Real Estate Bill cleared to protect you from scams by builders

NDTV Profit Desk

05 Jun 2013, 04:29 PM IST

The Bill creates a regulator for the realty sector along the lines of the Telecom Regulatory Authority of India (Trai), which regulates mobile tariffs.
The Bill applies only to residential projects and not to commercial real estate.
The Bill has provisions for tough penalty for putting out misleading/deceptive advertisements about projects. For first time offenders, the penalty could be as high as 10 per cent of project costs. For repeat offenders, there could be a jail term of up to three years.
The proposed legislation makes it necessary for builders to get all important clearances before they sell apartments. This means developers cannot pre-launch residential projects to collect funds from buyers.
This comes in response to builders who regularly miss deadlines for the completion of homes. Buyers have also complained that after making payments, they often discover that the builder in question has not cleared land acquisition permissions.
Developers cannot take more than 10 per cent of the advance from buyers without a written agreement. The buyers are entitled to a full refund with interest in case of delay in projects.
Union Cabinet Minister for Housing & Urban Poverty Alleviation Ajay Maken said the Bill will be introduced in the next session of Parliament and a majority of states backed the Bill (Read: Real Estate Bill seeks to protect middle class interests: Ajay Maken).
The government will clarify provisions pertaining to the Bill, which is applicable for residential projects only, later today.
Developers need to put aside 70 per cent of the proceeds of a particular project in a bank account according to the Bill. This will prevent developers from diverting funds meant for construction and ensure timely completion of projects, analysts said.
The Bill makes it mandatory for builders to define "carpet area" of the house. Currently, most developers sell residential flats citing "super area," which is 25-40 per cent more than the actual usable area.