Real Estate Bill 2016 -How it benefit buyers?

Rajya Sabha approved the Real Estate Bill 2016 yesterday. It is said that this act is more towards consumer than builders. Let us see how it can benefit buyers.

Real Estate Bill 2016

But the reality is different. The biggest investors in real estates as a developers are politicians and black money holders. Hence, how can this bill be a fair one? Let us see the  important points of this bill.

State level regulator-Real Estate is mainly regulated by state laws. However, this Real Estate Bill 2016 in many ways over act such existing rules. Hence, it is now made it compulsory to set up state wise regulation by establishing Real Estate Regulatory Authorities (RERAs).

Benefits to buyers-Your grievance may be addressed easily. If it centralized at the national level, then it is hard to get a quick response. This I think a good move.

Residential and commercial properties are part of this regulation-Real Estate Bill 2016 applies to both residential as well as commercial properties also. This I think brings in equal play when it comes to regulation of overall real estate industry.

Benefits to buyers-No such big deal. However, those who look for commercial properties may feel a positive point.

Registration is mandatory-Registration is now mandatory for all real estate projects for developers and agents. This includes the existing projects also. Hence, this law brings in the existing developers to follow the new rules.

Benefits to buyers-Big positive point. Because many developers used to give a reason of the process of registration is under process. However, now they have to first register, then start a project.

Disclosure of information by developers-At the time of registration of project, developers will have to disclose the information like promoter details, project plans, implementation schedule, land status, layout, approvals, and agreements.

Benefits to buyers-This give the clarity about who the developer and what is their financial status and the background of promoters and land status.

Deposit 70% of the collected amount of buyers in a separate account-It is now mandatory under Real Estate Bill 2016 to deposit 70% of the collected money in an escrow account separately. This must be utilized only for the purpose of construction activity and paying for land.

Benefits to buyers-This protect the buyer’s interest. Because in many cases, builders use to utilize the so collected money for their other projects. This leads to delay in the project. Now it is restricted. So a better hope for buyers.

Registration of projects is must for projects more than 500 or 8 apartments-Any developers who willing to build a project, which is more than 500, or 8 apartments must register with the regulator.

Benefits to buyers-Benefit is not a big one. Because small players now out of this regulation. Builders may split the project into small and develop to avoid registration.

Cost must be based on Carpet Area than the Built Up Area-As of now developers used to sell flats based on built up area or super built up area. In such a situation carpet area used to be around 60% to 70% of the built up area or super built up area. This sometimes used to confuse buyers. Now there is uniformity on this aspect. So from now onward the price must be fixed based on carpet area. What is carpet area?

  • Carpet Area-It is an area enclosed within the walls, where you can lay a carpet. This area does not include the inner wall area.
  • Built Up Area-It is an area of Carpet Area+Thickness of Walls+Area of Balcony.
  • Super Built Up Area-It is an area of Carpet Area+Thisckness of Walls+Area of Balcony+Proportionate area of common usage like lobby, lifts, stairs, swimming pool, garden, clubhouse, etc.

Benefits to buyers-I don’t think this will give you any benefit. Because let us say currently the builder is quoting you Rs.5,000 per Sq.Ft of flat. The flat is 1,200 sq.ft of built-up area and he claims 70% of this will be carpet area. In this case, the carpet area will be 840 sq.ft. Now, after this regulation, he may raise the price of what he offering to get the same benefit. He may from now onward may quote a price of Rs.7,142 on carpet area. At the end, he will get the same Rs.60 lakh either by quoting Rs.5,000 from built up are and now on carpet area with increased price of Rs.7,142. Hence, I don’t think this will create a big benefit to buyers.

Buyers and developers will now have to pay the same interest rate for any delays on their part-Earlier in many cases the interest penalty in case of delay from buyers used to be higher than the interest penalty in case of delay of a project from developers. However, from now onward this is equal.

Benefits to buyers-This I think a positive move. This leads to more responsibility on a developer to finish the project within a time.

Liability of developers on structural defects raised from 2 years to 5 years-Earlier if there is any structural defects then developers will be liable up to 2 years only. However, now it is increased to 5 years.

Benefits to buyers-This lead to force developers in building a quality flats. Otherwise, he will be liable for any such defects up to 5 years. A good move.

Change in plan needs a consent of allottees-Any change in plan by developers need a consent of 2/3 of allottees. Without which developer can’t alter the plan.

Benefits to buyers-This lead to clarity on plan and control over the plan.

Disposal of complaints in time bound manner by regulators and tribunal-All complaints must be disposed within 60 days by Real Estate Regulatory Authorities (RERAs) and Real Estate Appellate Tribunals

Please note that one must first complain with Real Estate Regulatory Authorities (RERAs). If they not satisfied with it, then they can approach the tribunals. Both are set in each state.

Benefits to buyers-This leads to speedy readdress of buyers complaints. Hence, a more responsibility and force to developers to act in a right way.

Violation of Tribunals and Regulatory Authorities leads to imprisonment to developers, real estate agents, and CUSTOMERS

Any violation of Tribunals and Regulatory Authorities by developers leads to imprisonment of up to 3 years for developers and up to one year in case of real estate agents and buyers.

Read the lines cautiously in the press release of Ministry of Housing and Urban Poverty “A provision is now made for imprisonment of up to 3 years for developers and up to one year in case of real estate agents and consumers for any violation of Tribunals and Regulatory Authorities.

This law now can imprison the buyers too!!.

Benefits to buyers-Strict law against developers and real estate agents is a good idea. However, imprisonment for buyers? I don’t know why they included consumers.

Advertising or selling homes without registration not allowed-From now onward builder can’t advertise or sell houses without registering the project.

Benefits to buyers-This lead to misleading advertisements from developers.

# Misleading advertisement by builders leads to punishable offense-If builder advertised related to the project and later it found to be misleading, then such first-time offenders will be fined 10% of project cost and repeat offenders could face a jail term.

Benefits to buyers-This create a greater responsibility for builders.

These are the few highlights of Real Estate Bill 2016. Let us wait for complete act notification and I update the same in future.

48 Responses

  1. As of now, we should be thankful for the RERA .
    In Rera act All developers are required to disclose their project details on the regulator’s website, and provide quarterly updates on progress
    In case of delays, the onus of paying the monthly interest on bank loans will lie on developers
    About 70% of the money collected for the project’s construction would have to be kept in a separate account
    The switch from built-up to carpet area will give clarity on what the home buyer will actually get

  2. I have bought a house in a complex which is under construction. I had bought this in resale I.e. From the original applicant. All paperwork is complete. The property is delayed now by over a year. Can the builder opt to not deliver the flat and instead cancel the allotment unilaterally and refund me the amount paid by the original applicant plus interest under RERA rules. That way I will lose all the premium paid to the original applicant?

    1. Somnath-The rules are clear. If the builder delayed, then he has to pay the penalty as interest and refund by canceling the deed. However, if the buyer not ready for cancellation, then builder can pay the penalty. He can’t cancel it unilaterally.

  3. Modern buyers see value for money. They don’t want to set in a given place for long. Due to industrialization people come places away from home but after 20 / 30 years they want to either go back to roots or to some location away from a city preferably in nature. Also modern buyer look for less concrete and focus much on things like ehomes. The new bill certainly has the potential to attract more new home buyers.

  4. Hey Basavaraj thanks for sharing your your great knowledge with us. Your blog is so much informing as i see , so please keep updating us .

  5. Hi,
    I am Siddhartha Koduru. I booked a flat with a reputed builder in August 2011. Took a bank loan and have been paying all stages of construction linked requests on time. There has been no delay from my side or my bank.

    But, it is September 2016 and I am expecting to get the possession of the flat in October or late December 2016. In this regard, I want to know what would be status of my Loan benefit with respect to income tax and is the 5 year duration offered applicable for me too.

    I would also request you to kindly guide me about any legal measures if I am going to loose a major portion of my hard earned money because of the delay form the builder.

    Thanking you and anticipating your early reply.


    Siddhartha K

    1. Siddhartha-You will get benefits of Sec.24 only but no tax benefits under Sec.80C of IT act as the property is under construction. However, if the property is constructed within 5 years, then you will be eligible for tax deduction of Rs.1,50,000 per year can be summed and claimed after your possession of property in next 5 financial years. If the property is not completed within 5 years, then the amount of tax benefit on interest payment will be only Rs.30,000.

  6. hi, My mother had purhased a site in bangalore i.e , in arashinakunte but she has ony sale deed ,hand written form 9 and 11 as khata,but no approvedplan layout.however some people have thelayout approval map appproved by gram panchayat ,,,,now that we are planning to construct GP are asking for approvred layouut plan.what should be my next cousre of action

  7. Hello Sir . We had purchased a flat last year in Mumbai which had the bulit-up area 685 and carpet area of 489.43. Our Agreement was made on the Carpet area. However, after the project was complete the builder said the built-up area has increased to 715 sq.ft. So I feel we need to make an extra agreement for this extra increased 30 sq.ft to avoid any problems in future, if we plan to sell the property. But the builder has insisted us to make the payment of Rs.90000 (30 sq.ft *Rs.3000) in black since if we plan to go for additional agreement we will have to pay the extra stamp duty,registration fees, Service Tax , Vat etc. Sir, please suggest what should be done ?
    Should we pay the money in black to avoid the extra expenses or should we go for the agreement.
    Thanks and Regards

      1. Thank you so much for your advice Sir. But does that mean we should make the agreement too and pay the Stamp duty , Registration charges , Service Tax and Vat. Kindly clarify .

  8. Hello Basu,

    Whats your take on Service tax refund refund for under construction property? Will buyer surely benefit (up to certain extent) from it or these could be fake promise like others? Your opinion please.


  9. Hi ! I bought flat at Ahmedabad in Aug-2102 and possession committed by builder in 2014. However, till date project is not over and possession not given. It will take another 6-7 months as confirmed by builder. It may be possible project will not get completed. Have paid 60 % flat cost ( 40 % through home loan and 20 % through own money ) so far.

    Request you to suggest – What steps to be taken and to which authority i approach. Pl share necessary address and email IDs . Also share what are rights and claim purchaser can make against builder.

  10. Sir,

    I have not taken the possession letter from builder, however we have already made all payment in august ,2015. Because of not paying the delay payment of such huge amount from my side, builder is not agreed to give the possession letter till date.Can i ask the same interest from builder also, as builder has demanded before issuing the possession letter to me.

    Plz reply.

  11. I am getting a builder buyer agreement ssigned now. What clauses to put in this agreement now as the real estate bill 2016 is yet to be notified.

  12. Hi,
    I have one question about this law.
    My builder has given us possession and last two years we are staying in society. We got our flat for furniture purpose and society is yet to be form. We also yet to get completion certificate from authority.
    Now our builder is trying to change actual plan of society and planning to club with other area with common amenities.
    Will this law protect us because completion certificate yet to handover and society also yet to be form.
    We all want our original layout rather change in actual plan.
    Thanks in advance.

  13. There should be provision that builder hss to obtan building usr prrmisdion from approved suthotity any default should br viewrd with heavy financislenalty and jail

  14. While the new Real Estate Bill / Act will be welcomed by home-buyers, it all depends on how States enact their laws modeled on this Central Act. Also the RERA proposed under this Act should be empowered to act against even erring govt officials, as builders often delay projects citing delay in getting requisite permissions from local govt agencies. Also, it is well known that most black money within India is invested in the real estate sector which remained unregulated for decades. That includes 1000s of crores of netas and corrupt babus. It’s highly unlikely that these worthies will enact laws which are detrimental to their own interests. However, provisions of the Act are desirable and if implemented in letter and spirit, should be a great relief for all home-buyers who are at the mercy of powerful real estate developers to fulfill their commitments on delivery of homes. A delay of 7-8 years is common these days. Hope this Act will curb such practices by unscrupulous RE developers.

  15. How a buyer, booked flat in 2012, with a possession promise by 2014 but still not yet got the possession, can be benefitted with these new rules.

      1. If this act is just an eyewash, why did you bother to write so many benefits that this bill brings to the buyers? Am not trying to be aggressive here, in one of the following answers you have mentioned that ‘it all depends on how forcefully they implement it’
        I am a buyer who was supposed to get a flat in 2012, in 2013 the project went into standstill as one of the banks tried to take over the project from the builder to recover loan from the builder, now the case is ongoing and there is no progress in the work at site as well,
        Since I don’t want to remain in dark and assume, I am asking every person whom I can, should I keep hope of of any faster resolution, my project is in WB and looking at the current government, I really don’t want to raise my hopes too much, but does this bill by contents of it is strong enough?

        1. Kartikey-This bill includes FEW positives and MORE needs to be GUTS from Govt to implement. For example, in Karnataka they can’t stop the illegal sand activity. Do you feel they control such uncontrolled black money siphoned industry?? NEVER.

          1. Thanks Mr. Basavaraj,

            So some positives is all that I and many like me stuck in that project can expect from this bill, which in a way way better than having no positives whatsoever, association of buyers are fighting case in the court, there has been writ-petition, but nothing is looking bright,
            This bill may put pressure in another way on the builder. I hope I am right on that, but can I ask you, will it also hold court answerable for the delay in justice that is happening largely due to political nexus and heavy money laundering?

            1. Kartikey-This is the faith of legality in India. We claim to IT advanced but the court cases pending since 20 years or so. We strongly say delay in justice is nothing but injustice. But no one dare to ask. You have to appeal to higher court to prove your point that due to political nexus the case is prolonging, then there may be hope. But you have to be ready for big struggle. I firmly and healthy wishses you best of luck brother 🙂

  16. Good approach but not sure if implemented successfully. Let’s hope good for buyers as buyer is at high risk.

  17. Mr.Basavaraj
    Thanks again for awaering us with such significant issues. I want to know that If anyone has booked a Flat in the yr. of say 2014 then all this norms will be applicable on that developers rt. but the thing is after disclosing the information by developers during Registration which is mandatory now if the buyer found some unknown facts regarding land status ,layouts,approvals etc.then in that case what action should the buyer take against the land developer??
    1 thing more as per amendment on structural defects the liability of developers raised to additional 3 yrs means 5 yrs in that case the Flat booked in the yr of 2014 will get benefit of additional 3 yrs. ??

    1. Shivani-Yes, all old ongoing projects also be part of this act. Builders now have to disclose the facts as per current act. If buyer found any irregularities, then he has to knock the door of Real Estate Regulatory Authorities at first and there also his voices not answered then tribunal. Yes, the raise in structural defects liability is applicable to all ongoing projects too. They now liable for 5 years.

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