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Real Estate Bill: What It Means For The Home Owner
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The Union Cabinet, on Tuesday, 4 June '2013, cleared the much-awaited Real Estate (Regulation and Development) Bill, which seeks to redress the shortcomings in the private residential housing sector by setting up a regulatory authority. It has invited tremendous opposition from the real estate industry. But, wait! The Bill can come into force only after it is passed by Parliament — a herculean task in itself, given the current clauses in the Bill. Meanwhile, here's a Primer on the Bill:
- It applies only to residential projects over 4,000 sq meters in size.
- Developers are prohibited from advertising or taking advance payments from buyers until the project is registered with the Real Estate Authority (each state will have one). For ongoing projects, developers are expected to register with the Authority within six months.
- After registration, the developer is given a login id and password giving access to the authority website where the details of the proposed project are to be listed. This website will be accessible to buyers.
- Flats can only be sold on a standard "Carpet Area" doing away with definitions such as "Super Area", "Built Up Area", "Plinth Area" and others that confused the buyer.
- In case a particular developer is dealing with a large project with different phases, each phase will be considered as a standalone project and registration will be required for each separately.
- The buyer will be compensated on their advance payment with interest in case of incorrect or false claims and delays in meeting deadlines. A penalty may also be charged, determined by the Authority.
- The buyer will also be penalised in case of delays, and charged interest on delays in payment.
- In the case of the cancellation of allotment, a refund is to be provided with interest. All compensation and refund amounts will be determined by the Authority.
- The developer will be held responsible for any defect or deficiency in the building construction for up to one year after handing over, which is to be rectified free of charge and within a specified time. In case the promoter fails to do so, he will have to pay the damages determined by the Authority.
- At least 70 per cent of funds of each real estate project are mandated to be deposited into a separate bank account which will prevent the developer from transferring funds from one project to another (one of the biggest reasons behind delayed projects).
- In case of violation of the Bill, the developers are liable to imprisonment for up to 3 years, or penalty of up to 10 per cent of the cost of the project. The promoters who fail to comply with the prescribed directions by the Authority are liable to a penalty of one lakh rupees for every day during which such default continues, which may extend to five percent of the estimated cost of the project.
- A Real Estate Appellate Tribunal will be set up to adjudicate disputes and grievances between a developer and a buyer, between a developer and Authority and between the Government and the Authority.