Real Estate Bill May Apply To Under-Construction Projects, Too
The Real Estate Bill, cleared by Parliament recently, is expected to usher in more transparency and accountability in the real estate sector. Although the Bill has been made retrospective in nature, all under-construction properties that have already obtained necessary approvals and are on the verge of completion will not come under the ambit of the law. However, the legislation will bring the much-needed relief to buyers who have not received delivery of their property.
The Bill's retrospective nature has got a thumbs-down from CREDAI and other developer bodies. They complain that if the Bill is enforced on under-construction projects, it will only add to the red-tape and further delay projects.
Urban Development and Housing Minister M Venkaiah Naidu, however, said the Real Estate Bill would apply retrospectively and the rules would be framed accordingly. The rules are a form of delegated legislation where the legislature gives the executive the power to frame regulations, in keeping with practical aspects and ground realities.
When the Real Estate Bill, 2016, is made applicable to ongoing projects, the developer will be required to obtain the consent of at least two-thirds of home buyers before transferring the majority rights or liability to a third party, or even before changing the design or layout of a project. Residents' Welfare Associations (RWAs) will have to be formed within three months from the date a majority of the flats are sold. The RWAs can then collectively demand a timely possession of property and also look after the maintenance of the common facilities.
But the extent of the applicability of the Bill on the ongoing projects still remains a grey area, as most of the provisions like prior registration with the Real Estate Regulatory Authority, and depositing buyers' money into an escrow account, cannot be complied with when the project has already taken off.
It will be reasonable to bring the recently launched or delayed projects under the ambit of the Bill.
It is always better to have laws with prospective effect because the person on whom the liability has been imposed is caught unawares when a law is enforced retrospectively. He might have undertaken the project looking at its feasibility under a prevalent legal regime, but the project may not remain viable if the laws are changed later.
Even as developers are required to give details of all projects launched by them in the previous five years and the current status of these projects, this will serve as a deterrent for builders because prospective buyers will look at their credentials before putting hard-earned money in a project. The Bill also mentions that the Real Estate Regulator shall not extend the deadline for project completion beyond a year under normal circumstances.
Therefore, even as the retrospective nature of the Bill appears to be a saviour for the harassed buyers, who now have a forum to voice their concerns, the step could prove a pain for developers