Are you one of those people who got lured by these catchy advertisements by builders only to realize that most of the features advertised aren’t available? Are you one of those people who paid the full amount to the builder and had to painfully wait for months before the project got completed? Are you a prospective home buyer who is scared of these kind of misleading Ad's and delays from builders?
There is great news for all Indians who want to buy or invest in real estate. The government of India has come up with a New Real Estate Bill that is bound to make the lives of the common-man much easier when it comes to buying property.
The idea of this article is to take a high level look at this new bill and how it would benefit us. Please note that only high level details reg. the bill are available and there may be amendments to this bill if our parliament sees fit. The Union Cabinet Minister for Housing & Urban Poverty Alleviation Ajay Maken is expected to address the Press and elaborate on the intricate details of the bill very soon. So, for now, let us take a look at the highlights of this proposed bill.
Highlight No. 1: A Regulator for Real-Estate is proposed
On the lines of SEBI that regulates the stock market and IRDA that regulates the Insurance industry, a regulatory body that governs real-estate in India will be created. It will have the powers along the lines of what a SEBI or an IRDA has.
Highlight No. 2: This Bill only covers Residential Property
This bill as well as the proposed regulatory agency will govern or supervise only the residential property market. The commercial real-estate market is currently out of bounds. It may get included in future, but the current idea is to protect the common man first.
Highlight No. 3: No More Misleading or Deceiving Advertisements
Most builders flout advertisements that grossly mis-state the facilities or amenities available in the property and mislead the customer. The bill will tighten such regulations and any such intentional mis-stating of facts may result in stiff punishments. If the builder promised a recreation club, a gym and swimming pool when you signed up for the Apartment and instead built yet another block of houses in the place ear-marked for those facilities, you as the buyer can complain.
A first time offender faces penalties of up to 10% of the Project Cost. Repeat offenders can expect stiffer penalties as well as Jail time of up to 3 years.
Highlight No. 4: No More Flouting of Projects without Proper Approvals
One of the main causes for delays of housing projects is the fact that builders flout projects and start collecting money from customers even before getting all the requisite clearances and approvals. Sometimes or should I say, most of the times the government machinery in India works in its own pace and such approvals may get delayed. This results in projects getting delayed for no fault of the buyer. The bill mandates that the builder obtain all necessary permits and approvals before they start collecting money from buyers.
Highlight No. 5: No More Asking Huge Down-payments to Book Your House
Builders in prominent residential areas demand high up-front down-payments for customers to book their dream home even before the documentation and legal agreements are signed. The Bill mandates that Builders cannot ask or take more than 10% of the project/property cost without a proper written agreement. Buyers can ask and claim a full refund of the money they paid if the builder delays the written agreement formalities.
Highlight No. 6: No More Diverting of Funds from One Project to Another
Developers usually collect money for one project and use it to complete other projects or use it in other business ventures. This results in delays in case they are unable to come up with cash to continue with the current project. The Bill mandates that developers must put aside at least 70% of the proposed project cost in a Separate Bank Account and track it properly to ensure that the project progresses as planned and without any delays.
Highlight No. 7: Specify Usable Area or Carpet Area Clearly
Most Builders these days sell projects under the "Super-Area" concept where the customer buys a property by knowing just the overall area of his house. The actual carpet area or the usable area is around 20 to 30% lesser than the area the customer pays for. The common area like lift lobby’s, veranda’s etc. are not part of the usable area for the customer and in most cases the buyer is not aware of how much common area he/she is paying for. The Bill mandates that builders clearly specify how much carpet area or usable area comes under each house and how much common area each buyer is paying for. Though the amount the buyer is going to pay will remain as before, the clarity on how much area each house is will increase.
Some Last Words:
Most builders advertise like
3 bedroom 1200 sq. ft. house starting from 48 lakhs
The actual price of the house including car park, Electricity and water deposits, registration etc. will be much higher and will work out to the range of around 52 to 55 lakhs. But, the advertisement will state only 48 lakhs. On top of that, the actual living area of the house will only be around 900 odd sq. ft. and the builder advertises a 1200 sq. ft. house.
In future the advertisement will be like
3 bedroom 1200 sq. ft. apartment with a carpet area of 950 sq. ft. starting from 52 lakhs
Sounds a lot better isn’t it? What do you think about this new bill? Feel free to leave your comments in the comments section...
Happy Real Estate investing!!!