Indian Cabinet today cleared the Real estate (Regulation & Development) bill. This bill in our view is a land mark development and will necessitate wide business practice changes across the industry.
Key features of Real Estate Regulation and Development Bill
Project launch only after all approvals in place – It is mandatory for developers to launch projects only after acquiring all the statutory clearances from relevant authorities. Under its provisions all relevant clearances for real estate projects would have to be submitted to the regulator and also displayed on a website before starting the construction.
Sales only after sourcing of clearances- Under the proposed new law, developers will be able to sell property only after getting all necessary clearances. Registrations of projects with the regulatory authority is a must. This means developers cannot offer any pre-launch sales without the regulatory approvals. Moreover the authority must approve or reject projects within 15 days
Project Escrow to be ensured- The bill seeks to make it mandatory for a developer to maintain a separate bank account for every project to ensure that the money raised for a particular project is not diverted elsewhere. Developers will have to keep aside 70% of the buyers’ funds in a separate bank account to ensure timely completion of projects.
Curb on Misleading advertisements-The proposed legislation has certain tough provisions to deter builders from putting out misleading advertisements related to the projects carrying photographs of actual site.
Written agreement a must- Developers cannot take more than 10% of the advance from buyers without a written agreement.
Tribunal setup in the interest of Consumers - The bill also seeks setting up of a real estate appellate tribunal for adjudicating disputes. The tribunal will be headed either by a sitting or a retired judge
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