If you’re looking to sell overseas property in India, you will find the latest news from the property market in the country very interesting - A new law has been approved by the Indian Parliament, which should bring substantial relief to homebuyers in India.
The Real Estate (Regulation & Development) Bill, 2015 was approved by both houses of the Indian Parliament and is expected to change a lot of things about the way real estate transactions are conducted in India.
The Real Estate Bill creates an industry regulator to handle disputes between homebuyers and real estate developers. So developers who delay projects unnecessarily are likely to be penalized under the new law. There are a plenty of reasons why middle class homebuyers in India are very appreciative of this law.
First, one of the biggest complaints of middle class homebuyers has been that there is no tough regulator to negotiate any legal disputes between themselves and a builder. Since court cases take years in India, nobody wants to get into lengthy legal disputes with developers, and so homebuyers end up compromising, even when it is clear that they have been taken advantage of.
Delayed projects are the bane of homebuyers in the country. Some projects take up to six years to be completed, mainly because of the random changes in layout plans done by builders almost on a regular basis. There’s a lot of manipulation that takes place, especially when it comes to the built-up area such as lift, corridors and stairs, and the carpet area – which refers to the net usable area within the apartment.
There is an issue with the poor quality of the construction and the fact that builders take months to hand over the possession of the apartment even after the construction has been completed and the payments have been made. They do that by changing clauses in the contract or introducing things in the fine print, which the buyers do not bother to read and may not agree with.
Builders are also known to divert the money given to them for a project to other projects, or worse, to speculate in land deals. This is one of the reasons why there’s so much speculation in the property market in India and homes are unaffordable for so many.
The new Real Estate Bill is expected to address most of these issues; and no surprise – real estate developers hate this law.
So here’s what the new law does – it protects homebuyers from deliberate mis-selling of property and requires all projects of over 500 square meters to be registered with the regulator. It states that the builders will henceforth have to specify a timeframe for the completion of the project and stick to it at all cost – or end up getting penalized by the regulator.
The new law does not say when builders have to hand over possession, just that they are required to stick to the promises made by them, whether it’s 3 years or 6 years. The law aims to stop the diversion of the money given to the developer by homebuyers for any purpose other than the one it was intended for.
So 70 percent of the money given to builders will henceforth be kept in a separate account, which will only be used for the purpose of developing the project. Builders can no longer change the carpet area or built-up area that was stipulated by them in the written contract.
The new law will ensure that unscrupulous builders or fly-by-night operators are weeded out and only legitimate developers continue to remain in the market. Ultimately, it should curb speculation in property and bring down land prices in the country.