Developers To Pay Interest At Par For Defaults
A parliamentary committee looking into the real estate bill has recommended penalty for defaulting realtors and even jail term of up to three years for repeat offenders.
The committee has also recommended several amendments to protect consumers, including provision of interest payable by both allottees and developers to be the same in case of any default by either party , making the transaction more equitable.
At present, while developers pay only 2-4% interest in case of their default, consumers are made to pay as high as 16-18% for their default. This has been the main reason behind huge number of home buyers dragging the developers to courts.
Reinforcing the existing penal provision of the NDA 's bill, the panel has also recommended that the violation of orders of the appellate tribunal by developers be treated as a “serious offence“ and that the penal provisions are inadequate. The present bill provides for imprisonment up to three years and or with fine up to 10% of the project cost. Similarly , if a real estate agent fails to comply with the tribunal's order, he can face imprisonment up to one year or with fine up to 10% of the cost of plot or apartment.
The panel in its report has mentioned that there was difference of opinion among members regarding imprisonment. Some had sought deletion of the jail provision and reduction of penalty to only 2%. However, these were rejected. Chairman Anil Madhav Dave said the recommendations aimed at making a law that will “promote good builders, punish errant ones“. The bill envisages setting up of a regulator for the realty sector.
The committee has also recommended that at least 50% of the investors' money be kept in a separate account only for the specific project and it's up to states to hike this minimum amount.
The panel has also redefined “carpet area“ as the net usable floor area of an apartment, excluding the area covered by external walls, areas under services shafts, exclusive balcony or verandah area, and exclusive open terrace areas, but includes the area covered by internal partition walls of the apartment. It is aimed at curbing the tendency of builders to include the balcony in the carpet area.Similarly , the panel has defined car parking garage and other service areas so that there is no confusion between the actual conveyed carpet area and other ancillary areas.
“The panel's recommendation have judiciously detailed out the responsibilities of both the consumer and developer and has ironed out many of the malice, which are prevalent in current build-buyer deal,“ said Sudhir Vohra, architect and urban law expert.
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