The Real Estate Bill!

Good or Bad?

For Buyers / For Builders?

A Real estate bill was passed by the Government which was regarded to make the process

of Real estate business transparent. On June 5th 2013 the union cabinet approved the bill.

With the elections round the corner, this may be a vital bill to make the ruling party show

to the world that it is towards transparency in the Real estate industry!

However is the bill looking at corruption and bureaucracy associated with getting

permissions from the different Government bodies? Builders in Chennai and other places

of the country are under stress due to pass the cost associated with bureaucracy and

corruption and it needs to be under the scanner.

Cons of the bill

Only for Residential properties: What happened to commercial properties? India needs

industrial and technological growth. We need to make Real estate in Chennai competitive

for everyone.

No provision to improve approval transparency and Government bodies are one of the

reasons for delay in implementing a project. If this is not addressed, builders will lose

money and the buyers will pay for that loss. It may increase potential cost for the end

consumer, absolutely bad for the development of Real estate in Chennai.

No protection for past projects which were booked before the bill.

Small builders escape the law: Registration with the regulator won't be mandatory for

projects less than 4000 square meter. So, many small developers across metros will

escape from registration and Government regulator's control. In these metro cities,

project areas tend to be smaller due to lack of large land parcel. Will the big builders in

Chennai start smaller projects? May be not but the small builders are the main cause of

worry in terms of quality, affecting the reputation of Real estate in Chennai. The one year

warranty must apply to everyone.

Pros of the bill

On time delivery of apartments

This has been a real issue with some builders using time based payment. The construction

progress may be too slow but payments are required on time. Builders who try to take

advantage of naive buyers are taught a lesson. The curious part is, in case there is a long

delay in delivery of apartments to buyers, then the buyer will be entitled to a full refund

with interest. This is pretty good protection for a consumer.

Clear and fair disclosures

Did you book a west facing or sea facing apartments for sale in Chennai during pre-launch

but when plan was approved and construction started, you saw that changed? It is very

common to book apartments for sale in Chennai with certain specifications but it changes

over the period of construction. A builder got approved for 7 floors but built apartments in

10+ floors. He had to change the entire design and reshuffled all apartments.

So if you wanted a north facing apartment,

you might be disappointed when such

reshuffling is performed. So now the bill

states that developers need to share project

plans in disclosure which will definitely be

delivered with an apartment. There can't be

any change at a later stage of development by

builder. In case builder is found guilty, then

the builder penalized at 10 per cent of project

costs or jail up to 3 years.

Actual Carpet area to be mentioned

Currently buyers are given the super built up area which includes common passage, club

house, etc. How do you know the extent of area that is available for you? Now, with this

bill it's mandatory for the builders in Chennai to declare the actual carpet area of

apartments in promotion activities.

No more pre-launch offers without approvals

Most builders in Chennai offer apartments for sale in Chennai at huge

discounts with pre-launch offer to attract buyers. However, buyers are not informed about

all clearances in the project and risk of delay in delivery due to issue of important

clearances from Government. In this case, builders in Chennai initially start working on

project after getting some clearances and start selling but such projects get delayed or

stuck at later stages due to some hurdles in getting complete clearance. The bill clearly

state that the developers have to get all important clearances before they start selling

apartments.

No more diverting funds between projects

It's a common practice among developers to raise funds from buyers in the pre-launch

offer and then utilizing the fund for buying land for other projects or engagements, but

not using it in current project. Now, with this bill it's mandatory to maintain separate bank

accounts for each project and transactions need to be maintained. Diversion of funds from

one project to another will not be permitted. Developers or builders have to put aside 70

percent of the proceeds of a particular project in a separate bank account which will help

to fund the project and leads to complete it on schedule time.

A one year warranty for your building!

In case there is structural defect or deficiency in the

development of building, then this bill allows approaching

builder for after sales service. According to the bill, buyer

needs to inform about the deficiencies within one year of

purchase date. So, developer will be liable to rectify these

defects without further charges.