The Real Estate (Regulation and Development) Bill:
The
Government plans to have, by year 2022,affordable housing for all citizens.Till
date especially in Mumbai, Pune,Bangalore, Delhi and countless other metropolis
and developing urban areas, the developers took undue advantage of the buyers
even when real estate was already pricey and
profitable, information about the builders was not dependable, and there was no
way for the consumer to have technical knowledge of construction.
The consumers in the growing real estate market face an acute
problem of information asymmetry. They don’t have adequate information about
the land itself, its ownership and other caveats. They have no way of knowing
whether the developer has all the necessary permissions in place and they have
always been cheated about the completion dates even when they end up paying on
a timely basis of “slabs”, which makes up for almost 90% of the cost of the
flat/real estate. However, banking on this information asymmetry, the developers
divert these funds to buy other projects and continue with the same procedure and
proceed for a 3rd project and so on and so forth. By this time, the consumers
of the 1st project are now in aggression over the delay so some
funds find their way back to completing this estate.The developer, even though
undertaking massive projects in this capital intensive sector, never takes a
loan or is never in need of financial assistance because he uses the consumer’s
money for rolling which is more than sufficient for him.
On the other hand, if the buyer vets the agreement, it is likely
that he will infer that all clauses are in favor of the builder and loaded
against him. For instance, a delay in payment empowers the developer to charge
you 18%p.a, while there is absolutely no mention whatsoever of any liability on
the developer to deliver the estate on time. Forget delivery, even the
completion dates are subject to numerous conditions and caveats which nullify
any legal backing to the promise of a delivery, even though it is mentioned in
the agreement. Project brochures are made by advertingprofessionals, which portray
a totally different scene from what is actually being developed. Amenities are
overstated, maintenance costs are conveniently ignored and the consumers are
misled to believe that surrounding estates will also be as pleasant as depicted
in the advertisements. Sample flats shown by the developer have class graded
amenities but in reality the ones provided on completion are cheap knock-offs.
The Developer always finds avenues to delay handing over the estate
to the society (read: housing society), primary reason being:
i. He can charge more maintenance
ii. If,FSI is increased, the developer can benefit by developing
the same estate further with a higher market price.
The Real Estate bill tries to curb these activities and help
overcome the hardship faced by buyers. The core objective of the bill is to
protect the interest of the buyers and promote fair play in real estate market.
The highlights of the Real Estate (Regulatory and Development) Bill are:-
1)
There has been no solid framework for any regulation
to set in in this sector and this bill will successfully formulate a uniform
regulatory environment for Real Estate.
2)
The Government is set to establish,first and foremost,
the Real Estate Regulatory Authority (RERA). This body will be created for the
registration of Real Estate agents and their subsequent projects. Appellate
Tribunal of Real Estate will also be devised so that the decisions of RERA
could be appealed. This will result in less pressure on the judiciary and
thereby result in faster dispute resolution through these forums.
3)
The Bill outlines the duties of developers, buyers and
agents in the Residential Real Estate sector.
4) Developers will be barred from booking or offering any Real Estate
projects of Residential(housing,condominium,town homes) Commercial (offices, warehouses)
and industrial (factories, workshops) nature for sale without registering them
in RERA. The information of the promoter would be uploaded with the details of
above mentioned point in the website of RERA.
5) To prevent diversion of funds
from the project, the bill envisages that 70% of the money paid by the
buyer should be maintained in a separate escrow bank account for the
construction of the project to cover the cost of construction, including but
not limited to, the cost of the land. The developer will be allowed to withdraw
the amount,subject to terms and conditions set in the legislation.
6) Standard model agreement will have written clauses with respect to
completion certificate and payments.
7) All measurements will be disclosed in terms of carpet area only. This
brings about uniformity. Carpet area is the area which includes usable spaces
like kitchen and toilets, and it would be clearly defined to impart clarity,
which was not the case prior to his bill. Misleading terms like super-built up
will be barred or will not have any legal backing.
8) Structural Defects: It is suggested that builders will be liable for structural
defects with imprisonment of five years which is more than the earlier
prescribed punishment of two years. “In such cases, the jail term is
that of one year or five per cent of the apartment cost or both. Other
pro-developer measures include single window clearance and digitization of land
records.” Defect liability
period for quality of construction is now 5 years.
9) The bill also brings about an increasingly regulated broker
environment.Brokers are also required to register with the Regulatory
authority.
10) At least 2/3rd of the buyers consent will be needed if
the developer wants to alter the plans,structural designs and specifications of
the building.No changes in the project plan at a later stage.
11) No Discrimination: There will be no discrimination based on caste, religion, creed,
or gender. The government may bring a non-discriminatory clause to allow anyone
to buy a property in the complex, even a transgender.
12) Resident Welfare Association: “Formation of resident welfare
association has been made compulsory
within 3 months of the allotment of the majority of the units in the
project so that buyers get to utilize facilities such as common hall, club
house, reading room”.
The main purpose of the Bill is to restore the confidence of the
people in the Real Estate zone by introducing transparency and accountability
in the housing markets.Along with guaranteeing speedy
trials of disputes and growth to the sector, “it also ensures to curb corruption and use of black money in the real estate market,
the Bill will include some provisions which will help in tracking down
innumerable sources of black money which currently costs the government Billions
of rupees in lost taxable income.”
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