Real Estate Regulator Bill: 10 things you should know about it

The real estate bill will regulate the sector and bring in clarity for both buyers and developers. Here are 10 things you should know about it.

NEW DELHI: The Rajya Sabha passed the Real Estate Regulator Bill, which will help regulate the sector and bring in clarity for both buyers and developers. Here are 10 things you should know about this bill, touted as a key reform measure in the vast real estate sector. 1) It establishes the State Real Estate Regulatory Authority for that particular state as the government body to be approached for redressal of grievances against any builder. This will happen once every state ratifies this Act and establishes a state authority on the lines set up in the law. 2) This law vests authority on the real estate regulator to govern both residential and commercial real estate transactions. 3) This Act obliges the developer to park 70% of the project funds in a dedicated bank account. This will ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money for one project, thus delaying completion and handover to consumers. 4) This law makes it mandatory for developers to post all information on issues such as project plan, layout, government approvals, land title status, sub contractors to the project, schedule for completion with the State Real Estate Regulatory Authority (RERA) and then in effect pass this information on to the consumers. 5) The current practice of selling on the basis of ambiguous super built-up area for a real estate project will come to a stop as this law makes it illegal. Carpet area has been clearly defined in the law. 6) Currently, if a project is delayed, then the developer does not suffer in any way. Now, the law ensures that any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer. 7) The maximum jail term for a developer who violates the order of the appellate tribunal of the RERA is three years with or without a fine. 8) The buyer can contact the developer in writing within one year of taking possession to demand after sales service if any deficiency in the project is noticed. 9) The developer cannot make any changes to the plan that had been sold without the written consent of the buyer. This puts paid to a common and unpopular practice by developers to increase the cost of projects. 10) Lastly, every project measuring more than 500 square metres or more than eight apartments will have to be registered with the RERA.

Five ways to check a builder’s reputation .

If you are planning to buy a property under construction, don't just go by the brochure claims. A lot depends on the builder's competence and resources. ET lists some checks before you finalize a project.

1. Ground report

You can conduct a quick Internet search by keying in the company name since customer forums, blogs, news reports, property sites, etc, typically have a lot of information. However, it is still a good idea to go in for field research. Talk to customers who bought units in old projects as well as local brokers. The current market price of the past projects in comparison to peers in the same locality is also an indicator of the builder's standing. You should check the credentials of the contractors associated with the project as well.

2. Track record

It is safer to buy from an experienced builder with a good delivery record since he is likely to have a more professional approach, with systems and processes up and running. Besides, you can check his track record and find out how well the past projects have been executed. Remember, lack of transparency is a good enough reason to not buy. A reputed builder will also typically be a member of an industry association, such as the Confederation of Real Est of Real Estate Developers Association of India (CREDAI), or the Builder's Association of India (BAI). These are self-regulatory bodies that have strict norms for builders and any deviation may lead to the company being blacklisted by the association.

3. Quality certificate

The International Organization for Standardization's 9001:2008 certification criteria for a quality management system is based on eight principles, including customer focus and satisfaction. Therefore, an ISO 9001:2008 audited and certified builder is expected to be more professional in his approach, and it is a good idea to check this before zeroing in on a housing project.

4. Realty ratings

Started in 2010, the CrisilBSE -2.28 % Real Estate Star Ratings (Crest) provide city specific assessment of real estate projects, and can help you compare and identify quality projects in a particular city. They also have a National Developer Ratings list, which rates a developer on parameters such as good track record of transfer of clean title, maintaining legal and construction standards, and timely project completion. However, the developer has to register with Crisil to be rated and not many projects are on its radar yet.

5. Financial stability

Is the company over leveraged? Get hold of the company's balance sheet, and if the business has too much debt or is unable to repay its loans, strike off the project. Some listed builders put up their financial details on their websites. For others, you can contact the concerned Registrars of Companies (ROC) office. The Ministry of Corporate Affairs' website (Mca.gov.in/MCA21/) also has the details. Log on and register yourself to view all company .documents under the 'view public documents' section. The site will ask for information like company CIN/FCRN, registration number, ROC details, which should be easily available with the company, or you can run a Google search. Also, check the cash flow statement (not income statement). Companies with strong cash flows are likely to complete the projects on time.