Real Estate Regulatory Bill beings cheer to home buyers
March 2016

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Home buyers were once a vulnerable lot, often at the mercy of dodgy and unscrupulous developers. Not anymore though; the Real Estate Regulatory Bill passed by both the houses of Parliament in March 2016 ensures that customers now have reason to cheer when buying a home. An important bill that had been pending since 2013, the Real Estate Regulatory Bill was passed by the Rajya Sabha on the 10th of March, followed by the Lok Sabha on the 15th of March.

The much awaited bill seeks to set up a system to regulate the real estate sector in India that will protect the rights and interests of home buyers. The provisions under this bill will ensure that developers complete projects in time, and compensate home buyers suitably in the absence of timely completion.

The Real Estate Regulatory Bill will now enable the setting up of an apex body that will regulate real estate activity in the country. Under the provisions of the 

  • Builders will not be permitted to advertise or sell any homes before all the necessary approvals and sanctions have been granted
  • The project will also have to be registered with the specially appointed state-level regulatory authority, alongside appeal courts to resolve disputes. The ruling to register the project is set to extend to ongoing projects as well
  • Developers will now need to disclose all details at the time of registration, including plans, schedules, layouts, legal paper work such as agreements, status of approvals, etc.
  • No changes will be permitted to the approved plans or designs midway, unless the developer is successful in procuring written consent for the same from at least two-thirds of the buyers
  • Buyers will no longer be compelled to buy homes on the basis of super built-up area, but will be able to do so by understanding the actual carpet area of the apartment
  • In the event of failure (by the developer) to deliver on the basis of promised / advertised plans, amenities, and designs, the developer will have to return the payment to buyers along with interest
  • Buyers too are liable to pay interest on their payments to the developer, in case of delay in executing the same
  • Developers will have to deposit 70% of the earnings generated from the buyers in a separate account that will be used solely for the purpose of construction and payment for the land
  • In case of deficiency noticed after seeking possession (of a home), the buyer can contact the developer within a year, to seek after sales service

As every bill that is proposed to be made into a law goes through its share of debates, the Real Estate Regulatory Bill too is not without apprehensions on the part of developers. Developers have expressed concern that the registrations process would cause delays for under-construction projects. They have also expressed concern about setting aside 70% of the funds collected from buyers; this they believe will stretch their already vulnerable liquidity position.  

While the bill is a welcome relief to home buyers in India, especially the large number of those affected by delays in completion of project, what remains to be see is how effectively each state in the country executes the same, and how soon will it be before it’s made into a law. The bill in its current form is awaiting approval from the President of India, following which it can become a law. The government’s responsibility towards this is to first notify key sections of the bill that will involve setting up a regulatory authority. Once this is achieved, sections related to registration of projects, real estate agents, and the functions and duties of developers will be notified.