5 Restrictions that Real Estate Bill Will Impose on Builders
BENGALURU: All states will be formulating regulatory mechanism as soon as the Real Estate (Regulation and Development) Bill will get cleared in both the houses of Parliament. With the clearance of this Bill numerous malpractices in the real estate landscape that are responsible for lack of consumer confidence and plummeting sales are like to get curbed, as reported by Sanjay Kumar Singh for Business Standard.
No Profiting from Information Asymmetry
Real estate developers have always taken undue advantage of buyers because of restricted information available to them. As an example, a builder informs the customer that land acquisition is complete for the project, but he hides the fact that only 80 percent of the task is done and the remaining 20 percent is stuck in a legal issue. In case, the apartment of the buyer is in this 20 percent patch, he will have to deal with delayed possession even if rest of the project gets delivered on time. With the clearance of the Bill, builders will be forced to disclose registered projects name along with accurate information regarding status of land acquisition, statutory approvals, and layout plan to the regulators.
No Playing Around with Buyers’ Money
Builders usually raise money from buyers of one project but do not use it to complete that job. They utilize that amount for purchasing land that will assist them in launching another project and earn money from new set of buyers. This practice of developers causes many troubles for the buyers due to delays in delivery. The Real Estate Bill will make it compulsory that 70 percent of amounts raised from sales in a project will have to be deposited in an escrow account.
No Discrepancy in Penalties
Presently, in case a buyer delays the payments, he has to pay enormous interest rates. But if the builder delays the delivery, he has to pay a petty amount. The amount a customer has to pay for delayed payments for a 2-BHK flat of 1,100 sq ft worth Rs 50 lakh at 18 percent is 75,000 per month. For the delay in delivery of the same project a builder has to pay only 5,500 per month. With the Bill coming in force, this practice will cease and both the parties will have to pay equal penalties.
No Changes in Project Plan at Late Stage
Builders often sell their projects by showing attractive picture to buyers but alter the building plans and specifications later. Practices like building a new block in the patch that was marked as green area or promising a sea view from an apartment and making new set of buildings that block the view, is common with developers. Another way in which builders cheat buyers is by providing an affordable housing component in place of a promised luxury project. The Bill will make it mandatory for the builders to get the permission of two-third of buyers to make alterations in the project plan, thus putting an end to dishonest activities.
No Delay in Handing Over Charge to RWA
Many times the developers delay handing over charge of the project as they earn various benefits from this like charging high rates for maintenance. The Bill forces to create a resident welfare association after three months of handing over of a majority of units in the project.