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How Will Home-Buyers Benefit From RERA

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How Will Home Buyers Benefit From RERA

With the implementation of RERA on May 1, 2017, the Maharashtra government is hopeful that it will bring more transparency and eliminate ill-practices in the real estate sector. It will not only enhance buyer’s experience but is also expected to change the entire home-buying process. So, how is it going to benefit home-buyers? Let us take a look at some key takeaways:

  1. Benefits To Buyer

The Act restricts developers to make any additions or alterations in the sanctioned plans, layout plans, specifications and the kind of fixtures, fittings, amenities etc. without approval from at least two-thirds of the allottees, apart from the promoter, who have agreed to take units in the building.

The developer cannot discriminate sale on the basis of caste or community. Also, buyer will pay only for the carpet area plus if the project gets delayed then buyers won’t have to pay the monthly interest on bank loans, the developer will incur the same. Under RERA, developer will have to open a separate account for project’s construction, in which 70% of the collected amount shall be deposited and developers can make withdrawal from it only for construction purpose.

If the buyer or allottee finds any construction defect within five years from the date of possession, the promoter will have to repair it without additional charges. If the developer fails to do so, then the buyer has the privilege to demand appropriate compensation from RERA. The promoter will also have to execute a registered conveyance deed in favour of the allottee within three months from the issue of occupancy certificate, or if sixty percent of total units in a building or wing have been paid in full to the promoter, whatever is earlier.

  1. Project Registration

The new law makes it mandatory for developers to register all residential and commercial projects with the newly formed Maharashtra Real Estate Regulatory Authority (MahaRERA) before 31st July, 2017. Till the time the project is not registered, the developer cannot advertise, market, book, sell or offer for sale. Failing to comply with this law may result in heavy penalties up to 10% of the estimated cost of the project. In case of repeated violation, the developer or promoter might be subject to imprisonment up to three years or penalty of further 10% of the estimated cost or both. Apart from registration, the developer is liable to provide quarterly updates regarding the status of the project.

  1. Full Disclosure and Transparency

Developers will have to share all details about the project like cost of land, development agreement, construction cost, and sanctioned plans etc. on their official website. They will also have to present a disclosure about the completion time of the project and submit the different phases of development plans, in addition to information about units and covered parking lots. While advertising their project, the developers will have to give out details about MahaRERA website where all these details will be uploaded.

  1. Filing of Complaint

If there is any discrepancy between what was promised and what was delivered, the buyer will have to contact respective authority. The complaints will be heard and a decision will be made within a specific time period and if the buyer is un-happy with the decision, then the buyer can approach Appellate Tribunal, and eventually the High Court.

  1. Guidelines For Brokers

Every broker is required to register with the authority and if they fail to do so, the broker shall be liable to pay a penalty of ₹ 10,000 for every day he continues to default, which might extend up to 5% of the cost of the plot, apartment or building which is up sale or purchase.

RERA was long-awaited and finally, it has been implemented, so in the coming months the picture will be clearer as to how the new Act will help the home-buyers.

Regulations

373 Maharashtra Cities To Fall Under PMAY Scheme

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The state of Maharashtra has added 232 cities to the existing 142 which makes it 373 cities under the Pradhan Mantri Awas Yojana Scheme (PMAY).

The officials at the housing department feel that this step will aid the government take up more projects under the PMAY scheme.

Sachin Kulkarni, Builder shared his concerns over the lack of coordination between the department in executing PMAY projects. He said, “This is a good sign. However, the PMO’s seriousness in promoting HFA is diluted by the time it reaches the authorities. Apart from collecting application from interested beneficiaries, nothing has moved on the ground in urban centres. I hope that this initiative moves on fast track”.

Maharashtra CM Devendra Fadnavis recently states that the in order to create more housing stock the state’s Slum Rehabilitation Authority scheme be brought under PMAY so that it can receive the subsidy to create more affordable housing. He clearly mentioned that the government intends to create more housing stock and it was taking various initiatives and making policy changes for it.

Also Read- Affordable Housing To Get A Boost With PMAY’s Scope To Be Extended To Private Lands

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Regulations

Real Estate Sector May Fall Under GST What Does It Mean For Buyers?

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One after the other the real estate sector has witnessed massive policy and law changes in its systems. Nonetheless, the tide has not passed yet. The GST council will take up a proposal to bring it under the uniform nationwide levy.

As the industry is still recovering from the RERA Act, the finance minister, Arun Jaitley said that there is a strong case to include real estate in the new indirect tax regime. He said this last week and also mentioned that GST Council will discuss it in November.

At present, the home buyers are paying 12 percent GST on under-construction properties. This percentage includes two taxes which are stamp duty and registration. The rate of which varies in each state but GST will make them uniform.

Santosh Dalvi, KPMG India partner (indirect tax) said, “If the entire real estate is brought under GST, they would have to abolish the stamp duty and we don’t know how the government plans to compensate the states for their loss.”

The stamp duty with registration and GST comes to approximately 18 percent for under construction properties. He further said, “So, it’s important to look at what rate it will be taxed at. We can then look at consumer prices”.

While agreeing, Bipin Sapra, EY partner (indirect tax), added, “It’s going to be a test for the government”.

Developers also pay taxes on raw materials. However, unlike other businesses, they don’t get any tax refunds through input credit. GST taxes every stage of the business activity to better compliance and compensates for it by permitting refunds.

Anuj Puri, Anarock Property Consultants chairman, said “By including real estate under GST, builders can get a fair amount of input credit, helping bring down costs,” He added that it would make homes cheaper for buyers.

According to Sapra, it will depend on the tax rate applicable.

Niranjan Hiranandani, co-founder of Hiranandani Group said, “Real estate under GST ambit means consumers will only have to pay one final tax.” He stated that with the commencement of RERA it brings transparency and GST would reduce the burden in terms of taxes payable while buying the home. He concluded, “Not only will this create positive sentiment but it should also boost actual sales”.

Also Read: Affordable Housing Is The Changing Face Of Indian Real Estate

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Regulations

Home Buyers Will Be Covered Against Builders Who Are Going Bankrupt

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In a move to protect home buyers from builders declaring their bankruptcy, the Insolvency & Bankruptcy Board of India (IBBI) has amended rules which make it necessary for any company to showcase how they have dealt with interests of all stakeholders. This is directed towards companies like Jaypee Infratech and some of the entities of Amrapali Group.

The regulator has informed about the revised rules last week. This will ensure that banks and other creditors do not get away by protecting their interests at the expense of others who are impacted by the action.  Banks are part of the creditors’ committee. They become an important decision-making body after a company is admitted for bankruptcy.

An expert bankruptcy lawyer said, “The change in the rules has plugged a gap as flat buyers are of the view that there is nothing to protect their interests.”

According to the new law that was enacted last year intends to speed up the resolution process in a period of 180 days, with a possible extension of 90 days. This will be done by appointing insolvency resolution professionals who will take charge of the company’s operations and prepare a plan. As per the law, an information memorandum will be finalized if the creditor’s committee is willing to take applications from other interested companies to take over the company.

The insolvency experts say that the law providing for the plan binds corporate debtor (the company) and its members, employees, guarantors, and creditors, other stakeholders involved in the resolution plan. However, there are no obligations mentioned in the rule to give any treatment to the stakeholders other than the financial creditors (banks) and operational creditors, which includes vendors and others who may have dues.

The National Company Law Tribunal, based on the comfort provided by the revised rules, will choose the final resolution plan based on bids that are received. The lawyer further said, “The tribunal will not clear the resolution plan without giving notice to all stakeholders and the flat buyers can raise objections at that point of time.”

Also Read: Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

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