Real estate: Concrete measures

India’s real estate market is one of the fastest growing in the world. It has not only been successful in attracting domestic real estate developers, but also foreign investors. The growth of the industry has been attributed mainly to a large population base, rising income levels and rapid urbanisation. It is the second largest employer after agriculture and is expected to grow at 30% over the next decade.

The real estate sector has transformed from being unorganised to a dynamic and organised sector over the past decade. It contributes roughly 6% to the country’s gross domestic product (GDP).

Amid this backdrop, the Cabinet recently amended the Real Estate (Regulation and Development) Bill, 2013. The changes were made to regulate the property market, avoid black money in the real estate sector that costs the exchequer a significant amount in terms of tax evasion, and tackle issues related to delayed possession and the like.

Salient Features:
As per the amendments, both residential and commercial projects now come under the regulator’s purview. Sluggish economic growth and delays in approval from various authorities have, in the past, slowed project delivery. As a result, buyers were kept waiting for their homes and developers, too, suffered high debt in their balance sheets. The amendments are expected to create greater transparency for all parties concerned.

Often, in the real estate market, some part of the payment is demanded in black, giving rise to corruption. The amended Bill makes it compulsory for developers to keep aside 50% of the money collected from buyers during pre-sale in a separate bank account on realisation from the buyers within 15 days.

This amount has to be used only for construction of the project. This provision would compel developers to use funds only for a specific project; hence, avoiding delays.

It will also prevent diversion of funds to other projects by developers. The Bill proposes to impose penalties, including deregistration of the project, if rules are flouted.

Other Benefits:
Each state will have a separate regulator to settle disputes, if any, and impose compensation. It is now mandatory for all housing and commercial projects to be registered with the regulator.

Developers cannot advertise or promote their projects without prior registration with the respective regulator. A majority of builders charge customers on the super-builtup area. As per the new Bill, customers need to pay only for the carpet area – the area enclosed within the walls of a flat – of the apartment. Also, developers can now only advertise the carpet area.

If a builder wishes to make any change to the plan or design, he would need to take the consent of two-thirds of allottees. If any structural defect is found in the building after completion, the builder would have to rectify it within two years. All projects that haven’t got completion certificates will be covered by this new Bill.

Involvement of Brokers:
If a builder proposes to engage brokers or agents to sell his flats or commercial space in a project, he will need to get registered with the real estate regulator. Non-compliance will lead to fines up to 10% of the project cost. Providing any wrong information will attract a fine up to 5% of the project cost. If the promoters fail to deliver a project in time, buyers can claim refund with interest and compensation.

To conclude, this Bill seeks to provide relief to real estate investors as it protects them against frauds and false promises.

Clamping Down:
The recently amended Real Estate (Regulation and Development) Bill, 2013, proposes to regulate the property market, avoid black money in the real estate sector that costs the exchequer a significant amount in terms of tax evasion, and tackle issues related to delayed possession and the like.

Both residential and commercial projects now come under the regulator’s purview.

The Bill makes it compulsory for developers to keep aside 50% of the money collected from buyers during pre-sale in a separate bank account on realisation from the buyers within 15 days.

This amount has to be used only for construction of the project. This provision would compel developers to use funds only for a specific project; hence, avoiding delays.

It will also prevent diversion of funds to other projects by developers. The Bill proposes to impose penalties, including deregistration of the project, if rules are flouted.

Each state will have a separate regulator to settle disputes, if any, and impose compensation. It is now mandatory for all housing and commercial projects to be registered with the regulator.

Developers cannot advertise or promote their projects without prior registration with the respective regulator.

As per the new Bill, customers need to pay only for the carpet area – the area enclosed within the walls of a flat – of the apartment. Also, developers can now only advertise the carpet area.

If a builder wishes to make any change to the plan or design, he would need to take the consent of two-thirds of allottees. If any structural defect is the found in the building after completion, the builder would have to rectify it within two years.

Source: CredaiNCR.Org

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