Govt cracks the whip, bars builders from diverting cash paid by buyers
- 7th Aug 2015
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In a far reaching development aimed at protecting the interests of property buyers, real estate developers across the country will now be barred from diverting more than 50 percent of the money collected from customers to their other projects.
According to recent media reports, the Housing Ministry has accepted the recommendation of a Parliamentary panel's on the Real Estate Bill to this effect.
Reports further add that the housing ministry has also accepted the panel's recommendation to allow respective state governments' complete freedom to make the provisions stricter if required and increase the 50 percent threshold. However they will not be allowed to lower the same under any circumstances.
Subsequently, the Housing and Urban Poverty Alleviation ministry has now accepted all 38 key recommendations made in its report by the 21-member Rajya Sabha select committee constituted to study provisions of the Realty Bill.
Some of the other important recommendations made by the House panel include:
- Housing projects on more than 500 sq metres will now have to register with the proposed real estate regulator as opposed to the threshold at 1,000 sq metres that was fixed earlier.
- The interest rate payable by the promoter or allottee in case of any default by either would be the same now.
- Failure to do so would lead to a penalty of 10 percent of the project cost.
- For subsequent violations, they will be charged another 10 percent of the project cost or sentenced to a three-year jail term.
It may be recalled that earlier the 21-member Parliamentary Select Committee headed by the BJP's Anil Madhav Dave was also keen to incorporate stringent clauses including a possible jail term for developers who did not adhere to their promises made to home buyers.
Subsequent to several public discussions on the topic with relevant stakeholders held across Kolkata, Mumbai, Shimla and Bengaluru, several panel members were convinced on the need to add stricter provisions that enabled the prosecution and imprisonment of builders who were found guilty of violating the trust of their customers with regard to specific projects.
The Committee is said to have held wide-ranging discussions on the proposed Realty Bill with the relevant stakeholders across Kolkata, Bengaluru, Mumbai and Shimla. A list that included several residents' welfare associations, consumer groups, property lawyers and activists, private builders, financial institutions, insurance companies and state governments.
Based on the feedback received from various consumer protection groups, the committee was of the view that financial penalties alone were not a strong enough deterrent to stop unfair trade practices.
About the Bill:
The Real Estate (Regulation and Development) Bill is a pioneering initiative to protect the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects.
The Bill provides for a uniform regulatory environment, to protect consumer interests, help speedy adjudication of disputes and ensure orderly growth of the real estate sector.
The Bill contains provisions of registration of real estate projects and registration of real estate agents with the Real Estate Regulatory Authority; functions and duties of promoters and allottees; establishment of Real Estate Regulatory Authority; establishment of fast track dispute resolution mechanism through adjudication; establishment of a Real Estate Appellate Tribunal; offences and penalties etc.
These measures are expected to boost domestic and foreign investment in the sector and help achieve the objective of the Government of India to provide 'Housing for All by 2022', through enhanced private participation.
The Bill ensures mandatory disclosure by promoters to customers through registration of real estate projects as well as real estate agents with the Real Estate Regulatory Authority.
The Bill aims at restoring confidence of the general public in the real estate sector; by instituting transparency and accountability in real estate and housing transactions.
This in turn will enable the sector to access capital and financial markets essential for its long term growth. The Bill will promote orderly growth through consequent efficient project execution, professionalism and standardization.
The Bill is expected to ensure greater accountability towards consumers, and to significantly reduce frauds and delays. The Bill is also expected to promote regulated and orderly growth of the real estate industry in the country through efficiency, professionalism and standardization. It seeks to ensure consumer protection, without adding another stage in the procedure for sanctions.
Rajesh Kulkarni is a professional content writer and he writes on various contemporary topics.... read more
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