The Real Estate space has largely been unregulated since now, with home buyers pretty much having to swing to the tunes of the builders. The terms and conditions of agreements would be heavily inclined towards the builder which the home buyers had no other option but agree to. Practices like delay of projects, builders doing changes in plans without taking consent of the owners, etc. were rampant and there was also no formal body to oversee all these problems and take corrective actions if necessary. Apartment Buyers who went to court with their problems saw the matters pending for months without any outcomes.
The main problem plaguing the real estate sector was the delay in delivering completed projects to apartment buyers. First time apartment buyers would have to carry on giving rent for the the apartments they are presently living in, and also EMIs for their incomplete apartments in apartment complexes. A delay in getting possession also implies that many apartment buyers were not able to benefit from any kind of income tax deduction until the project was completed. Also, if the 3-year deadline for project completion was not met, the income tax deduction benefit reduces to only Rs. 30,000 a year.
The Real Estate Bill 2016
The Bill has now been passed in both houses of parliament and also received assent of the Indian President. Now, Real Estate Regulatory Authority (RERA) and Appellate Tribunals are to be setup in states. State governments can establish one or more authorities within a State or Union Territory. Based on agreement, two or more states or Union territories could establish a common regulator.
Real Estate Regulatory Authority (RERA)
Once set up, this body will deal with regulating real estate projects and ensure their timely completion and handover.
Key impacts due to setup of Real Estate Regulatory Authority (RERA) are:
- More transparency: Builders have to disclose all the information like project layout, approval, land status, contractors, schedule and completion of project to the Real Estate Regulatory Authority (RERA), and then they need to pass the information to the buyers too. Builders who don’t abide by this rule will have to pay a penalty of up to 10% of the project cost. Developers are required to give details of all projects launched by them in the previous five years & the current status of these projects to the RERA. This information being available to prospective home owners will itself be a great boon for home buyers as they can then take an informed decision about investing in a project from a builder who has historic record of delivering projects late.
- Faster completion of Projects: The Bill also mentions that the Real Estate Regulator shall not extend the deadline for project completion beyond a year under normal circumstances.
- Lesser harassment of home buyers: The Act provides provision for penalizing builders, real estate agents and other stake holders if they do not follow the principles laid down by the Act. Penalty can be to the tune of imprisonment up to three years.
- Redressal of complaints would be faster: According to the Act, disposal of complaints have to be done within 60 days.
Impact on New Projects
- Greater certainty to apartment buyers regarding completion of apartment or villa complex projects. The Real Estate Bill provides that 70% of sale value will have to be kept aside by the builder in an escrow account and it can be utilized only for land cost and construction of the said project.
- Getting more clarity on the property apartment buyers are investing in: Builders cannot sell any property based on its super built area. They have to sell based on carpet area, which gives the apartment buyer more clarity on the apartment or villa they are buying.
- Getting after sales service: If a buyer finds any structural defect or deficiency in the property, he/she can contact the developer within one year of possession for after-sales service.
Impact on ongoing projects
- No more surprise with Builder making unexpected changes to property: The developer will be required to obtain the consent of at least two-thirds of home buyers before making any structural changes, changing the design or layout of a project.
- Residents get more say into the Apartment Management early on: Residents’ Welfare Associations (RWAs) will have to be formed within three months from the date a majority of the flats are sold. Once RWAs are formed, they can collectively demand a timely possession of property and also look after the maintenance of the common facilities.
- Apartment Buyers get monetary compensation for delay in projects: Now, both the consumer and developer will have to pay the same interest rate for any delay on their part.
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