The much-awaited Real Estate (Regulation and Development) Bill has obtained clearance from the Cabinet on 4th June. The Bill is expected to bring in transparency in the nation’s real estate sector with tighter norms for selling projects and preventing property fraud cases. This Act may be called as the Real Estate (Regulation and Development) Act, 2011.
The Central Government will notify the date of commencement of the Act. It is expected that different dates may be announced for different provisions of the Act.
Establishment of Real Estate Regulatory Authority
A Real Estate Regulatory Authority will be formed by the Appropriate Government and certain powers and functions will be assigned to it (Section-35). Each state or union territory will have its own regulator body to which similar functions will be set. The Authority will be headed by a Chairperson and it will consist few whole time Members (Section 37-1).
The Authority should aim towards the growth and promotion of a transparent, efficient and competitive real estate sector. It has to make recommendations on changes required for getting faster clearances of plans and development projects, issuing completion certificates and to effectively implement plans in the sector, encourage construction of environmentally sustainable and affordable housing projects, promote usage of good building materials and following efficient construction techniques, and so on (Section 28).
Besides this, the regulator will have to publish and create a website of records of all real estate projects with all relevant information, including status of registration or cancellation (Section-29-2b).
Mandatory Registration of real estate projects
As per Section 3 of the Act, a developer is not allowed to develop any residential property without prior registration of the project with the Real Estate Regulatory Authority. The registration is mandatory for projects proposed on a land area of 4000 square meters and above (the land area limit may be different in different states). In case, a proposed project has to be developed in phases, then every single phase shall be considered as a standalone real estate project and the builder should seek separate registration for each phase.
Even it is mandatory for all the property agents to get registered with the regulatory authority of their respective states.
Responsibilities of developers
A separate bank account for each real estate project has to be maintained in a scheduled bank and 70 percent of the amount collected for a project from the allottees would be deposited in the account and would be used only for the project.
Section 9 prohibits promoters from publishing advertisements or prospectus before the registration of their projects with the Authority.
No developer is allowed to take any amount of money from buyers before entering into a sale agreement. The agreement should include details such as the particulars of development, specifications, cost of the plot, dates and manner of payment, possession date, etc. The developer has to make sure that the proposed project gets developed and completed in accordance with the plans, designs, specifications and duration as approved by the Authority. Floor Area ratio (FAR) should also be clearly mentioned by the developer.
If there is any major defect or lack in the project developed, and if a buyer brings it to the notice of the promoter within a year from the date of handing over possession, then it is the duty of promoter to rectify the defect without any extra charge.
Promoter should hand over all the original copies of the title documents and the plans to the buyers’ association formed as per the local laws.
In case if a developer fails to give possession of an apartment or project then he is liable to pay compensation to the buyers at a rate as specified in the agreement. It is also mandatory for all buyers to make timely payments as specified in the agreement, which if delayed, the allot tees have to pay interest at prescribed rates.
Benefits to buyers
If a developer makes a false statement about his project and in case a buyer decides to withdraw his investment in the project, then the developer has to return the money along with interest at prescribed rates (Section 10).
The Bill defines carpet area and seeks developers to sell units on the basis of “carpet area”€ putting an end to the ambiguous super area system.
In case a promoter fails to rectify the structural defects found within a year from the possession date within reasonable time, then the buyers will have the right to receive compensation by the promoter, as determined by the Authority of that place.
The regulator will be empowered to form a dispute resolution mechanism in order to settle the disputes between the developer and the buyers or the buyers themselves through regulations.
If there is an appropriate need with regard to a complaint or suo moto against a developer, allottee or any other concerned authority, then the Authority is empowered to call upon the promoter at any time for enquiry.
Conclusion:
The Regulatory Bill seeks to provide a uniform regulatory environment to the real estate sector of India. If enforced well, it will bring in transparency and good relief to the buyers.
Though the Bill looks promising, in the current real estate scenario, better administrative reforms are required to ensure protection to end-users. More provisions are required to meet the challenges faced by both developers and buyers.
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