After a long wait and lot of deliberations, the Real Estate Regulatory Bill has finally been passed by the Parliament. This will now be sent to the President for final approval and to be turned into a law following which the states will be expected to make their own state-level regulatory bodies as per the law.
This can most easily be called the single-most transformative decision to have happened when it comes to real estate sector in the country. Not only for the buyers, but also for the developers, this is a historic step.
So how is it going to affect the developers’ world and the buyers’ world?
Benefits for Buyers:
- The builders cannot start a project without getting necessary requirements from the concerned authorities. Failure to do so and advertise the project with flashy advertisements to lure the customer and not delivering as per the promise can lead to penalties and even imprisonment. This, at the moment, also covers the projects under-construction.
- Developers will have to adhere to the strict delivery guidelines and any delay in delivery of the project will result in fines and penalties.
- Developers have to keep aside 70% of the collections from buyers in an escrow account to cater to the construction of the project for which funds are collected and they can’t divert these funds elsewhere.
- For non-compliance with the regulations mentioned in the bill, the developer as well as the broker/agent will be held liable and punishable under the law.
- The quoted price of the project will now be on the basis of carpet area instead of super-built up area.
Benefits for Developers:
- Brings transparency and better regulation for serious players o Investment in the sector as trust deficit reduces between financial institutions and developers.
- Developers with a short term objective will have a tough time to survive Impact on New Buyer No doubt this bill has given a ray of hope to all buyers, past and present.
- Given the state of real estate sector in the past couple of years with sales slowing down and prices reaching new bottoms, there is an assumption to wait further for this bill to become a law and then make the decision to buy.
However, there are certain things to be kept in mind while making the decision in the backdrop of real estate bill:
- There will be time taken before the bill becomes a law and becomes effective in each and every state.
- The prices will start rising this year owing to economic development in the country.
- Builders’ lucrative deals to clear unsold stocks are one of the best in a long time. No guarantee they will last forever!
- Owing to the clause in the bill about 70% fund to be kept away in escrow accounts, the cost of developing a project will rise further and builders are going to pass on that cost to customers. This mean further rising of prices.
- It is of utmost importance to do a background check on the builder and the project details to see if all necessary permissions are in place and if paper work is in order.
- This bill will ensure that no builder will try to conduct business in an inappropriate manner and those who have, will have to do a course correction Keeping these factors in mind, make an informed decision about buying your house.
Things to Consider by New Buyer:
- The real estate bill is definitely going to be a boon for you, but the onus still lies on you to do a diligent research about the project.
- Analyse your own financial health and spending capacity before buying a new house on loan. Don’t over-spend or take a loan that exceeds your income generating capacity.
- The responsibility will still be yours of physically checking the place before signing the purchase agreement. You can only claim damages if what was shown to you is different and of low quality from what you’re sold.
- Do employ an established consultant , but take time out to go through all the documentation on your own or with your trusted aides/legal help before signing the papers.
- Any dispute at a later stage can be taken to the real estate tribunal, but it will be a fair play out there. If the builder can prove that you have delayed on payments or have not fulfilled your side of the commitment, the tribunal can punish you as well.
- Do understand that this new bill will revolutionize the real estate sector of the country. The way business has been done till now will change drastically.
Only serious players will remain and the fraudsters will be eliminated over a period of time. However, a lot will depend on the effective and timely implementation of this bill in each and every state. This bill can single-handedly make the real estate sector on par with global developed markets that are evolved and mature in terms of investments and buyers’ trust. The ball has been set in motion. It can only move in positive direction from here.
Written by Ashwinder Raj Singh, CEO – Residential Services, JLL India