INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS...

BUILDERS FINALLY GET HEMMED IN BY DEADLINES

 THE government has made it mandatory for developers to adhere to deadlines on finished housing properties. Property developers will now have to refund the entire advance amount with interest if they fail to deliver flats to customers in the agreed time-frame.

   The Union urban development ministry has already circulated a note to state governments in this regard, saying refunds must be paid within a week after the deadline. As per the note, the developer will have to refund a minimum 20% of the advance within seven days of the deadline with the remaining money to be paid on an agreed time-frame.

   The refund time-frame would be decided by the real estate regulator, an official said. The proposed real estate watch dog, part of the Real Estate Bill, is likely to be tabled in the winter session of Parliament.

   The move is aimed to check the prevailing practice wherein developers announce a project even without seed money. Instead, they collect huge sums as advance from customers. Constructions start only after they have collected enough money. Buyers suffer as this leads to delays in projects.

   “The refund clause will be incorporated as a guideline for the developers in the new Real Estate Bill. The real estate regulator in each state would oversee that it is implemented in letter and spirit,” said a senior official. The move will not only help buyers but also reduce the number of property-related litigations.

   Commenting on the policy, Realty Verticals director Rajan Ahuja said: “It will make developers responsible and expedite the delivery of property.”

   However, some developers think that the market itself acts as a self-regulator. “Good developers never dupe customers. They always adhere to deadlines as it involve their reputation,” said Zoom Developers president & CEO Rumneek Bawa.