New Real Estate Laws Put Developers, Buyers on Equal Footing
The Real Estate Regulation Act, 2016, is an Act of Parliament that seeks to protect homebuyers as well as help boost investments in the real estate industry.
The bill was passed by the Rajya Sabha on March 10th, and by the Lok Sabha on March 15th this year. The new rules basically seek to eliminate the scope of agreements being in favour of either of the parties.
Under the new Act, both developers and home-buyers now have the right to terminate a sale agreement in the case of any default by the other party. Conversely, the new rules also allow both parties to amend the sales agreement with the written consent of the other party.
In a major relief for home-buyers, the total price of an apartment or plot can only be increased by competent authorities, and not by developers.
If a home-buyer starts defaulting consistently and not paying his dues to the developer, the developer can terminate the agreement and cancel the allotment made to that buyer. Furthermore, he can also deduct the booking amount and interest liabilities from the amount to be repaid to a buyer. On the other hand, if the real estate developer fails to give ready to move in possession of the apartment or fails to complete the project as per the stipulated time, the home buyer can terminate the agreement and is entitled to the refund of the amount paid with interest in 45 days of such termination. In case, the buyer does not want to withdraw from such a delayed project, he needs to be paid interest till the project is completed.
These rules, however, do not apply if the development of a project is delayed by conditions like war, floods, cyclone, drought, etc. which are evidently beyond the control of the builder.
Defaulting developers will now be required to refund money, or pay compensation to allottees at the rate of the State Bank of India's highest marginal cost of lending, plus 2% - and that too within 45 days of it becoming due.
Builders are also required to deposit 70% of advances collected in a separate bank account with the real estate regulatory authority, within three months of registering a project, to ensure completion of their ongoing projects.
While home buyers are entitled to rectification of structural defects by the builder over a period of five years from the date of issuance of occupancy certificate, builders are entitled to get interested in a case of delay in payments.
Real Estate Regulatory Authorities are required to be set up by every state by April 30, 2017, before the full Act is brought into effect on May 1, 2017.