The Real Estate Bill, 2015 that was passed by the Rajya Sabha recently will bring in many welcome changes to the way in which the real estate sector is currently functioning. The Bill, apart from providing more transparency, also has provisions that will largely eliminate many ambiguities that have led to several disputes between promoters and purchasers.
• The duties of the developer and the buyer are stated. While the promoter faces the prospect of having to pay a fine or even face imprisonment in the case of violations, the buyer will have to pay a penalty for delayed payments.
• A Real Estate Regulatory Authority (RERA) at the state level will be established to deal with complaints against builders and act as a statutory grievance redressal forum. This body will regulate both residential and commercial projects. It will be mandatory for any builder/promoter to be registered with the RERA if the project exceeds 500sq m or if has more than eight apartments. Real estate agents also have to be registered with the RERA.
Builders will no longer be able to create confusion using super built up area for calculating the area sold.
• All the details of any project have to be put on the public domain by the promoter. This will include details of land, status of approvals, details of agreements entered into by the builder with other third parties and particulars of architects/civil engineers/other contractors that will be involved in the project, among others. This will ensure a greater degree of transparency. At present, many buyers find it very difficult to get copies of documents that may be required for various purposes from the builder.
• The promoter/builder has to keep 70% of the sales proceeds in a separate escrow account and this has to be used for the construction of that particular project, thereby effectively preventing the builder from diverting funds to other projects that may be simultaneously going on.
• Approval from two-thirds of the allottees will be required to alter any plan, layout or other changes to the project. Any unilateral change of project plan or other specifications cannot be carried out by the builder.
• The Bill seeks to remove the present ambiguity in terms of the area sold and clearly defines carpet area. Builders will no longer be able to create confusion using super built up area for calculating the area sold. Garage has been separately defined and has been removed from the purview of the definition of an apartment.
Delay in completion of a project will make it necessary for the builder to compensate the purchaser in terms of the EMI that the purchaser might have to pay...
• Delay in completion of a project will make it necessary for the builder to compensate the purchaser in terms of the EMI that the purchaser might have to pay on account of any loan they might have availed, apart from other penalties that may be imposed by the RERA.
• Complaints can be filed before the RERA, which will have to dispose the same within 60 days. An appeal can be filed before the appellate authority and this too has to be adjudicated within 60 days. This will benefit the purchasers immensely as they need not approach a court of law or a consumer disputes redressal forum where proceedings are likely to take a long time before the matter is decided.
• Punishments ranging from fine to imprisonment up to three years have been stipulated in the Bill.
• An obligation is cast on the purchaser to make all payments on time as stipulated in the agreement with the builder.
• The buyer can approach the builder for any deficiency in the quality of construction or inadequate delivery of contractual obligations within one year from the date of taking possession.
• The Bill contains a model buyer-seller agreement. It stipulates that any agreement between the builder and purchaser should be on the lines of the model agreement in the Bill.
The above are only some of the salient features of the Bill, which I've explained without going into technical details with a view to keeping it simple.
A few hiccups
Concerns have been raised about the Bill's provisions that include even ongoing projects. The argument is that the stringent provisions if applied retrospectively could harm the progress and completion of ongoing projects.
It may be ideal for the Bill to include a timeframe within which approvals should be granted.
Promoters have also appealed to the government that the process for obtaining approvals should be simplified. At present, getting approvals takes more than a year, as multiple departments are involved in the sanctioning process. A single-window clearance system must be implemented in order to enable the projects to commence on time and thereby reduce chances of any delay.
It may be ideal for the Bill to include a timeframe within which approvals should be granted. If approval is granted beyond the stipulated timeframe, it should be factored in while computing any delay that the builder may commit.
In summary, such a Bill is the need of the hour and as in any statutory enactment, procedural shortfalls or complications can be addressed as and when the Bill becomes law and when it is practically applied to transactions.
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