Real Estate law is a blessing for home buyers: Know how
Are you planning to buy a home? Hold on for a bit. The Real Estate (Regulation and Development) Act, which protects the interest of home buyers will come into force on May 1. Experts say that this new law will reshape the entire real estate sector.
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Until now, the real estate sector was largely unregulated in India. For complaint against a developer, a consumer would have to knock at the doors of civil or consumer courts, to no avail.
However, things are about to change. The Real Estate Act (RERA) aims to put real estate mafiasm to an end and make consumer the king.
Here is how it will benefit buyers:
1. No useless penalties: Developers usually keep lopsided penalties in the agreement. If there’s a delay from the developer’s side, they either don’t mention the penalty they will give to the flat buyer or keep it as low as one-two per cent a year. At the same time, the penalty levied on the buyer for delay of payment ranges between 18 per cent and 24 per cent. According to a Business Standard report, even the national consumer court has taken cognizance of such disparity in penalties in some recent cases buyers have filed against developers in the National Capital Region.
RERA puts an end to such practices. It has standardised and defined the interest rate both parties would get in case of delays. It’s kept at two per cent above the State Bank of India’s Marginal Cost Lending Rate. At present it works out to be 11.05 per cent.
2. No fake promises: Developers often show one sanctioned plan to the buyer. Buyers pay according to the plan shown to them. Later, the developer changes the plan. He may reduce the area, change certain amenities, change configuration, and so on. Many buyers ended with lower area than they paid for or found that the promised amenities are missing when the project is finally delivered. The developer usually blames the government agencies for the changes and gets away with it.
But now the developer will need to report every time he makes any changes to the plan and also give a fresh deadline for completion of the project post the changes. He will also need to declare the total amount collected from buyers and the actually money used. All this needs to be certified by an engineer, architect and practicing chartered accountant. With a public record, the buyers can easily take the developer to task and claim refund based on the changes made.
Even when registering the project with the regulator, the developer needs to submit authenticated copy of PAN Card, annual report comprising audited profit and loss account, balance sheet, cash flow statement and auditors report of the promoter for the immediate three preceding years, authenticated copy of legal title deed, copy of collaboration agreement if the promoter is not the owner of the plot. Promoter also has to declare information regarding the number of open and closed parking areas in the project.
4 Transparency and accountability: The bill will make it mandatory for all commercial and residential real estate projects where the land is over 500 sq. mt. or eight apartments will have to register with the regulator before launching a project. By making registration of the project compulsory with the regulatory authority, the bill aims to provide greater transparency in project marketing and execution. Failure to do so will attract a penalty which may be up to 10% of the project cost and a repeat offence could land the developer in jail. Buyers will no longer need to rely on the word of the developer on the progress of construction. Potential buyers can also look at progress of the project before buying a flat there. The Act requires developers to make a whole host of information public and report quarterly progress on the project. Within 15 days of a quarter ending, the developer will need to report information regarding number and type of apartments or plots, garages booked, status of the project with photographs floor-wise, status of construction of internal infrastructure and common areas with photos, status of approvals received and expected date of receipt, modifications in sanctioned plans and specifications approved by the competent authority.
* No misuse of funds: Nowadays, a common practice among developers is to raise money from buyers for one project but not use it to complete that one. Moreover, the money is diverted to be used purchase land which would enable them to launch another project and raise more money from a new set of buyers. However, now developer will have to put 70% of the money collected from a buyer in a separate account to meet the construction cost of the project. States can increase the ceiling but not lower it. This will ensure that construction is completed on time.
* Disputes resolution: If there’s a dispute, the buyer can make an appeal to the Real Estate Appellate Tribunal by paying a fees of Rs 5,000 and for every complaint made to the regulator the fee will be Rs 1,000. Real estate appellate tribunals now required to adjudicate cases in 60 days as against 90 days in the earlier proposal. Regulatory Authorities will have to dispose of complaints in 60 days while no such time limit was indicated earlier.
* Stabilize housing prices: According to the government, the Bill will bring in the much-needed confidence to infuse more investment and, in turn, stabilise house prices.
Will builders benefit?
Yes. In case an allottee does not pay dues on time, penalty can be imposed on him/her. The builder will have the opportunity to approach the regulator in case there is any issue with the buyer.