Home Update. Real Estate Bill: more power to the buyer

The Cabinet last week approved the Real Estate Regulatory Bill. If this becomes law, it would offer the much-needed protection to home buyers. Here are the ways the provisions will impact you.

First, the Bill requires setting up a new regulator for the real estate sector. Just as you have SEBI and IRDA for the capital markets and insurance industry respectively, an authority will be created to help frame policies for the real estate sector.

The regulator will maintain records of all projects, promoters and agents. It will also monitor compliance of rules on an ongoing basis as developers have to provide updates on progress. The regulator will also maintain a database on violators.

You can thus have access to the names of promoters, details of the project for which registration has been revoked along with related reasons. And as real estate comes under the purview of state governments, individual states are responsible for setting up the Regulatory Authority at the state level.

Home buyers too will have more ways to check project details and promoter track records, if the Bill becomes law.

For one, it will become mandatory for all projects larger than 1,000 sq m or, alternatively, more than 12 apartments, to be registered with the regulatory authority. Developers must provide all project details such as layout plan, approvals and names of contractors.

For these projects, the time frame for completion must be clearly mentioned and adhered to. The developer is expected to receive all approvals from local authorities before marketing the project. The buyer will also have the right to obtain stage-wise completion schedule. Second, flowery ads with misleading data on project location, appearance and amenities will be discouraged, thanks to strict guidelines on advertisement.

Terms such as carpet area will be made uniform to ensure that there is no ambiguity in specifications. Third, apart from developers, real estate agents will also be regulated. They have to be registered and should maintain books of accounts, records and documents. Promoters and agents can be punished for making misleading statements.

Fourth, the new rules disallow a developer from making changes to the original plan without consent from at least two-thirds of the customers.

Changes to plans after signing agreements is a persistent problem for many buyers.

When payments are made, there is no way of ascertaining whether the money is actually used for a specific project.

If the Bill is enforced, the developer will have to maintain half the project cost in a separate bank account within 15 days of receiving it. This will increase accountability and help prevent fund diversion by the builder.

If your builder reneges on his promises, you currently have few options to get justice. You are forced to contend with long-drawn and expensive court battles. If the new rules are put in place, an Appellate Tribunal can be set up to resolve disputes in shorter time-frames. This will be in addition to existing options such as consumer courts. Also, the options for appeals in courts will be limited as other authorities will not be allowed to entertain cases covered under the Bill. The Appellate Tribunal will be headed by a sitting or retired Judge of the High Court who will have powers to impose punishments such as penalties or cancel registration. For example, the fine for not registering a project can go up to 10 per cent of the project cost.

Builders can be fined up to 5 per cent of the project cost for wrong or non-disclosure of information. As a buyer, you have the right to demand refund with interest as well as compensation for default by the developer.

Additionally, if there are quality issues after taking possession, the developer has the obligation to rectify them.

COMMENT NOW