The Real Estate Regulatory Bill – What does it entail?
It’s no news that the real estate sector in India is big and booming. It is also no news that the everyday escalating scams and frauds in the sector are a menace for the buyers. Therefore, it’s only fair to note that we have lacked a much needed regulatory mechanism to ensure transparency in the property market for a long time now. However, thanks to the pending Real Estate Regulatory Bill, the nation seems to be paving its way to monitoring the real estate market, after all.
On 5th July 2013, the draft legislation that was imminent since 2009, was finally approved by the union cabinet. It is now pending for this winter session of the parliament. The Real Estate Regulatory Bill aims to establish a regulatory authority for the realty sector in order to protect the rights of the consumers.
Let’s take a look at some of the highlights of the Bill:
1. The Real Estate Regulatory Authorities (RERAs)
The Bill aims at launching a Real Estate Regulatory Authority (RERA) in each state. Apart from a few exceptions, all residential real estate projects, as well as the agents dealing with them, will henceforth need to be registered with the RERA before any unit/units of the projects can be bought or sold. The registration requires the promoters of the project to upload all details of the same, like site information, layout plan, schedule for completion etc. on the RERA website.
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2. Timely delivery to the buyers
Delaying the possession dates is the most common practice among builders today. This has huge financial and personal implications for the buyers. In order to ensure strict adherence to the promised schedule, the Bill is entitled to impose 100 percent refund from the builder to the buyer, in case of a long delay in handing over the flats.
3. Transparency in sharing project details
Builders often promote their projects by showcasing infrastructure and amenities on paper, that are absent from the finished project. In order to hold the builders accountable for all such promises that they make, the Bill does not allow any changes in the project at a later stage. If the builder is found guilty of over-promising and under-delivering, then he can be penalized at 10 percent of the project cost or up to three years of imprisonment.
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4. Actual carpet area specifications
Common passage area, stairs and other spaces constitute for 20 to 30 percent more than the carpet area of the flat, which is the actual area that the buyer needs to be informed about. With this Bill in place, the builders will have to disclose the exact carpet area of the flat to the buyers.
5. Mandatory clearances before launch
Most builders keep the buyers in the dark about the pending government clearances of the project, before they start working on it and selling it off. This lands the buyers in trouble at a later stage. The Bill clearly states that it’s mandatory for builders to ensure all government clearances for the project well before they start selling flats.
6. A separate bank account
Another common practice among buyers is raising funds for an under-construction property from the buyers by taking advance payments, and utilizing the funds for other projects or purposes. In order to curb this problem, the Bill makes it compulsory to maintain a separate bank account for every project, where 70 percent (or less, depending upon the state) of the funds of the project will be kept aside. All transactions from this account will only be used for the project it is meant for.
7. Post-sale services
The Bill empowers the buyers to approach the builders until after a year of the sale, in case of any defects or deficiency in the property. Thus the builder shall be liable to rectify the issue at hand as early as possible.
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