Paving the way for regulation of the real estate sector, the Union Cabinet on Tuesday approved amendments to the long-pending real estate bill to bring under its ambit commercial and all ongoing projects as also brokers, while safeguarding consumers.
The new recommendations on the Real Estate Regulatory Bill will now be tabled in the Parliament for passing the bill and making it an Act.
“The bill seeks to ensure accountability and transparency, which will in turn enable the real estate sector to access capital and financial markets essential for its long-term growth,” the government said in a statement.
So in essence, developers who make inflated claims, with regard to the built up area or amenities, will now be penalised.
Here is all you need to know about the Bill
1. While the Bill already provides for strict penalties including jail for errant builders, the amendments seek to make it mandatory for all developers, including of housing projects, to keep minimum 50 percent of funds collected from buyers in a escrow account to meet construction cost.
"In essence, reduction of minimum balance to be maintained in the escrow account of a project has been reduced from 70% to 50%. This provision will effectively allow developers to continue their practice of diverting funds collected for a project towards land acquisition or other projects, and will work in their favour by also allowing them to grow their land and/or project portfolio. However, the 50% mandate will still place enough restriction on developers to divert funds elsewhere and ensure better completion records," said Anuj Puri, Chairman and Country Head, JLL India.
2. Through the amendments to the Bill of 2013, the Cabinet has extended the applicability of the Bill to commercial real estate also. This will provide protection to investors of commercial assets too.
Ongoing projects that have not received Completion Certificates have also been brought under the purview of the Bill and such projects will need to be registered with a proposed regulator within 3 months.
3. Another major modification is that promoters will not be allowed to change plans and structural designs without the consent of 2/3rd of consumers of a project
4. Real estate agents also have been made punishable for non-compliance of orders of regulatory authority. Basically, brokers who want to sell flats or plots in a particular project will now have to get registered with the regulator. Appellate Tribunals will also be set up under the proposed law.
5. Under the other new stipulations approved by the Cabinet, states have to make rules in this regard within one year. Adjudicating officers will have rank equivalent to that of District Judges. Besides, an online system for submitting applications for registration of projects will be introduced within one year of the establishment of regulatory authorities. Regulator will have to decide cases within 60 days.
6. Under the Bill, real estate project developers both in residential and commercial sectors will be required to register their projects with the proposed regulatory authorities. Promoters will be mandatorily required to disclose all information regarding promoters, project, layout plan, schedule of development works, land status, status of statutory approvals, proforma agreements, names and addresses of real estate agents, contractors, architect and structural engineer.
7. Under the proposed law, 10 per cent of the project cost will be imposed as penalty for non-registration and another 10 per cent of project cost or three years in jail or both if still not compliant with the rules and regulations. For wrong disclosure or non-compliance of information rules, five percent of the project cost will be imposed. The regulators will have the power of cancelling registration in the case of persistent violations and decide on further action regarding completion of such projects.
8. Buyers can claim refund with interest and compensation if promoters fail to deliver projects in time. If rules are violated, projects will be de-registered and penalties will be imposed on the developer. Infact builders often demand part payment in cash, making many ordinary buyers party to corruption. The Bill will help curb undeclared "black money" in property markets that costs the government billions of rupees in lost taxable income.
9. To seek redressal of grievances such as delayed possession of flats or sudden alteration in building plans, home buyers can approach consumer courts
10. While the revised bill does include provisions to protect buyers such as the additional window to approach consumer courts for grievances, a clause that provided power to the appellate tribunal to punish the director, manager, secretary or any other officer of a real estate company for contempt of not complying with the orders or direction of the regulator has now been deleted.
Updated Date: Apr 08, 2015 15:21:50 IST