Accountability and Transparency – New Laws to Safeguard Flat Buyers’ Interests
The recent trend where foreigners are actively seeking out real estate companies to help them find flats and apartments, has caught on with native residents in India too. The real estate sector in India is plagued with grievances of home seekers who have notbeen handed over the keys to their new homes despite having made the required investments, due to half-completed projects. A large number of such victims choose to remain reticent because they prefer not to undergo the trouble of unending disputes and arguments.IN this light the central government has issued a set of real estate rules. The highlights of which are as follows: Registering and Compliance with Real Estate Authority: As per the new set of rules, only those projects that have been registered with Real estate Authority formed by the respective state governments under center’s law will be legally viable. The developers are to ensure that while approaching the authority, they present their pan number and all financial details, including the last three year’s cash flow record supported by an auditor’s report. In addition, copies of property documents of planned place of construction and collaboration documents, if the place of construction does not belong to developer, should be submitted with the authority. Registration is only applicable to projects with over 500 square meters in area and has more than eight floors. It is mandatory for the developers to disclose to the apartment buyers details regarding various sanctions and changes made to the projects after receiving clearance for initiating the building construction process. Developers are subject to more stringent rules: It will no longer be possible to build new projects using the money obtained from those who have booked flats and villas. The new ruling dictates that developers deposit 70% of buyer’s money in a specified bank and that the rest of the money should be spent on the completion of the booked projects. It will be the responsibility of Real Estate authority to enforce the observance of these regulations. The regulations are also aimed at preventing the abuse of black money and the rampant corruption in the industry. All the ongoing projects will also fall within the ambit of regulations. Empowering Flat Owners and Residents People buying flats and apartments are required to form their own association within the first three months. This association of resident s and flat owners will be expected to assume responsibility for the operation of public spaces such as library and halls. Developers will be legally bound to deal with all construction works that may arise during the first year. Any construction changes in the authorized project will require the advance sanction of owners. A One Stop Solution for Flat Owners The developers are liable to pay the penalty to the flat buyers in the event of failure to complete the project. As per the new set of rules set by the central government, the penalty will be two percent higher than the loan interest based on a marginal cost existing in the State Bank of India. The parties if aggrieved can register their complaints with state Real estate authority. The law provides a provision to prosecute or fine those developers and real estate agents who violate the rules and laws that are in force. These provisions of the law will help to provide an investor friendly environment of transparency and accountability on part of the developers and builders.