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Much to the relief of prospective home buyers, the Real Estate Regulation and Development Bill was given a green signal by both (Rajya Sabha and Lok Sabha), which besides protecting the interests of the home buyers, aims to make the disorganized and uncontrolled real estate sector more clear, reliable and accountable. The bill which is just a regulation and not strangulation, aims to bring in clarity for both builders and the buyers.
With RS nod, the days of uncontrolled and unclear real sector in the country are no more as it aims to rectify such as zero accountability of builders, delay in project completion by the builders darkness in project details and payment structures. The home buyers all over the country welcome this new age when their investments will be secure and developers will have to be more accountable. Besides renewing the investor’s confidence, it will enable timely completion of projects and help in making the dream of “Housing for all”, turn into reality.
Listed below are the main key features of the bill, which one must know and which act as key reform measures in the boundless property market. The law authorizes the real estate regulator to administer both commercial and residential real estate transactions. Though the new law is pro-buyer but it should not be considered as anti-developer.
1) As per the law, State Real Estate Regulatory Authority of that specific state has been made as the ruling body to be contacted in case of help against any developer. But this will happen only once every state individually gives a go ahead to this law and sets up a state authority on the lines as mentioned in the act.
2) All permissions before project launch: No single project will be allowed to be sold by the developer without getting necessary approvals from the local authorities. Many builders in today’s date give heavy discounts to the buyers in order to lure them at the pre-launch stage without furnishing any details about all sorts of clearances required. Thus, as per this law, the construction for the apartments will only start once the developers get all sorts of necessary clearances prior to the launch of the project. The transparency and disciplinary provisions will help the consumers to understand the complete facts of the projects before making an investment decision.
3) Part of funds collected to be deposited till project completion: The realty projects often suffer a delay as the builders switch the funds collected from one project to another. And due to this fund diversion, consumers are left in lurch with their projects delayed and money struck. The law ensures that the developers deposit at least 70% of collections made, through cheques, in a bank account, so that the booking amount collected from a specific project is not invested into many projects simultaneously and also the developers don’t run out of cash and stall projects and are able to complete and deliver the committed projects on time. This reserve fund would cover the cost of land and construction and would prohibit too much money being pumped into this sector.
4) Registration of projects with concerned Authority: The Bill makes it compulsory for the builders to get all the real estate projects to be set up registered with State Real Estate Regulatory Authority (RERA). All the necessary information like details of the promoter, land status, project lay-out, project plan, status of various clearances and approvals, all types of agreements, details of all the contractors, structural engineers, architects and real estate agents, schedule for completion need to be disclosed to both the authorities as well as the consumers. Mandatory disclosure of these details besides increasing the credibility of developers would protect consumer rights as well.
5) Carpet area defined: Currently the developers quote and sell on the basis of unclear super built-up area as sellable area which is normally 30-40% more than flat’s actual usable area. The law makes this practice illegal and clearly defines the carpet area as net usable area of an apartment and hence going ahead you will be charged only for your carpet area. The carpet area will include toilets and kitchen and now the customer will know exactly what he is getting as living area and at what price.
6) Delays to attract interest: As of now, if a project is not completed on time, the developer is not affected in any way. But going ahead, with the passing of the law, any delay in project completion will make the builder bear the brunt for the same. The developer will cough up the same amount of penalty as EMI back to the consumer for any delay on his part, which the customer is paying to the bank.
7) On time project completion: the law ensures that the flats are completed and delivered on time as harsh rules are imposed on the builders for any kind of violations of the Appellate Tribunals or monetary fines or even both. Any developer who violates the order of Appellate Tribunal can be sent to jail for a maximum term of three years with or without fine.
8) Developers to provide after sales services: the home buyers need to inform the developer in writing of the problems faced or any kind of structural defect, within one year of taking the possession, requesting after sale service. The developers will be liable for any kind of deficiency noticed in the project within five years. He also has a right to change the plans once sold, but only with a written consent of two thirds of house owners. This will keep a control on the common practice by the notorious builders to increase the costing, altering project plans, structural designs and specifications midway like the layout of the apartment or the including the number of floors in a building.
9) Every commercial or residential project having more than eight apartments or covering an area more than 500 square meters will need to be registered with the Real Estate Regulator. This will also cover majority of the realty projects being constructed in various cities of the country.
10) Quick redressal: Under the fast track dispute redressal mechanism the Appellate Tribunals will have to arbitrate cases in 60 days as against the earlier time span of 90 days.
11) Insurance on land title: The Law makes sure that there is an insurance of the land title so that the consumer is not at the losing side if in case the land title turns out to be defective.
12) Lastly, the builders are prohibited from making deceitful claims in advertisement, on project location, appearance or amenities. There will be no gap between what is promoted and what is delivered. It is full responsibility of the builders to adhere to rules and provide correct information. Deceptive claims have been made punishable and the builders can be fined with 10% of the total project cost if found violating any kinds of rules set in the regular act. He can be even sent to the jail for any kind of repeated wrongdoing.
Hence, in its context and content, the new Law is going to be game changer in the landscape of the realty sector of India and will make the homebuyers truly empowered and the builders more accountable and transparent thus attracting new investors and customers, which will give a boost to the Indian Real Estate sector.
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