Model Real Estate Regulation Act- A Boon for Buyers

[s1joshi]

Model Real Estate Regulation Act- A Boon for Buyers

http://www.indianrealtynews.com/real-es ... uyers.html

If it ever gets passed in the parliament

Urban India has seen a boom in the realty market with the prices skyrocketing, largely due to limited spaces and high demand. However, the realty sector in India has been majorly unregulated, leaving customers harassed at the hands of builders and real estate agents in cases of project delays, misrepresentation and fraud by the builders. In majority of the cases the flats/properties do not get constructed and delivered to the buyers in a timely manner, adding to their woes. Whereas in other cases the constructed buildings do not conform to the accepted standards of architecture. At times, the buyers are taken unawares in cases of mortgage or charge created over their properties.

The highly unregulated realty sector in India has impelled the Ministry of Housing & Urban Alleviation to frame a Model Real Estate (Regulation of Development) Act, (Model Act) and the respective state governments are expected to enact local laws on the same lines, to regulate the sector. The Model Act seeks to regulate the realty sector by casting detailed obligations and duties on the builders and bring in much needed transparency in the system. Among the major changes that the Model Act proposes to implement, includes the provision for compulsory registration of the project. The registration shall not be required in cases where the area to be developed does not exceed 1000 square meters or where the number of flats to be constructed does not exceed four.

Further, a builder is required to furnish a bank guarantee amounting to five per cent of the estimated cost of the development works to the competent authority. Failure to register the project is punishable with imprisonment for a term upto three years. The Model Act also seeks to establish a regulatory authority and the appellate tribunal to regulate, control and promote planned development of colonies and buildings. The Model Act casts various obligations on a builder towards the buyers and seeks to ensure strict compliance of these obligations and responsibilities by the builder including the furnishing of detailed information to the buyers in relation to the project, for instance the existence of encumbrances over the land etc. The builders are also not allowed to issue prospectus or publish any advertisement relating to the project without first obtaining the registration under the Model Act and without filing the copy of the advertisement/prospectus with the regulatory authority. Further, the builders are required to maintain complete project details on the website maintained by the regulatory authority to enable informed decisions by the buyers.

A vital provision has been made in the Model Act that makes it mandatory for the builders to execute a registered agreement to sell before the acceptance of deposit or advance from the buyers. This provision shall not only safeguard the rights and interests of the buyers but also prevent losses to the state exchequer. Further, once executed the builders shall not be allowed to cancel the said agreement to sell, unilaterally. At present, the buyers make payments in installments based on demand letters issued by the builders from time to time and a registered conveyance deed is executed only after the payment of full consideration by the buyers.

Another problem adding to dilemma of the buyers is the non-construction of the property within the agreed time limit. There have been instances where builders of repute have failed to complete the constructions on time, in spite of prompt payment by the buyers. The Model Act makes a provision whereby if the property is not constructed within the time period as agreed, the builder shall be liable to refund the advance along with penal interest. The Model Act proposes path breaking changes in the existing legal regime and suggests measures to reform the realty market. The enactment of local state laws based on Model Act is expected to invite stiff opposition from the builders as it imposes greater accountability on them. At the same time, the enactment of such regulations shall result in the weeding out of small time builders and ensure that only the more prominent, big players are able to maintain their presence in the realty market. The real estate sector is moving towards more transparency and accountability. The Indian realty market awaits the enactment of local state laws based on the Model Law to protect the rights of the end users.

[sendtomanish]

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