Draft ordinance and the real estate scenario

Shahiduzzaman Khan
The government and the real estate developers are apparently at loggerheads over the passage of a draft ordinance named as 'Real Estate Management Ordinance 2008,' which is designed to regulate the country's booming real estate sector. The law ministry has been asked to place the draft before the council shortly for its final nod. The draft regulation stipulates jail terms and financial penalties for errant developers.
The government officials sat with the leaders of the Real Estate and Housing Association of Bangladesh (REHAB) quite a number of times to make the new laws and regulations acceptable to both the parties. The REHAB submitted a set of recommendations to the government for incorporating those in the ordinance. But after the passage of the draft ordinance, it was seen that those were left unnoticed. The REHAB quickly came up with a notice that if the ordinance is implemented, it will destroy the real estate sector, which accounts for around 11 per cent GDP.
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 lax monitoring of the sector, prompting the government to initiate the move to bring the fast-growing sector under a stringent law.
The draft was discussed late last year in the cabinet and sent back to the housing ministry for eliciting opinions from the stakeholders. An inter-ministry meeting in March 2008 suggested modifications of the draft to cover the whole range of activities - selling, buying or allocating private land, plots, apartments or flats, and construction of building on shared plot. The public works ministry placed the draft before the cabinet recently. The proposed law suggested maximum three years of imprisonment and financial penalty up to Tk 1.0 million for violation of provisions.
It suggested that real estate companies must obtain registration from the authorities concerned and get project designs approved under the Private Housing Project Land Development Rules-2004. An occupancy certificate is a must for handover of 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 money along with interest to the buyers in three months' time in case of missing handover deadlines.
The developers have to take initiatives for ensuring utility services in the project areas. If any company is found that it starts the project work without permission, the company will be fined up to Tk 1.0 million and its executives may be punished with three years of imprisonment. It also imposes bar against mortgage of any plot or flat before it is handed over to its owner. Developers will be fined for failing to inform its clients before-hand 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 people, mainly the clients of new flats and plots are largely satisfied with the provisions of the new law. They said it might be able to reduce the their sufferings to some extent. But it is apprehended that the government might not be able to implement it since the developers are very influential and can dictate terms.
On the provision that bind developers to bear the repair cost even after two years of handover of any apartment, the REHAB contended that myriads of things from different sectors are used in an apartment and it is absolutely impossible for any developer to bear the expenses. It said it requires no new law for booking, selling and buying of apartments and private lands as there are already many laws to handle these issues.
As per ordinance, developers cannot file any case against those government officials who are responsible for supervising the activities of their activities. Yet any official from the developer's side can be fined or jailed for violating any clause of the ordinance. This is highly immoral and contrary to ethical norms, said the REHAB. No good and meritorious person will like to remain in the real estate sector, it added. The REHAB has over 350 members as of now. Besides them, a number of companies are now operating in small scale. The service sector witnessed a rapid growth in the last two decades, employing tens of thousands of workers in construction work and contributing to the expansion of related sectors like cement and steel.
The recent moderate earthquakes that hit Dhaka and adjoining area caused development experts in Bangladesh to contemplate the possible scenario of deaths and destruction in case an earthquake of severe intensity. Thousands of high-rise apartments were constructed almost overnight on hurriedly filled-up ditches and using low quality cement and iron rods in violation of a six-storied limit, imposed by the national building code. The other grim side of the story is that most of the land-owners or real estate developers, to avoid cost escalation, have relied heavily on ordinary masons instead of qualified structural engineers for technical advice while constructing the buildings.
According to recent reports, Rajdhani Unnayan Kartipakhyaya (RAJUK) the government office responsible for overseeing all constructions of buildings, has already identified 50 apartments at Lalmatia, 23 at Shahjahanpur, 60 at Dhanmondi and 110 at Mirpur and Tejgaon area that have not followed the building code. The reports further said that some buildings have also been constructed on the basis of forged documents and that some real-estate developers have constructed apartments, 8-9 storied high, in some city centres by violating the law. But what appears to be puzzling is that the developers claimed that they had obtained necessary documents from the Civil Aviation Authority of Bangladesh, RAJUK and the Department of Housing before embarking on the construction work.
Besides the imperative of acquiring the required permission and abiding by the national building code, there is the question of ensuring the quality of the construction materials like bricks, iron rods, sand and cement. Stories abound in the country of numerous factories that are producing low quality cement by using low quality raw materials. These factories often flout the strict quality control measures and market inferior quality cement at cheaper prices. The unsuspecting consumers are buying such cement at their own peril, having no idea how well these buildings would be able to withstand a mighty quake. Therefore, there is a need to make stringent laws to make the developers strictly adhere to the national building code.
Like the electric and gas metre readers in DESA and Titas gas distribution company, many officials of the RAJUK are also known to have become very rich by manipulating the approved designs and plans for the developers. Anyone who has ever built a house in Dhaka knows how difficult it is to convince the relevant RAJUK officials before getting the design approved. However, the large construction firms maintain their own set of people to deal with the RAJUK officials.
Some unscrupulous real estate developers - certainly not all - usually indulge in all kinds of shoddiness to maximise their profits. A government agency like RAJUK is responsible to oversee the conduct of all real estate developers in the capital city to ensure that they follow the rules and codes and do not cheat the unsuspecting flat owners who would eventually buy them. However, before the draft ordinance goes to the council of advisers for its final approval, there should be a consensus settlement between the government and the leaders of the REHAB on the issues they have differences. Otherwise, the whole real estate sector is poised to witness chaos and confusion leading to its destruction.

(The Financial Express- 03.08.2008)