The Union cabinet on Wednesday cleared 20 key amendments to the Real Estate (Regulation and Development) Bill with a view to safeguarding property buyers’ interests from unscrupulous realtors by regulating the sector while providing for penal measures against defaulting customers, too.
In a slew of “pro-consumer” measures, the cabinet chaired by Prime Minister Narendra Modi amended an earlier clause in the bill which will make it mandatory for developers to deposit 70% of the money collected from buyers in a separate escrow account to meet the project’s construction cost. The earlier clause had fixed this provision at 50%.
“This would check developers from diverting funds to other projects and ensure speedy completion of the project for which money has been collected,” a housing ministry official said.
The bill that will now be taken up for consideration and passage by Parliament will cover both residential and commercial real estate. It proposes to set up a real estate regulatory authority (RERA) where developers will have to compulsorily register and disclose project details before launch. Violations will lead to a penalty of up to 10% of the project cost or imprisonment of up to three years.
In another move, the cabinet decided the rate of interest payable by the promoter or the allottee in case of default and delays will be the same. Also, a developer’s liability to repair structural defects in the sold property has been increased to five years from the earlier two. Promoters have been barred from changing plans and design without consumers’ consent.
However, considering a demand by builders who had been protesting that the bill was stacked against them, the cabinet, in a first, introduced a new penal provision for allottees on failure to comply with RERA orders. Allottees will have to pay up to 5% of the apartment cost or face a year in jail or both for defaulting on payment or any other violation on their part.
The bill had become a political hot potato after Congress vice-president Rahul Gandhi attacked the government during Parliament’s monsoon session and charged it with diluting various provisions that harmed the interests of middle-class home buyers.