Realty watchdog, reforms to empower property buyers
By Vinod Behl
Once the the Real Estate Regulator (Regulation and Development) Bill, pending since 2013 is passed, the realty regulator proposed in it, along with reforms, will empower and protect property buyers and investors, paving the way for more organised, fair, credible and transparent property transactions. The Indian realty industry, thus, will also become investor-friendly.
A recent survey by the Ministry of Consumer Affairs, dubbed real estate sector as the second worst industry after telecom in terms of quality of service. The prevailing liquidity crisis, uffordable property prices, high delivery defaults, tepid sales and low investor confidence has plunged the sector into crisis.
In this backdrop, Real Estate Regulatory Authority — cleared by the Upper House of Parliament and the main Opposition, the Congress party, assuring support in the Lower House — assumes significance. It seeks to check fraudulent practices and provide a fair deal to property buyers.
The consumer-friendly landmark legislation is aimed at setting up regulatory and redressal mechanism, the absence of which is responsible for the present mess in the real estate.
The key provisions of the legislation, which bring brokers along with developers under its ambit, include:
- Mandatory registration of projects
- Need to provide complete information on project plan, lay-out, approvals, land title
- Also required is completion schedule, with ban on pre-launch advertising without sanctions
- Mandatory disclosures in ads and prospectus to check gap between promise and delivery
- Sale of property only on the basis of clearly defined carpet area
- Move to ensure buyers get exactly the space for which payment is made
- Mandatory escrow account to check diversion of funds that delay projects
- Provisioning of fair compensation for delays in delivery
- Focus also on quality of construction, speedy dispute resolutions
- Also proposed pelty and imprisonment for non-complying developers.
Though this model legislation covers both residential and commercial real estate including ongoing projects, yet it’s the residential real estate which is going to get big boost, especially by boosting the confidence of home buyers.
Unlike in the past, now the home buyers can take informed decisions to invest with all the project information at their disposal which developers and brokers are now liable to disclose. In this context, it is worthwhile to mention single-most important factor responsible for keeping home buyers away thereby resulting in lukewarm sales.
It has been the sheer lack of safety of their investment, especially in view of extraordirily long delays in project completion, with buyers money stuck for years without redressal. But now the watchdog will ensure timely completion with time-frame for completion and delivery of registered projects to be clearly mentioned and adhered to.
The mandatory project-specific escrow account will ensure that as much as 70 percent of the money collected by developer for certain project from buyers is not diverted elsewhere, thereby ensuring that project is not delayed due to fund crunch. The escrow mechanism will also guarantee security of the money invested by home buyers.
The provision of a model and fair buyer-seller agreement under the regulatory mechanism will put an end to short-changing of home buyers on account of hidden charges like exterl development charge (EDC), interl development charge (IDC), parking charges, maintence fee, club charges and preferential location charges.
So, there will be no escalation of charges and the home buyer will not be liable to pay any charges other than the ones mentioned in the agreement. The provision of speedy and time-bound dispute redressal within two months is also a big confidence-booster for home buyers who are till now deprived of this and were forced to run from consumer courts to lower courts to higher courts for justice.
The regulatory authority is fully supported by the ongoing reforms in the real estate and housing sector, which will prove a big boon for affordable and low cost housing, in line with government’s flagship mission of “Housing for All”.
This year’s budget has addressed the affordability issue through a number of policy initiatives like 100 percent service tax exemption for affordable homes, and additiol yearly rebate of Rs.50,000 on housing loan interest for first time home buyers in affordable segment with loans not exceeding Rs.35 lakh.
(Vinod Behl is editor, Realty Plus, a leading real estate monthly. The views expressed are persol. He can be reached at email@example.com)