Homebuyers have raised concerns over the draft real estate rules, saying they fail to protect the interests of those who have booked apartments in the projects that are yet to be completed.
Parliament in March passed the real estate (regulation and development) act to regulate residential and commercial projects and protect the interests of buyers who often complain of delays and cost overruns.
The law provides for a regulator, at the Centre as well as in states, to oversee transactions and settle disputes.
Though the law treats all ongoing projects that have not received completion certificates at par with the new ones, the buyers say the draft rules -- put out by the housing ministry to seek public response -- are unclear on what is required of developers.
The rules will be notified by October-end.
It is mandatory for developers to set aside 70% of the money collected from buyers in a separate account and use that solely for funding the construction of the project.
But the draft rules do not say how this provision will apply to ongoing projects as developers have already collected 60-70% of the money.
“Because the rule is so vague, a developer will easily get away by depositing 70% of the remaining cost. We have demanded that the developer deposit 70% of the unspent money collected from buyers in an escrow account,” said Abhay Upadhyay, national convener, Fight for RERA (real estate regulatory authority) .
An escrow is a temporary account held by a third party during the process of a transaction between two parties.
While registering a project, a developer has to share all the project details and give a timeframe to the regulator. This provision, consumers groups say, can be misused in case of ongoing projects as a developer can set a new deadline and alter the layout.
“The rules should clearly specify that for ongoing projects a developer will have to submit the original sanction plan and the time frame promised at the launch along with subsequent changed plans,” Upadhyay said. It would ensure that a developer is penalised for delays.
Developers say the law can’t be applied retrospectively.
“We have received over 450 representations from various stakeholders, including buyers association and developers. We are going through them and will take a final call soon,” a housing ministry official said.
Once the Centre notifies the rules, states will be free to adapt them according to their needs without tinkering with the basic requirements.
A project coming up on 500sq m or more has to be registered with a regulator. The developer will have to pay a registration fee in accordance with the area and type of the project.