Some advantages and disadvantages of real estate bill
The real estate sector in India is infamous for being unregulated and unorganized, with no proper guidelines for builders to follow, because of which buyers are routinely taken on a ride.
November 08, 2013 / 17:19 IST
Sulekha.com
The Real Estate Bill, which was passed in June this year, provides transparency and accountability in the realty sector. Its objective is to make known the status of building approvals, to enable customers to make accurate decisions. This apart, the bill aims to take steps to promote affordable housing for everyone. In India, this regulatory bill was presented in the Parliament in 2009, after which it underwent numerous amendments. The bill was finally passed by the cabinet after five years, on June 4, 2013. When the Real Estate Bill comes into effect, home or property buyers can expect to get timely ownership, and as per the promises made by developers.
The real estate sector in India is infamous for being unregulated and unorganized, with no proper guidelines for builders to follow, because of which buyers are routinely taken on a ride. Over the last decade, real estate prices have gone up so much that a common man now will find it very hard to buy a home of his own. In such a scenario, regulation is the need of the hour. And, one hopes this new bill will rise to the occasion. However, when the bill becomes an act, it will be applicable only to new real estate projects and not ongoing or completed projects. What is in the bill?It proposes to get real estate companies registered with the proposed regulator if the project is being developed in more than 1000 meters of land. Developers or builders will have to submit detailed project reports that will include:- completion date
- land title
- names of architects and agents
- details of the bank account where the amount generated from project sales will be deposited. This amount will not be used for other activities
In addition, the bill seeks to enforce strict penalties for various offences. For example, in case a builder does not present a detailed project report, the penalty may extend up to 5% of the estimated cost of the project.Advantages of the bill:- Timely delivery of flats: Developers often make false promises about the completion date of the project, but hardly ever deliver. As per the bill, strict regulations will be enforced on builders to ensure that construction runs on time and flats are delivered on schedule to the buyer. If the builder is not able to deliver the flats on time, he/she will have to refund the purchaser with interest.
- Furnishing of accurate project details: In the construction stage, builders promote their projects defining the various amenities and features that will be part of the project. But not everything goes as per plan, with several features missing. As per this bill, there can't be any changes to a plan. And if a builder is found guilty of this, he/she will be penalized 10% of the project’s costs or face jail time of up to three years.
- Specifying carpet area: Generally, builders sell flats on the basis of built-in area, which includes a common passage area, stairs and other spaces which are 20-30% more than the actual flat’s area. But, not all buyers are aware of the concept of carpet area. With this bill it will become mandatory to declare the actual carpet area.
- All clearances are mandatory before beginning a project: Builders often attract buyers with huge discounts and pre-launch offers. And, the buyer, enticed by the offers, does not bother about the clearance. But, due to delays in getting clearance, the buyer does not get the flat on time. This bill ensures that developers get all the clearances before selling flats.
- Each project should have a separate bank account: Developers raise funds through pre-launch offers and use them to purchase some other land or invest it in other projects. This bill will make it compulsory that a separate bank account be maintained for each project. Each transaction will have to be recorded, and diversion to another project will not be entertained.
- After sales service: As per an interesting clause in the bill, if the buyer finds any structural deficiency in the development of the building, the buyer can contact the builder for after sales service. But, the buyer should approach the builder within a year of purchase to rectify such defects without further charges.
Disadvantages of the bill:- Past real estate projects not included in the bill: Only new projects are covered by the bill. Projects that are ongoing, completed or stuck due to clearance or financial issues, don’t come under this. Hence, many buyers will not be benefitted by it.
- Delay from government agencies: There can be delays caused by the government, which sometimes takes a lot of time to clear a project. It is up to government bodies to follow strict time frames to approve projects, so that developers can launch, complete and deliver them on time.
- No compulsory regulation for projects less than 1000 square meter: Registration with the regulator will not be mandatory for projects less than 1000 square meter. So, small developers will not be bound to register.
- New project launches expected to be delayed: Because a project will not be allowed to launch without the requisite clearances from the government (which generally takes two to three years), projects will automatically get delayed.
All said, the real estate bill promises complete justice, by ensuring buyers get their dream homes on time and at an affordable price. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
