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The Rajya Sabha passed the long-awaited Real Estate bill on Thursday, 10 March 2016 bringing cheer to home buyers. The Lok Sabha will now take up the Bill on Monday, 14th March 2016. The bill will apply to both new as well as ongoing projects.
This bill seeks to regulate the real estate sector, bring in transparency and help protect consumer interests by removing corruption and inefficiency from the sector. The Bill is applicable to all residential real estate as well as commercial real estate – above 500 square metres and above 8 apartments.
Image courtesy of Naypong at FreeDigitalPhotos.net
The Minister for Parliamentary Affairs and Urban Development Minister M. Venkaiah Naidu said that the bill would prohibit unaccounted money from being pumped into the real estate sector. The Real Estate Bill is also expected to renew investors' confidence and ensure timely completion of projects and, in turn, create more opportunities.
Some of the main provisions of the bill are:
It is mandatory for all projects in each state to be registered with real estate regulatory authorities, and developers will have to disclose all the project information including details of the promoter, project, layout plan, status of approvals and agreements along with details of contractors, architects and structural engineers. Pre-launches will not be allowed without getting all approvals from the local authorities.
Builders will have to deposit minimum of 70 per cent collections from buyers in a separate escrow account (temporary pass-through account held by a third party during the process of a transaction between two parties) to cover the cost of construction and land. This will prevent construction delays and will ensure that the sellers do not invest the money received from one project into another project.
State-level authorities called Real Estate Regulatory Authorities (RERAs) will be established to regulate transactions related to both residential and commercial projects and ensure their timely completion and handover.
The Real Estate Bill has a provision of imprisonment of up to three years or monetary penalties or both in case promoters or developers are found guilty of fraud and up to one year in case of real estate agents and buyers for any violation of orders of Appellate Tribunals.
Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days and Regulatory Authorities to dispose of complaints in 60 days while no period was indicated in the earlier Bill.
The builders would also be responsible for fixing structural defects for five years after transferring the property to a buyer. In case consumers fail to make payments to developers, the appellate tribunal can fine them, too.
The developers will now have to take consent of 66 per cent of the homebuyers in case they plan to increase the number of floors or change the building plans. This is expected to protect the buyers from any ad-hoc changes that are a norm presently.
The current practice of selling properties on the basis of the ambiguous super built-up area for a real estate project will be deemed illegal. Buyers will be charged only for carpet area (includes kitchens and toilets), which is the net usable area of an apartment.