Indian Government to Penalise Defaulting Real Estate Developers

NRI
investment in property in India need not spend anxious moments
worrying about the delay in getting possession of the residential
apartments they have booked. The Government will soon bring in
legislation which will ensure that builders stay with their commitments.

The Urban Development Ministry and the Department of Consumer
Affairs is planning to penalise builders to the extent of 1%
of the value of the property every month in case of delay in
giving possession of flats.

A provision to this effect would
be made in the Real Estate Management and Regulation Bill.
A 1% penalty would translate into Rs.20, 000 per month on a Rs.20
lakh worth property.

This provision would have to be made in
the agreement the buyer makes with the seller at the time the
property is booked.
The provision would compensate buyers adequately enough to cover
rental income the property would have otherwise generated.

The
rental values of residential value hover around 0.5% of the capital
value even in metros, so a property buyer would not feel short-changed.

The Urban Development Ministry and the Consumer Affairs Department
will table the final bill in the upcoming monsoon session of
Parliament.

States are being asked to institute a real estate
regulator to keep tabs on the activities of property developers.
In Delhi ,
the statutory body will be set up to regulate the business practices
of builders.

The Government has taken a stern view of pre-launch bookings
of properties – a practice which has defrauded many an innocent buyer.

Steps to prevent recurrence of such cases are being taken up
– some of these include making a bank guarantee and insurance
of the property compulsory prior to the sale.

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