Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

A welcome regulation for home buyers
Wed, 4 Apr Pre-Open

A house is probably the most expensive asset a person will buy over his or her lifetime. Yet to purchase this asset, the buyer is not greeted with a red carpet or flowers. Instead he or she has to deal with delayed possession, inflated costs and ambiguous agreements. Builders form cartels and are often backed by rich politicians and film stars. This is why many of them are still able to maintain their prices despite a deteriorating external environment. High interest rates, low liquidity and falling demand can cripple the real estate sector and lead to distressed sales. But, many builders in India have so far managed to keep their feet firmly on the ground.

In order to address the various discomforts of buyers, the proposed Real Estate (Regulation and Development) Bill may be a welcome solution. The draft bill, aims at ensuring transparency in the sale of plots and construction. This will help protect the interests of customers and property buyers. It also seeks to provide correct project information. It also has a number of clauses to help punish promoters and brokers who deceive customers.

The proposed real estate regulator would make registration compulsory for property agents and residential projects over 1,000 square meters (sqm). Builders who fail to register their flats or plots before selling them may even face imprisonment. Since the minimum threshold area for registration has been reduced from 4,000 sqm earlier, the bill would cover the entire supply of residential units from the organized sector. The bill also makes it mandatory for the developers to deposit 70% of the funds received from homebuyers in a separate bank account. The idea is to avoid diversion of funds and ensure the timely completion of the project.

Moreover, the draft bill also proposes up to 3 years jail and/or a penalty up to a tenth of the estimated cost of the real estate projects for promoters who fail to comply with key provisions. If a promoter knowingly does not provide the buyer with the right information, he will have to pay 5 percent of the project cost as penalty.

The entire real estate sector has lost its reputation on account various corruption allegations and scams. All these provisions will help ensure that there is more transparency in the sector. After the cabinet approves the bill, it will be introduced in Parliament. Within a year of the act coming into effect, it will be implemented in all states and Union territories. We hope that serious action is taken to ensure that this revolutionary bill is passed and to ensure more comfort for home buyers.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "A welcome regulation for home buyers". Click here!


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Feb 22, 2018 02:45 PM