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) 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. “ 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 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.
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, “