In a relief for home buyers, India has enacted new laws that govern the country's sprawling and overcrowded real estate market with harsh penalties against erring home builders.
Here are 5 things you should know about the new rules.
While the main real estate act is centralised, individual states will have to ratify their own rules, and will have their own regulatory authorities. However, so far, only 13 states have notified their respective laws to the centre.
Both new building projects and ongoing projects will be subject to the laws, with the exception of certain projects that have already been completed.
Tighter screening of home builders
Home builders including those who have ongoing construction are required to register with their local state regulatory authorities in the next three months, and provide regular updates on the status of the building projects on the regulators' websites.
Builders will be required to deposit 70 per cent of the money they collect from prospective home buyers into an escrow account that will only be used for construction purposes. They will also need to disclose details of exactly when the property will be completed, and how much money they have already collected.
In addition, any new advertising of unsold property for ongoing projects or any major structural changes will need approval from two-thirds of existing occupants or home owners.
No more early bird deals
Home builders can now only advertise property and homes once they have received all the regulatory approvals.
In addition, builders will also have to enter a registered sale agreement if they collect more than 10 per cent of the home value at the time of booking the project.
Penalties for delayed projects
If a builder has delayed a housing project they will now have to either refund the entire amount they have charged, or pay interest on it until the home is delivered to the buyer.
Defaulters will be subject to an interest rate of two percentage points higher than that being offered by the State Bank of India, on the amount already paid.
Home builders that violate the new laws could be imprisoned for up to three years.
Real estate disputes
In case of disputes, instead of going to civil courts, home buyers can now take their complaints in connection to their property projects to special real estate courts that will be set up in each state. This is aimed at speeding up the current redressal process.Suggest a correction