For long, the real estate industry has been dominated by developers/builders with consumers at their mercy. It is an industry in which builders are known to harass the (usually middle class) buyers/consumers in so many ways – in time lost due to delays, delivery of low quality houses etc. With the passage of the Real Estate Bill, things are about to change—of course, for the benefit of consumers.
The most outstanding feature of the proposed law is the establishment of a state-level regulatory authority—Real Estate Regulatory Authority (RERA)— which will now govern all real estate projects launched by developers. The proposed law makes it compulsory for all real estate projects, which are above 500 square meters or have more than 8 units in them, to be registered with RERA.
In fact, now not only builders but also real estate brokers will have to be registered with RERA. All disputes between the consumer and the builder will now be addressed by RERA. This will give a dedicated platform for providing quick and effective dispute redressal. But, of course, for this we need to wait till all the states ratify this law and establish state authorities in this regard.
Transparency Now Mandatory
Under the proposed law, the builder/developer must upload details of the project on the RERA website. The details must include the site and layout plan, the carpet area of property for sale and schedule for completion of the real estate project. The consumer will be able to browse through these details and take an informed decision.
The builder/developer has been obligated to regularly update the consumer on the progress of the project and, in the event of a delay in handing over, he will have to compensate the consumer with interest. The developer/builder cannot make any changes to the original plan without taking the consumer’s consent.
Carpet Area Defined
Another welcome relief is that the proposed law has clearly defined what the term “carpet area” means and has mandated that all sales must be made on the basis of carpet area only. This will bring in the much-needed standardisation in the industry.
No Funds Diversion
An area where the consumers suffered heavily till now was the diversion of funds by the developer/ builder. It was often observed that the builder/developer collected money from the consumers for a particular project but diverted it to other projects.
Under the new law, the promoter is now obligated to use 70 percent of the receipts from the consumer for the specific project for which the money is collected. In fact, on the monetary front, the promoter is prohibited from taking more than 10 per cent as advance from the consumer without entering into an agreement.
Completion Certificate a Must
The proposed law has also addressed the common problem which consumers face when real estate projects are completed. To ensure that the handover of the project is smooth and the consumer does not face any problems within a year of taking possession the promoter shall compulsorily obtain a completion certificate from the relevant authority, form an association or society of buyers and provide essential services till the buyers’ association takes over the maintenance of the project.
On the issue of checking the builder/developers’ credentials, the bill includes provisions which make it incumbent on builders to submit their details and of the project along with their photographs while applying for registration. They will also need to submit details of projects launched by the promoters in the past five years with their actual status.
For errant promoters, provisions have been made for heavy penalties and imprisonment in certain cases. All in all, the proposed law is a much-awaited welcome step and aims at standardisation in business practices and transactions in the real estate sector while ensuring consumer protection.
(The writer is a visiting faculty at various Indian B-schools and a freelance corporate consultant)
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