The long wait for Real Estate Regulation & Development Bill was finally over yesterday as Rajya Sabha passed the bill. The bill was first introduced in the Rajya Sabha in 2013. Hopefully this bill shall bring transparency and accountability in the industry which is marred by delays and cost overrun. The bill covers both residential and commercial projects. Now all states have to ratify this Act and establish a state authority on the lines set up in the law.
Salient features of the bill are:
- State Real Estate Regulatory Authority: This bill paves way for the establishment of State Real Estate Regulatory Authority as the government body to be approached for redressal of grievances against any builder.
- Mandatory registration of projects: All projects that are more than 500 sq meters and have at least 8 units have to be registered with real estate regulators. Developers have to share all info related to projects such as project plan, layout, government approvals, land title status, sub contractors to the project and schedule for completion with the state regulator. Thus, buyers can validate whether projects are approved by the local authorities or not to their satisfaction.
- Separate account for projects: Developers will now be required to deposit at least 70% of their funds including land cost in a separate account to meet the cost of construction. This would ensure developers do not divert funds for some other projects which is the main cause of delay in project completion.
- Imprisonment provision: For any violation of the orders of the regulatory authorities or the Appellate Tribunal developers can face imprisonment up to 3 years. However authorities may use it as the last resort.
- Transparent & fair agreement provisions: Earlier most of sale agreements / MOU between the developer and the buyer were one-sided with clauses of heavy penalties on buyers for any delay in payment and hardly any fines on developer for delays in completion. Now, the law ensures that any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer.
- Recognition of Carpet Area: This bill has removed the practice of selling properties on the ambiguous saleable area or super-built up areas. From now onwards all properties shall be sold on carpet area which has been clearly defined in the bill.
- After sales service: Developers shall be liable to provide after sales service for one year from the date of possession in case of any deficiency in the property.
- Restriction on change in project midway: The developer cannot make any changes to the plan that had been sold without the written consent of the two-third majority of buyers in the project. This puts an end to a common and unpopular practice by developers to increase the cost of projects midway and to change the project masterplan midway in case of favourable FSI changes.