Realty Bill to tighten noose around brokers, ensure transparency

Despite a 40 percent decline in sales in 2011, new home prices in the financial capital of the country are unlikely to decline this year. This is because builders are cartelised, and backed by investors who also have political clout. This is why they have been able to hold prices despite an acute cash crunch, falling demand, and high interest rates.

A home buyer is most frequently faced with the problem of delayed possessions, extra costs (due to inflated built-up areas) and lopsided agreements. (Read what the Competition Commission had to say about DLF, the biggest listed realty company, here ).

[caption id=“attachment_263308” align=“alignleft” width=“380” caption=“The draft bill, prepared by the Union ministry of housing and urban poverty alleviation, is aimed at ensuring transparency in the sale of plots and construction. Reuters”]  [/caption]

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But the proposed Real Estate (Regulation and Development) Bill may just bring some relief to home buyers.

The draft bill, prepared by the Union ministry of housing and urban poverty alleviation, is aimed at ensuring transparency in the sale of plots and construction. In order to protecting the interests of customers and property buyers, the bill seeks to provide complete project information and has incorporated several clauses to punish promoters and brokers who dupe customers.

Mandatory registration of projects

The bill calls for mandatory registration of real estate projects and real estate agents who intend to sell any immovable property over 1,000 square metres or 12 dwelling units.

According to a report in The Economic Times, " since the minimum threshold area for mandatory registration has been reduced to 1,000 square metres of land from the earlier proposed 4,000 square metres, the bill would virtually cover the entire supply of residential units from the organised sector."

The draft bill says no promoter should issue advertisements , print prospectus or invite bookings without obtaining the certificate of registration. And the builders are also likely to face imprisonment if they fail to get the property registered.

In addition, 70 percent of the funds realised for the project from the allottees should be deposited in a separate bank account to ensure timely execution of projects.

Imprisonment/ penalty for promoters who knowingly provide false information to buyers

Moreover, the draft legislation also proposes up to three years’ jail or/and a penalty up to a tenth of the estimated cost of the real estate projects for promoters failing to comply with some key provisions. Also if a promoter knowingly does not provide the buyer with the right information, he will have to pay 5 percent of the project cost as penalty.

Also, the promoter cannot accept any payment/advance without first entering into an agreement with the allottee. And if an allottee suffers due to false representation by the promoter, he may be compensated in a manner determined by the authority and can also choose to withdraw his entire investment from the project.

After the cabinet approves the bill, it will be introduced in Parliament. And within a year of the act coming into effect, it will be implemented in all states and Union territories.

You can view the entire bill here.