The much awaited the Real Estate (Regulation and Development) Bill, 2015 has been passed by the Rajya Sabha on March 10, 2016. The key points of the proposed bill which is going to benefit property buyers but impact consderably promoters, developers and real estate agents, are as follows:
Ø The Bill requires setting up a new regulator for the real estate sector. As real estate comes under the purview of state governments, individual States are responsible for setting up the Regulatory Authority at the State level. State-level authorities, called Real Estate Regulatory Authorities (RERAs), will now regulate transactions related to both residential and commercial projects.
Ø An authority will be created to help frame policies for the real estate sector. The regulator will also monitor compliance of rules on an ongoing basis as developers have to provide updates on progress and maintain a database on violators.
Ø The specified residential real estate projects need to be registered with RERAs. Further, Promoters cannot book or offer these projects for sale without registering them. The regulator will maintain records of all projects and promoters.
Ø It is mandatory for developers to register all projects larger than 500 sq mtr or, alternatively, more than 8 apartments, to be registered with the regulatory authority. Further, if the project is developed in phases, each phase must be registered separately.
Ø The duly filed application should be submitted by the promoters/developers/real estate agents with the RERA for approval along with prescribed supporting documents like layout plan of the project; the carpet area of property for sale; the details of existing projects of the promoters; details of various approvals received by the promoters; details of land title on which the project is proposed and details about the payment dues on land title etc.,.
Ø If the applicant does not hear back from the RERA within 15 days of the application for registration, the project will be considered as registered. However, RERA is empowered to revoke the approval by giving 30 days’ notice period.
Ø Real estate agents dealing in these projects also need to register with RERAs. The registration is necessary to facilitate the sale or purchase of property in real estate projects that have been registered. Registered agents must not facilitate the sale of unregistered projects.
Ø The regulation requires the buyers to pay consideration on purchase of house on carpet area basis (which clearly defines in the bill). Hitherto, it was payable on super built-up area basis.
Ø In general the buyers faced the problem in the form of change in building plans including change in number of floors constructed after entering into an agreement with promoter. The Bill requires that builders take consent of 2/3rd of the home buyers in case of changes.
Ø To mitigate developers from diverting funds to other projects, which will endup delaying completion of projects, the bill proposed that the 70% of the amount collected for the project by the buyers must deposit in a separate bank account.
Ø In a cases where there are delays in completion, the developers/promoters will not pay any penalty or if pay it will be a low rate of interest as agreed between parties during execution of agreement. To avoid ambiguity/favour to one party, the bill is proposed that both parties have to pay the same rate of interest in case of delays in payment by buyer or hand-over by the developer.
Ø The promoter shall :
- a) obtain a completion certificate from the relevant authority;
- b) form an association or society of buyers;
- c) provide essential services till the association of buyers take over the maintenance of the project.
If the promoter is unable to give possession of the property with agreed time, he shall be liable to return the amount received by him for the project along with interest.
Ø In case the promoter fails to register the property, he may be penalized upto 10% of the estimated cost of the project. Failure to register despite orders issued by the RERA will lead to imprisonment for up to 3 years, and/or an additional fine of 10% of the estimated cost of the project. The promoter will have to pay upto 5% of the estimate cost of the project if he violates any other provisions of the Bill.
Ø Real estate agents will have to pay a fine of Rs. 10,000/- for violating any provision of the Bill, for each day the violation continues.