“The clearance of the Real Estate Bill in the Rajya Sabha is a momentous decision for the real estate sector. This Bill is bound to bring about the much needed relief for the home buyers in India who are still struggling to put a roof above their heads. The Bill aims to bring in transparency in the real estate sector, thereby, encouraging investments from foreign and domestic financial institutions and protecting the interest of the home buyers.
The Real Estate Bill will place the Indian real estate market, which currently is fragmented and unorganized, at par with that of other developed countries with clear accountability of developers through the establishment of the Real Estate Regulatory Authority (RERA). Mandatory disclosure of projects, including details of the promoter, project, land status, clearances, approvals, etc. would increase the credibility of developers and would protect consumer rights as well.
Another significant ruling is in the form of definition of “carpet area”. Buyers will now be paying only for the carpet area and not the super built-up area which was fraught with confusion earlier. Also, the developers will now have to take consent of 66% of the home buyers in case they have to increase the number of floors or change the building plans. This will protect the buyers from any ad-hoc changes that are a norm presently. Additionally, buyers and developers will now finally be on a level playing field with respect to penalties on delays. Both parties will now pay the same rate of interest in case the buyer delays payment or the developer delays giving possession. Earlier, the Buyer-Seller Agreements were heavily tilted towards the developers who used to pay very little penalty in case of delay in giving possession.
Furthermore, developers would need to deposit 70% of the project cost in a separate bank account to cover the construction cost of the project for timely completion of the project. This would go a long way in ensuring timely construction of projects and act as a safeguard in the event of any inordinate delays of the project as it would limit diversion of developers’ funds for other projects. Scenarios where buyers who are saddled with the burden of paying rent and also paying the EMI of a home loan which is delayed because of the builders should be a thing of the past. While this stipulation of having 70% of the funds in an escrow account will be a welcome relief for home buyers, it is likely to result in the builders losing fungibility of money, thereby, resulting in a hike in prices.”
Credits ET Realty