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19 New Rules in favor of Property Buyers

19 New Rules that will help buyers feel much safe in India

19 New Rules for Businesses in Real Estate Sector that property buyers are more safe

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Businesses in Real estate sector involved in a commercial asset or residential asset class has been plagued with a number of issues/challenges such as demand-supply mismatch across segments, project delays, and liquidity issues. Such delays have been acting as a pain point for property buyers for ages now.  Can it be blamed solely on the real estate builder? I don’t think so, there has been a number of cases where these developers have found themselves in legal compliance, Additionally, the real estate sector has limited access to long-term funding, taxation and fees structures are either complicated or irrational, leading to higher project cost impacting the end user/buyer. RERA Act stands for Real Estate (Regulation and Development) Act aims at establishing a Real Estate Regulatory Authority for regulating the real estate which was not regulated till now. The Union Government has undertaken several policy initiatives to improve transparency and accountability and improve liquidity in the sector. Key points that you should be aware of are:

 

  1. RERA applies to the whole of India, except the state of Jammu & Kashmir.
  2. Registration has been made mandatory for all those real estate projects whose area of proposed land to be developed exceeds five hundred square meters or the number of flats to be developed is more than eight, inclusive of all the phases.
  3. Also, the on-going projects which have not received the completion certificates before the commencement of the Act, i.e. 1 May 2017 need to get their registration done within three months.
  4. In case if the developer fails to get a property registered, then the developer will face a penalty of up to 10% of the project cost and a repeated violation could lead to imprisonment.
  5. The promoter also needs to furnish the details of the projects launched by him, in the past five years whether developed or being completed, in his application for registration.
  6. All the promoters have to obtain all the approvals before the launch of the projects. Any fraud or misrepresentation regarding this would lead to huge penalty including imprisonment.
  7. A web-based online system would be created wherein the promoter needs to disclose the details about the project and also need to give updates regarding the construction progress within a time period of three months.
  8. Also, according to the act, every phase of the apartment to be constructed will be considered a standalone or individual real estate project, and separate registration needs to be obtained for each project.
  9. In order to make any structural changes to the project after the start of the project, the promoter needs to obtain at least two-third of the buyers’ consent.
  10. The promoter or the developer cannot make any changes to the proposed plan without obtaining the written consent regarding the same from the buyer. The changes in the proposed plan would not allow the promoter to increase the cost.
  11. Registration of real estate agents has also been made mandatory under the act.
  12. Further, no real estate agent shall facilitate the sale of any unregistered project or misrepresented project.
  13. “Carpet Area” is defined in the act and the property is to be sold on the basis of carpet area and not the super built-up area which included the area of walls as well.
  14. A separate escrow account is to be made where the promoter needs to place 70% of the money collected from a buyer in order to meet the construction cost of the project. This money cannot be used in other project or work and is to be entirely used for timely completion of the project. Any deviation in this would attract imprisonment.
  15. In the case of any shortcomings in the project, then the buyer can contact the developer in writing within one year of taking possession.
  16. RERA lays down a provision for maximum jail term of three years which may be accompanied with or without a fine if a developer/ promoter violates the order of the appellate tribunal of the RERA.
  17. In the case of late delivery, the promoter will be required to return the entire money invested by the buyers along with the pre-agreed interest rate mentioned in the contract based on the model contract given by RERA. If not so, then the promoter will have to pay 2% interest above the SBI lending rate on the amount to the buyer.
  18. RERA mandates that promoters cannot ask for more than 10 per cent of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.
  19. The developer will have to rectify the matter within 30 days, in the case of some default in the quality of construction and the provision of services from the five years from the date of possession of the property.

 

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