Real estate is one of the biggest investments a person makes in life. With wide investments made in Real estate, it justifies the need for The Real Estate Regulation Bill, which was passed(after amendments) on Thursday(17-03-2016) in the Rajya Sabha. This bill promises to secure the interests of home buyers and expunge corruption and inefficiency from the sector.
The bill was first proposed and introduced in 2013 and amendments have been made to it by the present government. When it was introduced in 2013, the provisions of the bill said 50% of project funds need to be deposited in a dedicated account that is entitled only for that current project. The revised 2016 Real Estate bill states that 70% of project funds has to be allocated. Similarly, the new revised bill that was passed recently has improvements that benefits the buyer’s interest. The following has few such benefits listed for home buyers.
Perks to the buyers :
- This Bill enforces the contract between the developer and buyer and act as a fast track mechanism to settle disputes. Thereby, buyers possess a tool to fight back in case of fraud.
- As the real estate developers have to deposit 70% of the project cost in an escrow account and ensure that the money is used only for the construction of that project, protects the interest of home buyers.
- This ensures there is no delay in possession as the developers are not allowed to invest the dedicated money in multiple projects.
- In case of defaults or delays, the builders are entitled to pay equal rate of interest as the buyer.
- This Act is welcoming news for people who have already bought homes as well, as it will also cover the existing buyers who are currently facing delays on possession of their property.Benefit to Buyers is that if the developer fails to /delay in completion is obliged to payback the buyer’s money inclusive of their Interests (paid as EMI).
- This new Real Estate Bill ensures there is 90% transparency in details and better governance for the buyers.
- The Act proposes to bring parity between the buyer and seller where the seller is liable to pay the customer the same interest as demanded of the buyer. And if there are any disputes, the Appellate tribunals will have to adjudicate within 60 days of complaint and regulatory authorities will have to dispose of complaints in 60 days.
- If the developer has misled by any statements or representations in any form, the customers can demand to return their payment with interest.
- Pay only for the carpet area and not the ‘super built-up area’. Developers often misused the latter to levy additional charges for common areas.
- The developer cannot make any changes to the original plan in the midway without taking a written consent from the customers.
Shortcomings of the Bill:
The new amendments made to the bill as of now makes it very attractive though few areas have not been covered. Here we throw light on those few:
- No compensation has been provided in case the developers breach the environmental rules put forth by the National Green Tribunal(NGT) including harm to wildlife ,effect on nature, surroundings ,etc.
- Developers are required to get buyers approval to change plans but bill mentions no way to solve controversial environmental approvals like traffic, cleanliness, water, etc.
- It bans advertisements or brochures inviting advances or deposits. This poses to be a potential problem for developers as they cannot garner eyeballs for their projects, they could witness a decline in the pre-launch sales.
- Mandatory registration before starting a new project would lead to renewing a license procedure that can lead to corruption and red-tapism .
- The act does not clearly state that the registration is not been mandatory for projects less than 500 square meters. Registration with the regulator will not be mandatory for projects less than 500 square meter. So, small developers will not be bound to register.