4 Oct 2009

New 'Real Estate Regulations' to protect the buyers

Providing for inscrutable builders and developers of real estate and with a view to protect the purchasers of plot/building/apartments etc. the Ministry of Housing and Urban Poverty Alleviation, Government of India has released the draft "MODEL ACT FOR REAL ESTATE (REGULATION OF DEVELOPMENT)". The proposed law seeks to "establish a Regulatory Authority and an Appellate Tribunal to regulate, control and promote planned and healthy development and construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties, and to host and maintain a website containing all project details, with a view to protecting, on the one hand the public interest in relation to the conduct and integrity of promoters and other persons engaged in the development of such colonies and to facilitating on the other the smooth and speedy construction and maintenance of such colonies, residential buildings, apartments and properties and for other connected matters".

The proposed regulations prohibit the development of land into a Colony of plots or construction of a building or conversion of any existing building or apartments, for the purpose of marketing all or some of the apartments, without registration of such project with the Regulatory Authority sought to be established under the proposed law. Any promoter seeking to develop such land would require to make an application to the Authority; pay the prescribed fees; furnish a bank guarantee of an amount equal to five percent of the estimated copy of such development; obtain sanction of appropriate authority of compliance of building regulations etc. Thereupon the Regulatory Authority will make an inquiry into the authenticity of the approval and sanction obtained by the developer, and then "after having ascertained that valid planning permission and building approvals have been obtained by the promoter, grant or refuse to grant such registration in writing, within a period of thirty days from the date of receipt of application, and provide a password to the promoter for access to its website."

The promoter/developer would be required to keep available the sanction granted by the local authority, approval of the Regulatory Authority and other information to all persons taking or intending to take a plot, a building or an apartment on ownership basis in the project. Before any advertisement or prospectus etc. of the proposed building is issued to public, the promoter/developer would be required to submit a copy to the Regulatory Authority. Once so done, the promoter would have to ensure that such advertisement/prospectus "shall contain true statement and disclose the details of the registration, the extent and situation of the land, the area of the plots, building or apartments offered for sale, nature of title to the land, the cost payable, names of the agents or property dealers or brokers or middlemen known by any other name through whom the property proposed to be marketed and such other matters as may be prescribed. "

It would also be the responsibility of the promoter, apparently to ensure transparency and also to make the details available to all, "through a system of self entry, access the website and enter the required details of the real estate project for which registration has been granted which shall include the names and addresses of his authorized agents or property-dealers or brokers or middlemen by whatever name called and thereupon the Regulatory Authority shall host the details on its website after verifying the factual accuracy of the information so furnished by the promoter." 

With a view to protect the innocent purchasers from later being back-tracked, the proposed law also prohibits the promoter from taking "any sum of money as advance payment or deposit, from a person who comes forward to take a plot, building or apartment, as the case may be, without first entering into a written agreement for sale" and also directing the promoter to get such agreement registered under law. It is also provided that such agreement shall provide for "schedule of development of the project including the construction of building and apartments, along with specifications and external development, works, the dates and manner by which payments towards the cost of the plot, building or apartment are to be made by the allottees and the date on which the possession of the plot, building or apartment is to be handed over." Further, in the event of cancellation of the agreement, the builder would be required to return the full amount received along with interest at the applicable market rate. 

The Regulations also prescribe the responsibility of Promoter at various stages such as "to take measure for protection and safety of property"; "regarding the account of sums taken from or on behalf of the allottees"; "responsibility to allottees during project period"; requirement to adhere to approved plans, and project specifications; procedure to be followed for handing over of apartment, common areas and documents to the Collective; supply of essential services; etc. 

The proposed Regulatory Authority would comprise of people with expertise in such areas and will continue to bear the responsibility of scrutinizing the various applications made by the promoters and other incidentals. Details of the functions and powers of the Authority have also been prescribed. Specific powers have been entrusted to the Authority to call for information, conduct investigations etc.; issue directions; promote planned land development and promotion of the real estate sector. 

One can only hope that the area, hitherto unregulated, would come within the scope of regulation and the buyers would be protected from fraud and other unhealthy practices prevailing in the real estate sector. Have a look at the draft regulations and if possible, send your comments to the Ministry by 6th November, 2009.

No comments: