The much anticipated Real Estate (Regulation and Development) Bill was passed in the Rajya Sabha on Friday after which it has moved to the Lok Sabha and to the president for approval. Only after it gets assent of the President, it will become a law.
The Real Estate Bill has been a topic of discussion for the last 2-3 years. It is aimed at making the real estate business in India more regulated and transparent and make it easier for the buyers and builders to deal with each other. The realty sector lacks an organized way of doing business, thus it needs a regulating body. Now that the bill is in the hands of the parliament, market players are expecting that it will soon be out in the market as a law.
There are a few aspects of the market that will be affected after the bill is passed. Let us talk about these aspects in some detail.
Transparency in Dealing
The lack of transparency has been a major topic of debate among the builders and buyers. The loading cost that the buyers have to pay along with the price of their home can reach as high as 50 percent in metropolitans like Mumbai which makes them feel cheated. So, the bill proposes that the houses will be sold only on carpet area basis. This means that the Basic Selling Price (BSP) per square feet will be based on the area covered within the four walls of the room. The prices of shared services will be additional so you know what you are paying for.
Moreover, promoters have to register their projects with the regulatory authorities and also disclose certain information about the project- such as implementation schedule, layout plans, status of approval, etc.
Earlier, the builders used to raise the funds in the name of their new launch projects and buy land with those funds. This resulted in accumulated land with the builders. However, the new law mandates that the builders have to keep 70% of the funds raised from the buyers in a separate account which is to be used towards the construction costs of the same project only. Banks do not lend money for land purchase so the builders have to resort to lending from non-banking financial institutions. This is going to affect the property prices as the developers would try to recover the costs from the buyers.
Regulations and Registration
Apart from the renowned developers, there are numerous small development companies functioning in the market. So to get a better hold on the market, Real Estate Bill suggests that all projects need to be registered with the regulating authority, even those under construction. Market players opine that the smaller companies would not be able to survive so many regulations and will either shut down or consolidate with bigger organizations.
Other regulatory mandates include:
Both developers and buyers will have to pay the penalty for delay at the same rate.
The liability of builders for structural defects will be increased from 2 to 5 years.
It also provides for arranging insurance of land titles, which will be beneficial if the titles are defective.
The grievance cases have to be adjudicated by the Appellate Tribunal within 60 days.
Any violation of orders can land a developer in jail for 3 years and an agent for 1 year.
Thus, the Real Estate Bill aims at promoting fair play in the realty market and making it more organized. The law will be a delight for the new home buyers.
Read More About……………Cabinet Nod to Real Estate Bill: How it Affects Homebuyers?