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  • Builders to pay 10.9% interest for delays, RERA to be implemented

    November 01, 2016

    The Union government notified rules on Monday to implement the Real Estate Regulation Act (RERA), which will enable buyers who have invested in real estate projects - including existing ones - to secure interest at 10.9% per annum for delayed possession.

    In case a buyer is seeking a refund, they will now be entitled to a refund on the entire payment at the same rate, and the builder will have to repay the amount within 45 days of a claim being made. The interest rate has been fixed at 2 percentage points above the SBI's marginal cost of funds (the current benchmark lending rate for banks).

    Now that the rules have been notified, every builder will have to register with the state regulator. The final rules specify that developers of ongoing projects will also have to deposit 70% of the funds collected, but which have remained unused, into a separate bank account within three months of applying for registration.

    This is a major change from the draft rules, where this provision was absent, and is aimed at providing security to buyers and ensuring that construction is completed without the builder transferring the funds to another project. To address the problems being faced by buyers, some of whom have been waiting for their homes for up to 10 years, the rules also stipulate that the developers of ongoing projects specify the scheduled completion date while registering the project with the regulator.

    The rules spell trouble for developers who have diverted funds collected from buyers, because, under the new law, the regulator would be obliged to issue judgments within 60 days of complaints being filed.

    The rules also make it mandatory for a buyer to pay the interest at the same rate of 10.9% on the dues raised by developers. This will come as a major relief for buyers who have to currently shell out upwards of 15% interest for delayed payments.
     
    The rules will be applicable to the Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, an official release said. In a statement, the Union urban development ministry said it was working on similar rules for Delhi. The rules, it is learnt, will be notified in November.

    With the Centre notifying the rules, states and UTs are expected to follow suit soon. As per the provisions of the RERA, 2016, the regulatory authorities have to be put in place by April 30, 2017, a day before the full Act is brought into effect. Chandigarh has set up a temporary regulatory authority , which makes it one of the first in India to do so.
     

    OUR TAKE

    The decision to implement the RERA is an important one. Along with this rule, many other rules will be implemented in the favor of the consumers and buyers. This has been done to put a stop to the real estate mafia which has been prevalent in almost all metros. The real estate player’s habit of not delivering the houses has to be stopped and this new regulation will go a long way in ensuring that.


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