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.
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 sq.mt or 8 apartments-Any developers who willing to build a project, which is more than 500, sq.mt 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 suchfirst-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.