Real estate regulation could now protect you as a property buyer
The rapid real estate development in the country in the last decade has been rather fascinating for one to see ,to own dream home. The skyline of cities has changed, with now high rise buildings visible in most areas due to cluster development. The rise in income levels and therefore the urge to elevate standard of living has introduced many to luxury and ultra-luxury living. Also, people have started viewing real estate as an asset class for investing, and not only one to move into a new home to live in. In the backdrop of the interest evinced by many towards real estate, the time has indeed come for regulated development to take place.
The Government now plans to bring to the Real Estate (Regulation and Development) Bill, to the Parliament in the budget session. The Bill has been framed under provisions dealing with "property transactions" in the concurrent list of the Constitution that applies to states, making the proposed legislation more than a model law.
The Real Estate (Regulation and Development) Bill has proposed the following, which intends to protect the interest of property buyers:
- Real estate developers will have to disclose project details and contractual obligations to ensure transparent, fair and ethical business practices. Hence there could be model agreement which could reduce ambiguities in real estate transactions, which you as buyer may not be familiar with.
- Moreover, the regulation will make it mandatory for private developers to register all projects before the sale they sell property to you as buyers. The property shall be registered provided that all necessary clearances have been obtained and all major concerns of the buyers are addressed about incomplete or fraudulent land acquisition.
- If the developer fails to declare the status of clearances, the Bill provides for levying a fine that can amount 10% of cost of project or three years of imprisonment.
- Also ensuring that the developer adhere to timelines, the Bill states that the realty player will have to park 70% of funds in a particular bank account, thereby precluding resources from being diverted and thus safeguarding property buyers.
- The Bill also enunciates that developers should sell a residential property on the basis of "carpet area", instead of the current practice of "super area", thereby ensuring that buyers get a better deal and transparency (over the how much carpet area you can enjoy) prevails.
How are realty player reacting to this...
Well, private developers are expressing discomfort over some of provisions of the said Bill. They are of the view that, they are already subject to several clearances and therefore there is no need for a regulator.
We are of the view that, a strong legislation would put a restrain on unethical and unscrupulous practices in the real estate industry, which from the outside looks very fascinating when the skyline of several Indian cities is changing. Yes, the penal interest provision could hurt realty players; but the Government seems to be inclined to protect the interest of real estate buyers (ahead of upcoming general elections next year) and regulate the sector well. If the Bill goes through by retaining the aforesaid provisions, it would indeed in the interest of several buyers - especially the middle class, for whom purchasing a property has been a herculean task (due to skyrocketing prices) and unscrupulous practice adopted by some developers.
However we are also of the view that, along with passage of the aforesaid Bill, the Municipal Authorities should also be directed to be more active in order to reduce the bureaucratic delays and discourage corruption at all levels.
Best Regards
Prakash Nair
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