REAL ESTATE REGULATORY BILL: Highlights for Home Buyers
Posted on March 15, 2016 by Sugee Group
As a relief to home buyers, the much-awaited Real Estate Regulation & Development Bill has been passed in Rajya Sabha. This act targets to empower buyers and regulates all residential and commercial real estate sales through a regulatory authority.
So what does the Bill have to offer? The bill aims to protect the interest of buyers and bring more transparency in the sector.
Here are some of the important highlights for home buyers
The Bill mandates all real estate projects where the plot area is more than 1000sq.mt. or the number of apartments exceeds 12 needs to be registered Real Estate Regulatory Authority and developers will have to disclose project information including details of the promoter, project, layout plan, land status, status of approvals and agreements along with details of real estate agents, contractors, architects and structural engineers on authority’s website.
The Bill provides that 70 percent (or such lower percent, as may be prescribed by the State) of sale proceeds will have to be kept aside by the developer in an escrow account – an escrow account is a temporary pass through account held by a third party (in this case Scheduled Bank) during the process of a transaction between two parties – and it can be utilized for land cost and construction of the related project. It will help Real Estate Regulatory Authorities (RERAs) to monitor transactions related to both residential and commercial projects and ensure their timely completion and handover. One of the major reasons for project delays is real estate companies raise funds through a particular project and utilize those funds to complete other lucrative projects.
Pending the registration of the Agreement, the Developer can demand maximum advance No pre-launch to be allowed without approvals from the local authorities.upto 10% of the cost of the apartment from the buyers.
Registration with RERAs is not required for projects that are less than 1000 square meters, or entail the construction of less than 12 apartments. The Standing Committee has suggested that projects that are smaller than 100 square meters plot area or three apartments need not register with the RERA.
Till now buyers had no clue about what area they were paying for. A major benefit for consumers proposed is that builders will have to quote a price based on the carpet area and not on the built-up area while carpet area has been clearly defined in the bill as the net usable area from wall to wall.
Currently, if a project is delayed, then the developer does not suffer in any way. Now, the law states that any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer. The flat buyers will have the right to claim a refund of the entire amount paid along with prescribed rate of interest and compensation in case of default or inability to give possession.
Real Estate agents will also need to register with the regulator. This is another good move where not anyone and everyone will jump into becoming a real estate agent or a broker, as is the case currently.
The defect liability period is two years from the date of taking over possession.
The developers cannot make any changes to the plan that had been sold without the written consent of the buyers.
There is also a provision for imprisonment for up to three years for developers and up to one year for real estate agents and consumers for violating the orders of tribunals and regulatory authorities. Commercial real estate projects have also been brought under the ambit of the Bill.
Establishment of Real Estate Appellate Tribunal: State-level appellate tribunal will be set up for buyers for addressing complaints. If builder delays in transferring properties to buyers, the appellate tribunal would intervene and slap fines on them within 60 days. In a worst case scenario, the tribunals can send a developer found guilty of fraud to jail for three years.
Sugee Developers being pioneers in the redevelopment sector and closely dealing with tenants and landlords understands the emotions and attachment of the buyers to their homes. We welcome the regulatory bill as this would protect the buyer rights. This act will also minimize fraud and project delays and safeguard buyers by curbing unfair practices in the sector.