The buyer is always in fear of changed output of the projects outlined by the builders either in terms of quality, hidden cost or the disgusting delay of the possession. With the wide landscaping, lustrous brochures, royal looked exteriors the magician builders create a trap to fade out the buyer’s money. Thanks to the acute shortage of housing, lot of political sponsorship, lot of organized aversion of buyers and absence of any government structural mechanism.
This caused a major change in high profile judicial perspectives and they started sending an outlined signal to deal with builder’s behavior.
After a decade a bill related to Real Estate that was initiated and started to be worked on in 2007, was introduced in 2013 and was passed in 2015 n now in the process of becoming a Law. Though this bill took a long time but it will become a law soon named as RERA (Real Estate Regulatory Authority).
It is strongly enforced to regulate the grievances against the builders. It is not an anti-business bill but yes it helps to provide the growth in this sector with enhanced trust and credibility proving to be a desired inspiration benefiting both the project developers and the consumer.
RERA aims to provide a structured framework and reducing the conflicts between the property developers and buyers. Property developers have not welcomed the law because of unease due to a possible increase in the cost of capital, especially when this industry is already going through a liquidity crunch and mounting inventories. The RERA seems to be rearranging the balance in favor of the buyers of properties, especially apartments. Though the land is a state subject but the transfer of the properties and the regulations of contracts is on the current list.
The Regulatory Act created new reformed measures to rectify and provide a structured form of regulations for the clearances. The bill states that:
- All residential and commercial developments will be done under this act
- A setup by RERA will be formed in all states to help the increasing level of problems faced by the industry by making it more transparent
- There will be no discrimination in the distribution of the sale of property to a certain section of the society
- RERA provide every State the freedom in relaxation of the plot size from 500Mtr to 8 Apartments based on the situations of the local environment
- RERA bench will setup in all states which will act a government body and can be approached by the buyers in case of any grievances against any builder.
- This act bounds the developer to secure 70% of the project fund in the name of a project account. This ensures that the builder cannot utilize that amount or the amount taken as a booking or down payment in another numerous projects lined up in future, thus delaying the possessions to the consumer.
- This act makes the project developer mandatory to post all the updates on the related issues of the project to make a transparent wall between the builder and the buyer. The information includes the layout specifications, floor planning, the project planning, broker details, contractors or the sub contracts of the project, government and bank related approvals and schedule for the completion of the project
- The selling of the estate project will be defined according to the carpet area instead of the super built up area, which is a current selling practice these days
- This law ensures that if the project is delayed in any of the circumstances the developer is liable to pay back an equal amount to the consumer as the EMI is being paid in the Bank
- In case of violating the terms and conditions of RERA, it holds the right for the jail term maximum of 3 yrs with or without fine
- In case of any deficiency in the project the builder can be contacted by the buyer in writing
- Just to increase the cost of the project the developer cannot make any changes in the layout (which has been already sold) without the consent of the buyer except minor deviations due to the engineering constraints
- Any project of more than 8 apartments or 500sqm has to be registered with RERA
The single major drawback of the act is that it can increase the cost of the project. As we noted above that delays in the project can lead to strict penalties including imprisonment and also there is hardly any provision for the accountability to enforce the government authorities. With the presence of RERA the disputes between the developers and the authorities can increase, resulting in the increased cost of the project.
The RERA also have a layout structure for the settlement but due to lack in consumer court sessions other sectors like banking, electricity etc can also get clogged. The stressed balance sheets and the poor consumer service is one of the reasons that the regulations cannot be mechanized. In the development of smart cities RERA plays an important role. It has to look in to the upcoming new projects as well as the second and the older generation properties. In developing smart cities land and property records, transaction costs (fees, taxes and duties), empowerment of local bodies to provide the better services, usable land and drastic reduction in regulatory bottlenecks needs to be improvised.
In case of any disputes its RERA’s duty to put the case on a fast track through district judges.
Amendment of this Act will help the sector to become more transparent in every aspect and not in some segments. The brokers and the agents will now be included in the latest draft of the Bill, which means that they are equally liable for the legal action if found engaged in any practice which is not in line with the new Law. This will bring a new revival in the sector as the person will be more confident and feel secure to invest in real estate. All states have to set up a single window clearance system for the project related approvals. This creates confidence and comfort to the domestic as well as foreign investors. Bank funding can also be accessed with a better credibility of the sector.
We can be assured in the near future that an enforced Bill Act will bring India’s new and clean real estate.