For harried home buyers, real estate bill offers no clarity for ongoing projects
The rules offer no clarity on how the issues related to under construction projects will progress further
While the direction for regulation of future projects is seemingly clear, it is the non clarified rules in the draft for ongoing projects that has led home buyers to raise a hue and cry over it.
As a result of the delayed projects, a lot of complications have arisen and the policy makers have failed to clarify many points that can arise in ongoing projects as far as developers’ course of action is concerned.
The rules offer no clarity on how the issues related to under construction projects will progress further. For one, it does not solve one big complaint of home buyers on how penalty under different sections of the act can be invoked in the case of ongoing projects.
Home buyers are, therefore, expressing their anxiety against the proposed draft rules prepared for the real estate regulatory authority. Some harried home buyers are even planning to sign united petitions against their builders and send it to the PM.
As for the builder community, they believe that one of the key reasons for the draft falling short of expectations is that the accountability of government bodies is not covered. If that would have been covered, the draft would have been a fool-proof one.
Apart from that a lot of clarifications are required on various aspects of the project handling. For instance, the plan which builder needs to submit for existing project with the regulator needs absolute clarity as builder’s original plan could be different from what has been sanctioned or may have been revised it later.
Another point that arises is whether buyers are entitled for compensation towards the changes wrought in the plan by the builder before registration with the authority. And, is there any provision by which a builder will disclose previous changes made to the plan of an under construction project?
In addition, the errant builders escape the severity of the punishment through the drafted rules. The Act clearly stated a 3-year jail term for erring builders coming down heavy on them to fix the delayed project scene which was majorly hampering the real estate business. While the proposed draft rules stipulate a compounding fine of 10% of the cost of project, thus providing a leeway to the builder consortium.
Also, in existing projects where builder has already collected a substantial amount, how does the escrow account formula work? When a registered builder delays a project, will he be penalised? Does the consent of two-thirds of the buyers necessary to change the layout of a plan applicable to existing projects as well?
Builders have to give information on the completion date of a project. What about ongoing projects in which builders are failing to communicate or commit delivery timeline? Also, any violation can lead to cancellation of registration for future projects. But, what about violations that have already happened in ongoing projects?
Throwing light on the key problem - project delays - that builders too have to deal with, Rohan Agarwal, MD, Geopreneur Group active in Mumbai region, relates it to the lack of single window clearance system. He explains, “As there is no single window clearance system in the sector, each approval takes an uncertain amount of time duration. This is certainly going to have an adverse effect on the developers towards completion of project deadlines as our governmental policies are very unstable and change frequently with a retrospective effect which is the primary cause of delays in projects.”
Reacting to the penal clause of draft rules that developers may have to pay 11.2 percent interest to buyers for delay in handing over homes, and the problems that he sees builder faces a lot, Agarwal says, “Previously, as per MOFA there was a similar clause wherein the developers had to pay 9 percent for delays which has now increased to 11 percent under the new draft. The penal amount is quite significant and as per the new draft policies the implementation of these penal clauses will be much stricter than before. This will protect consumer’s interest further and increase pressure on developer for timely delivery.”
Although this move is a relief for home buyers whose major frustration was delay in deliveries, yet home buyers and experts feel the penalty should have been higher. The fixing of interest rates at 11.2 percent is far less than the penal rates that were imposed by consumer courts in past cases, which has been up to 18%, protest home buyers. They strongly feel that delayed projects cause untold harassment and call for interest at penal and not just compensatory rates.
The tussle is this and so much more: Developers on their part fear that the draft rules if applicable on ongoing projects, the penal clauses may further slow down the process and they would feel pressurised, while the aggrieved buyers want to make use of the stipulated rules to rectify all their complaints and book the developers on the slightest of default.
“This is a first draft from the regulatory authority which has come under the public domain and it would require a few further clarifications and revisions,” states Rohan.
The draft measures really need to be in sync with the existing problem of real estate, keeping the interests of both buyers and developers, in order to make a strong foundation for future direction. Perhaps, that is why the government is seeking comments from the public till 8 July to come up with answers to many such queries.
Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.
The clearance of the Bill in this last session would have heralded a happy opening in 2016 for the real estate community as well as consumers
For middle-class families interest rates play a limited role in house sales. This is why despite the cut in home loan rates and attractive discount schemes being offered by various developers, buyers are still sitting on the fence.
In order to balance out the rising cost of financing due to approval delays and also due to proposed condition that money accrued money from a project should be utilised only for that project, the central authorities can open up new avenues of funding for developers