RERA lays down that “In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter’s failure to rectify such defects within such time, the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under this Act.”
Undoubtedly, this is the first time that such a provision has been introduced and its applicability may become a headache for developers in times to come.
Speaking at an event orgainsed by Magicbricks on ‘Real Estate – The RERA and GST Era’ in New Delhi on June 29, Madhya Pradesh RERA regulator Antony De Sa said, “Any builder worth his salt would not construct a poor building.”
Khaitan and Co Partner Sudip Mullick said the provision of a builder’s responsibility towards a structural defect for up to 5 years is not harsh because “builders can appropriately cover themselves through insurance. The concern for builders would be workmanship for 5 years which may pose a considerable challenge”.
The question is how should a developer proceed because he sources raw material from other vendors and delegates the construction to contractors and sub-contractors?
Neeraj Bansal, Head (Real estate and Construction), KPMG, said that developers would have to work around this and create a process in a transparent manner. “Unlike in the past, developers will now have to create a back-to-back warranty with suppliers in case a challenge comes up. Starting from the contract to execution and finally handing over, documentation has to be clearly spelled out. Five years is a long period and workmanship is a loose term – is it tiles, paints, electrical wiring or something else, a developer will have to clearly spell out his liabilities in a transparent manner.”
Haryana’s RERA Executive director Dilbag Singh Sihag said, “Before RERA kicked in across the country, Haryana already had a law wherein at the time of granting license, a developer had to give an undertaking to maintain all amenities for a period of 5 years.” He added that structural defect had been defined explicitly in the state Act, thus, ruling out any confusion about what a structural defect is.
The Haryana Real Estate (Regulation and Development) Rules, 2017 (draft rules) define structural defects as “actual physical damage/defects to the designated load-bearing elements of the building, apartment or unit like faults, breakage or cracks, appearing over time in elements such as load bearing columns, walls, slabs, beams etc which can affect the strength and stability of the apartment or the building and shall include (i) defects due to design attributes of reinforced cement concrete (RCC) or structural mild steel (MS) elements of an engineered (structurally designed) building structure (ii) defects due to faulty or bad workmanship of RCC or MS work (iii) defects due to materials used in such RCC or MS work (iv) major cracks in masonry work that are induced as a result of failures of RCC or MS work (v) any defect which is established to have occurred on account of negligence, use of inferior materials or non-adherence to the regulatory codes of practice by the promoter.”
While the accountability to clear structural defects is up to 5 years in Haryana, as regards workmanship a developer is responsible for only a year under the state laws, added Sihag.
Civil engineer Pragya Srivastva, who works as a freelance consultant, says that structural defect refers to a deficiency in a building where the structure fails to perform in a manner that is reasonably intended by the buyer. “It may arise due to a fault in design, material or construction quality. While material deficiency causes leakages and dampness, construction flaw leads to cracks in foundation, plumbing issues, electrical and mechanical problems etc.” She adds that there have been cases where a project is designed for a particular location, keeping in view its soil conditions, but the structure comes up in some other area with different soil conditions which often causes structural faults. “Apart from going by the rulebook on construction engineering, a developer will have to keep a check on contractors who sub-contract the work and also keep an eye on pilfering so that he is not hauled up at a later stage,” she sums up.
So, if a developer wants to save himself from the pain of poor construction, he will have to keep tabs on agencies he conducts business with. The end user would, of course, benefit from this improved diligence.