Buyers of homes in projects that are under construction, especially those that are delayed, might be in for some cheer as builders may speed up work to avoid stringent provisions of the new real estate regulatory bill.
The bill, which seeks to protect the rights of home buyers, mandates registration of projects, including those that have not got completion or occupancy certificates.
Registration will require builders to set aside funds collected from buyers and pay interest in case of delays. Experts said registration of projects may still be some 15-18 months away, enough time for those that are currently 60-70% complete to finish. Of 17,000 projects under construction in the top 27 cities, 56% are at least 60% complete, according to property research firm Liases Foras.
The Real Estate (Regulation and Development) Bill has been passed by both houses of parliament and once it receives the assent of the President, the section dealing with setting up of the regulatory authorities in the states within one year will be notified first.
Once the authorities are in place, sections related to the registration of real estate projects and real estate agents and the functions and duties of promoters will be notified. Completion of projects will depend on many factors, including lining up financing.
Builders have to deposit 70% of the amount collected from buyers in a separate account to cover the cost of construction, including land. Developers will also have to pay the same interest rate for any delays on their part as buyers do when their payments to the builder are late, among other provisions.
If the pace of construction picks up, it could revive demand for building materials such as cement and steel, pushing economic growth, said Pankaj Kapoor, managing director of Liases Foras.
Kapoor cautions that a lot will depend on how builders manage to finance their projects, considering that many of them have been strapped for cash for some time.