The Real Estate (Regulation and Development) Bill, 2016 has come into effect from 01-05-2016.
HIGHLIGHTS OF THE BILL
|1||The Bill provides for mandatory registration of all projects with the Real Estate Regulatory Authority in each State. Real estate agents who intend to sell any plot, apartment or building should also register themselves with this authority.|
|2||It makes mandatory the disclosure of all information for registered projects like details of promoters, layout plan, land status, schedule of execution and status of various approvals.|
|3||It seeks to enforce the contract between the developer and buyer and act as a fast track mechanism to settle disputes.|
|4||Fifty per cent of the buyers’ investment has to be deposited into an escrow account that would be used only for the construction of that project.|
|5||The Bill prohibits a developer from changing the plan in a project unless two-thirds of the allottees have agreed for such a change.|
|6||Builders would be responsible for fixing structural defects for five years after transferring the property to a buyer.|
|In case builders still cause delays in transferring properties to buyers, the appellate tribunals would intervene and slap fines on them within 60 days.|
Once cleared by the Lok Sabha, where the government enjoys a comfortable majority, the Real Estate (Regulation and Development) Bill will become law.
The government had fast-tracked the proposal based on the renewed interest shown by the Congress, the main opposition party, in getting the bill cleared in Parliament.
- Congress vice-president Rahul Gandhi had told concerned home buyers that his party will support the bill.
- The bill was first introduced in 2013, when the Congress-led UPA was in power. The version that the government submitted for discussion included as many as 20 amendments or changes, based on the feedback of a parliamentary committee. The first version of the bill was rejected by the Rajya Sabha last year.
- Last week, the Congress wrote to Prime Minister Narendra Modi asking for the bill to be prioritized in this session of Parliament.
- The bill makes it mandatory for residential and commercial projects to be registered with a real estate regulator which will monitor transactions and settle disputes. In recent years, several projects have been delayed, leaving home buyers in the lurch with no protection.
- The new proposal covers a larger number of projects for registration -any project that includes eight flats or 500 square.
- If the developer fails to hand-over the property to the buyer on time, then he would be liable to pay same amount as interest which he is charging from the buyer on delay in payment.
- Builders will have to deposit at least 70% of money collected from buyers during pre- sales, including land cost, in an escrow account to meet construction costs, compared with the earlier proposal for 50%. This is to ensure that developers who run out of cash don’t stall projects. Builders would have to pay interest to home buyers for any default or delays at the same rate they charge them.
- Builders will be liable for structural defects for five years, instead of two years as proposed earlier. They will also have to pay interest to home buyers on delays at the same rate that customers would be charged if they defaulted on payments.
- he Congress had extended its support to the Bill, which was passed by a voice vote in the House. It is touted as a major reform measure to regulate the vast real estate sector and bring order in it.
- Here are highlights from speech by MP Rajeev Chandrasekhar, who is the member of the Select Committee:
- The Bill ensures the timely completion and delivery of flats to the consumer. Currently, when a consumer buys a property that is under construction, he is promised the delivery of the flat within one to two years after registration. In practice, however, the delivery of the flat is almost never made within the agreed upon timeline.
- This Bill solves this problem – it ensures that strict regulations will be imposed on developers to ensure timely construction and delivery. It further provides that consumers are entitled to a full refund with interest, if there has been a long delay in the delivery of a flat.
- Bill has put in place a robust mechanism for the publication of accurate project details and disclosures. No one can deny that in the past, there have been myriad instances in which developers have put out misleading promotional material with regard to amenities provided by projects at an under construction stage, for consumers to discover that none of these have been provided for in the final product.
- Section 11(3)(a) of the Bill mandates that developers need to share final project plans as part of their disclosure terms, with no room for iterations. Further, Chapter VIII of the Bill also imposes a 10% project cost penalty and upto 3 years in jail. These add a much needed degree of accountability and also protects consumers from this highly prevalent malpractice.
- Bill provides that developers must mandatorily mention the actual carpet area of projects to the consumers. Thus far, developers have typically sold properties by citing super built area. This includes common passage area, stairs and other areas which make up to 30% of the actual area of the property being sold. Consumers are not usually informed about the actual carpet area of the flat. By mandating that the carpet area be explicitly mentioned through section 4, this Bill is ensuring that even the most undiscerning consumers are thoroughly informed.
- Bill ensures that all clearances are completed before the launch of a project. Sections of the Bill mandate that developers have to receive all clearances before issuing their properties for sale. Most builders offer flats at huge discounts at the pre-launch stage to attract buyers – but without informing consumers about the status of clearances and potential delays in delivery.
- Bill mandates that developers are bound to provide after sales service for properties found to have structural defects, at no extra cost to the consumer. Under the Bill, buyers are simply required to inform the developers of the deficiency within one year of purchase.