Real Estate Bill: More power to the home buyer

The Rajya Sabha on Thursday passed the Real Estate (Regulation and Development) Bill, 2015, offering the much-needed protection to home buyers. Here are the ways the provisions will impact you.

First, the Bill requires setting up a new regulator for the real estate sector. Just as you have SEBI and IRDA for the capital markets and insurance industry respectively, an authority will be created to help frame policies for the real estate sector. The regulator will maintain records of all projects, promoters and agents. It is mandatory for developers to register all projects larger than 500 sq m or, alternatively, more than 8 apartments, to be registered with the regulatory authority. The time frame for completion must be clearly mentioned and adhered to.

The regulator will also monitor compliance of rules on an ongoing basis as developers have to provide updates on progress and maintain a database on violators. You can thus have access to the names of promoters, details of the project for which registration has been revoked along with related reasons. And as real estate comes under the purview of state governments, individual States are responsible for setting up the Regulatory Authority at the State level. State-level authorities, called Real Estate Regulatory Authorities (RERAs), will now regulate transactions related to both residential and commercial projects.

Home buyers can hope for a better buying experience. For one, rather than pay for super built-up area which is subject to lenient interpretation by the developer, the regulation requires buyers pay for carpet area. It also clearly defines it. Two, buyers faced problems arising from change in building plans including change in number of floors constructed. The Bill requires that builders take consent of two-thirds of the home buyers in case of changes.

Three, to avoid developers from diverting funds to other projects, thereby delaying completion, 70 per cent of the project cost must now be deposited in a separate bank account.

Four, when there are delays in completion, the developers typically did not pay any penalty or paid a low rate of interest as the agreement typically was in their favour. Now, both parties have to pay the same rate of interest in case of delays in payment by buyer or hand-over by the developer.

Also, developers are expected to receive all approvals from local authorities before marketing the project. The buyer will also have the right to obtain stage-wise completion schedule. The Bill also regulates real estate agents — they have to be registered and should maintain books of accounts, records and documents. Promoters and agents can be punished for making misleading statements.

If a builder reneges on his promises, a home buyer currently has a very limited set of options to get justice and have to contend with long-drawn and expensive court battles. Now an Appellate Tribunal can be set up to resolve disputes in shorter time-frames. This will be in addition to existing options such as consumer courts. The Tribunal will have powers to impose punishments such as penalties or cancel registration. Builders can be fined up to 10 per cent of project cost and/or jail term if they do not abide by the orders of the Tribunal.