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How Will Buyers Benefit From The New Bill?


If enacted, the new regulation Bill will solve many major issues faced by buyers while buying a home today.

As we all know, the union cabinet has approved the draft Real Estate (Regulation and Development) Bill which has been pending for over five years. The Bill aims at establishing a regulatory authority for enforcing fair practice and accountability norms, and a fast track dispute resolution mechanism in real estate transactions. How exactly does the Bill address some of the major problems that property buyers face currently though?


One of the main triggers for the introduction of the regulator, is the fact that a large number of property buyers all over India are suffering as several real estate projects are delayed or stuck up for want of clearances or funds or due to litigation. The Bill has adequately addressed this burning issue by providing that:

The developer cannot sell any real estate project without registering it with the Real Estate Regulatory Authority.

The project can be registered only if the developer has the requisite approvals and gives a declaration that he has the legal title to the land and that the land is free from all encumbrances.

The developer gives a declaration as to the period of time within which he undertakes to complete the project.
The developer undertakes to deposit 70 per cent of the amounts realised from sale of the project, in a separate bank account, which will be used for meeting the cost of that project alone.


The developer, on registration of the project, is also required to publish all the relevant project information on the regulators’ website for the benefit of the public at large. This, inter alia will include:
Proforma of the agreements proposed to be signed with the buyers. The number and the carpet area of apartments for sale in the project. Quarterly up-to-date list of number and types of apartments or plots booked.

This provision will go a long way in bringing about transparency in the process of buying a house. Today, most of the developers are reluctant to share the format of the agreement of sale before the booking amount is paid. The helpless buyers have no option but to take a plunge in the dark, only to be disappointed later when they finally get the agreement. At that point, they cannot go back as the developer will deduct cancellation charges, which could be substantial.
Most developers have also not been disclosing the correct information about the total number of flats available and number of flats booked. The general practice is to create a scene of scarcity with regards to availability of flats so as to hurry the buyers into decision-making and to artificially maintain the price at high levels.
The provision, regarding the quarterly disclosure of number of units booked will go a long way in dispelling the scarcity illusion and hopefully, will lead to more realistic pricing. In fact, it can be more effective, if this disclosure is made monthly. It is pertinent to note that the earlier avatar of the Bill actually provided for such a disclosure on a fortnightly basis.


In case of a pre-launch, the property is sold at a very early stage, even before the approvals are in place. The developer offers investors very attractive rates in order to raise funds to finance the preconstruction stage. The practice of pre launches, which hitherto has been widely prevalent and popular amongst developers as well property buyers, particularly investors, is likely to come to an end, once the Bill is passed. This will go a long way in protecting the interest of genuine property buyers who have suffered on account of delays.

Another view on this is that such a move is likely to slow the launch of new projects and thereby, limit the supply of new houses, which may lead to an increase in prices. Further, pre-launch sales have been a major source of funding for developers who are deprived of any bank funding for land acquisition. Hence, the developers will have to resort to other modes of raising funds like private equity funding. This is likely to increase the cost of funds for the developer, which will ultimately be passed on to the buyer.


The developers have been, since long, confusing the property buyers, by using various measures like ‘saleable area’, ‘super built-up area’, ‘built-up area’, ‘usable area’, etc., in relation to the size of the property. It is really surprising that in India, when one is buying a bottle of cold drink for Rs 10, the bottle clearly mentions the net contents. However, when it comes to buying a property worth lakhs or crores, the buyer struggles to find out the net area he is buying in.
The Bill seeks to address this issue by not only making it mandatory for the developers to disclose the carpet area but also, by clearly defining it as ‘the net usable floor area of an immovable property, excluding the area covered by the walls.’


Surprisingly, the Bill refrains from mentioning the issue of conveyance, which is a major concern, especially in a city like Mumbai, where majority of home owners are being deprived of their right of ownership to the land on which the building is constructed. It simply states that the developer shall take all necessary steps to execute conveyance without specifying the timeline for the same or penalty.


The Bill also proposes to bring the real estate agents fraternity-which is currently unregulated, within its ambit. It provides that real estate agents will have to register themselves with the regulator, if they want to sell any projects of developers that are registered with the regulator. The Bill also provides that real estate agents should not make any false representations with regard to services; facilities; grades; standards; approvals; affiliations; etc., being offered by the developer.
They should also facilitate the buyer in getting all the documents he is entitled to at the time of booking the property. As the above pointers highlight, the Bill, if enacted in its present form, could come as a huge relief to property buyers. However, before the Bill finally becomes an Act, it will be subject to debate/discussion and amendments, before it can be passed in the parliament.


The bill aims at establishing a regulatory authority for enforcing fair practice and accountability norms, and a fast track dispute resolution mechanism in real estate transactions. It provides buyers relief from project delays, makes the status of projects transparent and enforces agents to act on the buyers’ behalf.


Category : Flatons Advisors Blog



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