Glossy brochures and developers’ promises will no longer cut it in India’s property market. Whatever is getting sold needs to be backed up by details … or else.
“A number of stringent provisions have been introduced by the regulating authority post Rera (Real Estate (Regulation and Development) Act),” said Jaxay Shah, President of Credai, (the Confederation of Real Estate Developers Association of India). Credai is headlining the Indian Property Show opening Thursday (December 7) in Dubai.
Developers must clearly state the carpet area, display of all project information on the company/project website, offer up all (pre-launch) approvals, etc. That’s not all.
“Once the project is registered, purchasers receive a number of safeguards under the Act,” said Shah. “If the project promoter fails to deliver home as per agreed deadline, they are bound to return the entire money invested at pre-agreed interest rate mentioned in the contract.
“But if the buyer does not want to give up the home, the builder will have to pay interest on each delay month to the buyer until the final delivery of the unit.”
Before Rera, the developers were only obliged to pay at a token interest rate in cases of delay on the delivery. (The irony is that they would charge “hefty” interest from buyers in case they defaulted on payments.
“Rera will put an end to the practice,” said Shah. “Furthermore, developers will be punished for other violations, including poor quality of construction. Aggrieved buyers can get redressal within six months through a fast-track court.”
What is the status in the case of stalled projects? Shah makes an interesting observation — “RERA does not cover the issue of stalled projects especially as these were initiated under agreements before RERA came into existence.
“However, Rera would treat these projects as ongoing projects. If customers approach the Authority, there would be an institutional support in the form of RERA to protect their interest.
“While there is no data on stalled projects, one needs to emphasise that the problem of stalled projects is limited to a few cases which of course receive wide attention in the media, thus making the problem look much larger than it actually is.”
There are other recourses for affected buyers. They could approach the judiciary, and “some of the cases are proceeding under the insolvency legislation,” said Shah. “In a few cases that have come before it, the Supreme Court has stepped in to protect the interest of home purchasers.
“What is certain is that the bargaining power of home purchasers has improved with RERA. It is expected to improve further as some prominent cases of stalled projects get deliberated at the highest judicial level.”
Factbox: Tougher regulations need not make it difficult for small developers
Smaller developers needn’t feel overawed by Rera, which governs the sale and construction of projects in India.
“Rera isn’t sidelining any mid-size or small developer,” said Jaxay Shah of Credai. “It’s just that its making sure that there is transparency and there is actual delivery of projects when they are promised. So, the role is to protect investors’ money.
Whether it is small project, mid-size or large, the feasibility will depend on that particular project and not on the developer. For instance, in cases with affordable housing, they will analyse whether the developer has got the cost of construction in his account. And when the project is sold the money needs to come into a proper account.
“This is going to streamline transparency at all levels.”
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