favours for home buyers

The Real Estate Bill which was passed in the Rajya Sabha on Thursday largely seeks to protect the interest of home buyers, at the same time aims to bring more transparency, accountability and efficiency in a sector which has hitherto been fundamentally unregulated and unorganised.

Delays in project delivery by developers, zero accountability on builders and opacity in project details and payment structures has blemished the credibility of the real estate sector for a long time resulting in lack of trust of buyers, which this bill aims to set right.

Moving ‘The Real Estate (Regulation and Development) Bill, 2015′ for consideration and passage, Urban Development Minister M Venkaiah Naidu said, it will not only bring transparency but also help in regulating generation of black money, to which the real estate sector contributes the largest in the country.

Here are things home buyers need to know and how the bill speaks in favour of them –

• Timely completion of projects: the bill ensures the completion and delivery of flats on time as stringent regulations are imposed on developers for any violations of the Appellate Tribunals or monetary penalties or both.
• Carpet area to be defined: The bill defines carpet area as net usable area of an apartment which means now a home buyer will be charged only for the carpet area. This comes as a huge relief to home buyers as developers now-a-days quote on super built up area or sellable area which is nearly 30-40% more than the usable area.
• Punish developers, real estate agents: as per a provision of The Bill, imprisonment of up to three years in case of promoters and up to one year in case of real estate agents and buyers for any violation of orders of Appellate Tribunals or monetary penalties or both can be awarded. Besides, Misleading advertisements will be punishable offence where first-time offenders will be fined 10% of project cost and repeat offenders could face a jail term.
• All clearances before project launch: the Construction of a project can start only after getting statutory clearances. Prior to the launch of the project, developers will have to get all the clearances necessary to go ahead with the development.
• Part of home buyer’s money to be kept till project completion: A minimum of 70% collections from buyers should be deposited in separate escrow account to cover the cost of construction and land. The bill prohibits unaccounted money from being pumped into the sector; 70% of the money has to be deposited in bank accounts through cheques.
• Registration of projects with Regulatory Authority: The Bill provides for registration of all real estate projects with Regulatory Authorities to be set up, which will require developers to disclose project information as well as details of the promoter, project, lay-out plan, land status, status of approvals, and agreements along with details of real estate agents, contractors, architects and structural engineers.
• Developers to provide after sales services: The Bill has increased the period from 2 to 5 years for developers to be accountable for any structural defects arising within 5 years of project construction. Developers cannot change architectural plans without the consent of two-thirds of home buyers.
• Speedy redressal of complaints: Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days.
• Delays to attract interest: Both builders as well as home buyers will have to pay the same interest rate for any delays on their part.
• Insurance on land title: to benefit consumers in cases where the land titles are found to be defective, The Bill provides for an insurance of the land title.

Image Credits : DNA

In the latest move of Maharashtra state government it is likely to see that realty rates in Mumbai suburbs may rise again, after the final notification of state government through which Maharashtra state government is planning to hike the additional premium charges and development rights with an aim to generate more revenue for exchequer, which is currently cash-strapped.

The Maharashtra Government’s Urban Development Department (UDD) modified regulation 32 of DCR (Development Control Rules) on December 4 with an aim to hike the optional incentive of FSI (Floor Space Index) for the suburb of city from 0.33 to 0.50. Floor Space Index is an indicator that how high a real estate developer can build a plot; the ratio of the total constructed area and the size of the plot. Apart from that the additional FSI will come out at a cost as state is hiking the premium with the rate of 60 percent of the current ready reckoner rates. Earlier, it was linked with ready reckoner rate of 2008. However; now state hopes to mop up around Rs 3,500 crore to Rs 4,000 with the premium received which can be shared equally between the civic body and the state government. Real estate developers are saying that hike in premium will directly increase the realty rates in the suburbs of Mumbai, as the cost of the additional FSI works out in the range of Rs 4,000 to Rs 12,000 per sq feet. The more they added that it will get passed to the buyers as in present time realty market in Mumbai is more sluggish and increase in rates are likely to pose a challenge.

How Transfer of Development Rights will generate revenue for state government?

According to Paras Gundecha, Chairman and MD of Gundecha Group, “There is no incentive and it will jack up the cost of projects in real estate sector and at the end we as the real estate developers will be forced to increase the selling rates”. On the issue of increase in premium, real estate developers are saying that it will also lead them to increase in the cost of TDR (Transfer of Development Rights) certificate. The suburbs of Mumbai city have a base FSI of 1 and it allow to use TDR 1 that can be brought from the market. Transfer of Development Rights is floating FSI generally generated on the residential projects of slum or whenever; land owners lose their plot for reservation for an amenity, which can be used for suburbs. In the year 2008, the state government has first introduced 0.33 as incentive FSI for suburbs to reduce the monopoly of the TDR lobby with an aim to help the government, so that they can earn more revenue from transferring development rights. In present, the cap of FSI is continues to be 2.

In March 2015, the CM Devendra Fadnavis had proposed to increase the FSI for the Maharashtra suburbs and for that he issued notice to hike FSI by 0.60. Apart from that after going through multiple objections and suggestions from the public, the FSI was hiked by 0.50 and it is expected that additional FSI will not be applicable at BKC (Bandra Kurla Complex), as it is the part of the slum rehabilitation schemes, so these areas are coming under CRZ (Coastal Regulatory Zone). The suburb regions of city have a base FSI of 1, however; the construction projects can utilize the TDR of 1 and it will include the incentive FSI 0.50 with the cap of 2.

Mumbai Metro

Phase 1 of the Mumbai Metro which runs from Ghatkopar to Andheri has resulted in a substantial improvement in the realty development along the metro route and areas close to metro stations due to east-west connectivity within the city saving office goers precious time of commuting to-fro work.

As there was no direct link earlier, this metro route has come as a blessing for commuters by taking the load off the existing road and rail infrastructure. This decongestion has attracted buyers who were hitherto hesitant to buy residential or commercial spaces in these areas. Places like Chandivali and Sakinaka in Andheri (east) are easily accessible now. “The demand for both residential & commercial property is heading northward due to the Mumbai Metro,” says Manju Yagnik, vice-chairperson, Nahar Group.

Experts believe that infrastructure development acts as a catalyst that boosts residential and commercial property segments. In this context, the Phase -1 of the Mumbai

Metro has played a crucial role. Considering the pivotal function of rail infrastructure development in the city, Maharashtra chief minister and chairman, MMRDA, Devendra Phadnavis  has sanctioned an outlay of Rs 35,400 crore for the development of 118-kms Metro network in Mumbai alone.

The network includes a 40-kms Dahisar-CharkopBandra-Mankhurd Metro-2 corridor (Rs 12,000 crore), 40-kms Wadala-Ghatkopar-Thane-Kasarvadavali Metro-4 corridor Rs 12,000 crore), 27-kms Dahisar-E-AndheriE-Bandra-E Metro-5 corridor (Rs 8,100 crore) and 11-kms Jogeshwari-Vikhroli Link Road Metro-6 corridor (Rs 3,300 crore).

All these Metro projects will certainly draw property consumers to adjoining areas due to resultant enhanced connectivity. Infrastructural proposals have always contributed to the real estate boom in the city and Nishant Agarwal, managing director, Avighna, believes that the future infrastructure plans like the new metro routes will also continue to fuel growth in the real estate sector.

Property prices in the neighboring areas of the metro rise significantly once the project gets on track. Ramesh Nair, COO business and international director, JLL India, points out that the areas near Ghatkopar-Andheri Metro line have already seen a price rise of nearly 400 percent over the last eight years. A similar trend may continue with the announcement of the new metro corridors in the city.