Saturday, July 09, 2011

Watchdog for realty check

              LACK of affordable housing and zero accountability on contractual obligations of the builder makes the real estate sector a dangerous proposition for those who stake their life’s savings on buying a dream house. The ever burgeoning demand for quality and affordable housing has made land the final frontier of Indian politics. And it is in this context that the demand for a regulator in the real estate sector has hit a feverish pitch. Presently, the gullible buyers are duped by an unholy nexus between unscrupulous developers and real estate agents. The contracts drawn between the two parties levy a heavy penalty on the buyer if he does not live up to his commitment but allows the developer to squeeze maximum out of his catch. The realty sector has since long been demanding a regulator to protect the interest of home buyers against the run by night and errant developers, and to make the real estate transactions more transparent. “If we are going to buy a flat in any project, the developers force one sided contracts on us. For example, there is no provision for penalty if the project is delayed endlessly, however, the exit clause for the buyer is always tough.”
              “If a buyer walks out of the project he loses 10-15 per cent of the booking amount, which is really not fair. But the buyers have no other option as most of the developers follow this rule.” There is no mechanism to address rampant complaints against developers such as delays and false pre-launch claims, especially about the floor area. The sector badly needs a regulator to make the home buying experience better for the home buyers. The government had already proposed a Bill in 2007. The first draft of the Real Estate (Regulation of Development) Bill was introduced in September 2009.
              But despite persistent demands from the consumers, the Bill failed to see the light of the day. The urban development ministry has made some amendments to the Bill and ministry officials claimed that the final draft will be tabled before parliament in the upcoming monsoon session.
              THE NEW draft has various provisions that protects the buyers against the fly by night developers, false advertisements and even for putting up wrong spellings of the project. It also proposed to make it mandatory to mention the actual carpet and build up area in the advertisement. Initially, work on the real estate Bill was started by the urban development ministry, but subsequently the housing ministry took charge of the proposed legislation. State-centric issues, such as building bye-laws and municipalities, have been removed from the new draft to make it a central legislation.

WHY BUYERS NEED LEGAL PROTECTION?

  • While the Greater Noida buyers were taking loans and dipping into their life savings to buy their dream flats they were not told about the Allahabad High Court case on the land on which the flats were supposed to come up
  • Even after a buyer is cheated of her flat, the builder is demanding 10 per cent of the total cost of the flat as penalty in order to refund the buyer’s hardearned money
  • There is no exit clause for the buyer in the contract. Even after the builder is proven to have sold a disputed property, the buyer does not get its money back
  • The housing contracts are one-sided in the favour of the builder
  • The buyer has no control over the land deal
THE REAL ESTATE REGULATION BILL
  • The Bill was supposed to set the tone for the housing reforms and a model for the states to follow.
  • Real Estate Regulation Bill was proposed in 2007
  • The first draft of the real estate (regulation of development) Bill was introduced in September 2009.
  • The Bill was expected to be presented in parliament by 2010, but it failed to see the light of the day amid opposition from the developers
  • The Bill is expected to be presented in the upcoming monsoon session of parliament
WHAT THE BILL PROMISES
              A REGULATOR will ensure that advertisements are issued only once all project approvals are in place. This would put an end to pre-sales activities and speculation. Developers have been criticised for diverting customer advances to build land banks rather than use the money for project execution, which eventually resulted in delays for lack of funds. The regulator will play a critical role in ensuring that such practices are curbed and errant builders penalised. The developer will be bound by law to provide customers with access to information about the project they are about to invest in or have already invested in, which at the moment is a challenge. They will also have to specify the exact carpet area and built up area. Customers will be protected with a written agreement of sale that would have to be in place before the customer pays any advance. The regulatory authority will ensure that the developer hands over the conveyance deed and other documents to the customers in a time-bound manner. To protect the interests of stakeholders, the regulator will provide a complaint redressal mechanism by adjudicating and resolving any disputes that may arise between the parties.