Impact of Cabinet Nod to real estate bill on home buyers
23 March 2016
The real estate sector has been buzzing with the news of clearance of the Real Estate (Regulation and Development) bill by Rajya Sabha first, and then Lok Sabha. Both the nods were received this month (March 2016), after this Real Estate regulatory bill was pending for a long time, since 2013. This is good news for the home buyers, as the bill protects their rights and introduces regulations on the builders. It seems to be a real blessing in disguise to all the home buyers as they would get more information in hand while buying a home, and also know recourse actions if builders are unable to provide timely delivery of homes.
But, what exactly are the amendments cleared as per this Real Estate bill? Are there any favourable rules that would bring in more investments in the real estate sector? Let us check out the key provisions of the Indian Real Estate Bill cleared by the Rajya Sabha and Lok Sabha.
- Regulation authority would be established at state levels to regulate and supervise the real estate transactions in that region. This step is likely to improve transparency and encourage structured investments in real estate.
- Builders / developers will have to register all their real estate projects with this authority. For successful registration, they will need to reveal all project related information such as project plans, promoter details and implementation schedule, land status, layout plan, agreements, details about real estate agents, status of necessary approvals, etc.
- Real estate developers will not be able to sell any homes till the above mentioned registration and all necessary approvals are in place. Without these, they won’t be even able to advertise or market about their project. And yes, this does not only apply to new projects, but, also to ongoing projects.
- Buyers will have access to all key information related to the real estate project where they are investing their money. The builders would not be able to make any modifications / alterations to the project design / layout, without the approval of majority of the buyers.
- To ensure on-time construction and delivery of real estate projects, the builders will be required to deposit 70% of the project cost (especially money collected from buyers) in an account that will be reserved for that particular project only. This would ensure that the builders are not able to manipulate the funding, by making use of funds from some other real estate projects. Clearly, funds allocated for a particular project have to be utilized for only that project.
- In the past, homes were being sold to buyers based on the super built-up area, without revealing further information about the carpet area. As per this bill, homes will now have to be sold to the buyers by letting them know the exact carpet area. And all calculations will happen only based on the carpet area, which augurs well for the investors and buyers.
- For any delays or defaults with regards to delivery of projects, builders will be liable to pay interest to the buyers at the same rate at which they charge them. And it is not always the builders who are at fault. Hence, even the local authorities will be covered under this bill and liable to a legal recourse if they fail to give the necessary approvals within the stipulated deadlines. The exact penalty costs will be - 10% of project cost for non-registration,another 10% along with 3 years imprisonment for continued violations, and even 5% of project cost for incomplete / inaccurate disclosures.
- Aggrieved buyers will now be able to approach the consumer courts at district levels, instead of just the real estate regulatory authorities. More than 600 district level consumer courts will be established to handle buyer grievances.
- Real estate properties with size greater than 500 sq.mt. (or 8 flats) will fall under the law, instead of the earlier size criteria of 1000 sq.mt. (or 12 flats).
- As mentioned earlier, builders may get prison for 3 years if they violate the provisions of this bill. Similarly, if the agents or buyers violate the provisions, then, they will be liable to 1 year of imprisonment.
- There will be a setup of a fast track dispute resolution mechanism to enable quick resolution of disputes / discrepancies among different parties via Appellate Tribunal as well as adjucating officers.
- All these bill provisions are applicable for commercial and residential properties.