If you have tried approaching a real estate developer enquiring about their new project, your silliest question is given a patient ear and responded to in the most appropriate manner. Before you put the token money down, you are treated like a king. This continues only till you have confirmed your booking. Here is where your journey from king to pauper begins. With every payment instalment made thereafter, their attention continues to lessen. A point in time will arrive, where a casual enquiry about the completion of the project could either be ignored completely or resolved in an unsatisfying manner. You will have no option but to wait, twiddling your thumbs.
Meanwhile, the builder may utilise the funds/capital obtained from you and other customers anywhere he wants; make agreements that unilaterally favour him, change the original plan without hassles, etc. Even if you figure this out and ask for your money to be returned; you will get only promises. In case you are lucky enough to get a cheque, it will be drawn with an intention of dishonouring it, so it will bounce. If you feel irritated, a builder would overtly tell you to either to co-operate with him or would suggest that you knock the doors of the consumer or the civil courts. He knows; an individual buyer neither has the time nor the perseverance to fight against him in a long legal battle. He can spend some those funds for under the table dealings to get an Occupancy Certificate (OC) even when he has not adhered to the developmental plan. (Municipal authorities or the other development authorities issue OCs stating that the construction has taken place as per the plan submitted to the authorities, and authorities thus don't have any objection to the building being occupied).
This has been the state of affairs in the sector that contributes to nearly 9% of India's GDP. The Housing and construction sector has been a major source of revenue for many states. After Agriculture, it's the Real Estate sector that employs a maximum number of people in India. However, it's fragmented nature and lack of transparency in dealings has earned it an unfavourable reputation over the years. The builder-politico nexus and unscrupulous, corrupt practices have made homebuyers vulnerable and builders unrestrained. In absence of the regulator, builders always have an upper hand over customers, for whom justice is difficult to obtain. This is going to change soon.
As you may be aware at the Rajya Sabha recently, the Government successfully passed the Real Estate (Regulation and Development) Bill, 2016. This has cleared the way for the state level regulatory authorities which will be founded as per the guidelines of the recently passed bill.
The passage of the Bill is expected to bring in much-needed transparency to the sector. Now the builder would think twice before short-changing you. The implications of doing so would be as severe as 3 years of imprisonment.
Other Provisions Include:
The reaction of developers...
Although developers are welcoming the passing of the Real Estate Bill, they have been unsuccessful in hiding their discomfort. With the Government insisting that the ongoing projects should also be brought under the purview of the new regulation, builders have been expressing their apprehensions. Commenting on this development, The Confederation of Real Estate Developers’ Associations of India (CREDAI), the apex body for India’s private sector developers has expressed that, “This is not only time consuming but also poses insurmountable difficulties in determining the nature and scope of regulation for an ongoing project.”
However, builders have correctly pointed out at some of the shortcomings in the new law. Comments of the Rajeev Talwar, CEO, DLF Ltd highlighted the two elements missing from it, “The Bill does not talk about single-window clearance for approvals. It also needs to hold local bodies/authorities, banks, contractors, financial institutions accountable.”
Genuine builders to suffer the most
Recently a Mumbai-based builder ended his life because the “Golden Gang”—a “team” of politicians and bureaucrats made his life hell demanding money to clear projects. Lawmakers may have found it easy to hold builders responsible rather than taking the long road to improving the bureaucratic procedures and fix up responsibilities. Perhaps for lawmakers, these are petty issues and one-off cases.
In truth, the existing process for project clearance is the root cause of corruption. And it is hard to believe that the lawmakers pretend to be completely oblivious about cases such as local politicians harassing builders.
Since the Bill fails to address two major concerns, prudent customers may continue to be cautious in their dealings with the real estate fraternity, while others may go back to twiddling their thumbs during delays caused for any reason. However if this Bill works, customers can hope to become the King of their castle someday soon.
Meanwhile, the builder may utilise the funds/capital obtained from you and other customers anywhere he wants; make agreements that unilaterally favour him, change the original plan without hassles, etc. Even if you figure this out and ask for your money to be returned; you will get only promises. In case you are lucky enough to get a cheque, it will be drawn with an intention of dishonouring it, so it will bounce. If you feel irritated, a builder would overtly tell you to either to co-operate with him or would suggest that you knock the doors of the consumer or the civil courts. He knows; an individual buyer neither has the time nor the perseverance to fight against him in a long legal battle. He can spend some those funds for under the table dealings to get an Occupancy Certificate (OC) even when he has not adhered to the developmental plan. (Municipal authorities or the other development authorities issue OCs stating that the construction has taken place as per the plan submitted to the authorities, and authorities thus don't have any objection to the building being occupied).
This has been the state of affairs in the sector that contributes to nearly 9% of India's GDP. The Housing and construction sector has been a major source of revenue for many states. After Agriculture, it's the Real Estate sector that employs a maximum number of people in India. However, it's fragmented nature and lack of transparency in dealings has earned it an unfavourable reputation over the years. The builder-politico nexus and unscrupulous, corrupt practices have made homebuyers vulnerable and builders unrestrained. In absence of the regulator, builders always have an upper hand over customers, for whom justice is difficult to obtain. This is going to change soon.
As you may be aware at the Rajya Sabha recently, the Government successfully passed the Real Estate (Regulation and Development) Bill, 2016. This has cleared the way for the state level regulatory authorities which will be founded as per the guidelines of the recently passed bill.
The passage of the Bill is expected to bring in much-needed transparency to the sector. Now the builder would think twice before short-changing you. The implications of doing so would be as severe as 3 years of imprisonment.
Other Provisions Include:
- The developers will have to maintain a minimum of 70% of the money collected from the potential the buyers in an escrow account opened with a bank, to be utilised exclusively to meet the cost of that project.
- Every project with the proposal of developing 8 flats or acquiring 500 square meters of the plot will have to be registered with the regulator.
- The builder would be held responsible for structural defects in first 5 years.
- The developer will have to take permission from a minimum of 2/3rd of allottees for making changes to the original plan.
- Availing insurance for the land titles would become possible.
- Appellate Tribunals and Regulatory Authorities will have to dispose of complaints within a stipulated time period.
The reaction of developers...
Although developers are welcoming the passing of the Real Estate Bill, they have been unsuccessful in hiding their discomfort. With the Government insisting that the ongoing projects should also be brought under the purview of the new regulation, builders have been expressing their apprehensions. Commenting on this development, The Confederation of Real Estate Developers’ Associations of India (CREDAI), the apex body for India’s private sector developers has expressed that, “This is not only time consuming but also poses insurmountable difficulties in determining the nature and scope of regulation for an ongoing project.”
However, builders have correctly pointed out at some of the shortcomings in the new law. Comments of the Rajeev Talwar, CEO, DLF Ltd highlighted the two elements missing from it, “The Bill does not talk about single-window clearance for approvals. It also needs to hold local bodies/authorities, banks, contractors, financial institutions accountable.”
Genuine builders to suffer the most
Recently a Mumbai-based builder ended his life because the “Golden Gang”—a “team” of politicians and bureaucrats made his life hell demanding money to clear projects. Lawmakers may have found it easy to hold builders responsible rather than taking the long road to improving the bureaucratic procedures and fix up responsibilities. Perhaps for lawmakers, these are petty issues and one-off cases.
In truth, the existing process for project clearance is the root cause of corruption. And it is hard to believe that the lawmakers pretend to be completely oblivious about cases such as local politicians harassing builders.
Since the Bill fails to address two major concerns, prudent customers may continue to be cautious in their dealings with the real estate fraternity, while others may go back to twiddling their thumbs during delays caused for any reason. However if this Bill works, customers can hope to become the King of their castle someday soon.
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