Know RERA ACT

The Real Estate (Regulations and Development) Act, popularly referred to as the RERA Act of 2016, is said to bring about a sense of clarity and order to the Indian Real Estate sector. The Act has defined a set of stringent norms for the real estate developer, the intermediary, as well as the consumer. There is conflict among how people perceive the impact of the RERA ACT – some are concerned about the likely increase in cost of construction and compliance, while others are optimistic about the results of the Act. In order to help you form your own opinion on the topic, we give you a simplified version of what you need to know about the RERA Act, and how it affects you. Watch our video on the RERA Act for a quick overview.

RERA Act 2016

Real Estate Trends Of 2018 Shaped By Events of 2017: An Analysis

Last updated on January 8, 2018 by Chrisanta Dias

At the start of 2017, the Indian real estate sector was grappling with the after effects of demonetisation which came out of the blue towards the end of 2016. However, 2017 brought even more change in the form of the roll out of Real Estate (Regulation and Development) Act, 2016 (RERA) and implementation of Goods and Services Tax (GST). 2017 will be considered as a watershed year in Indian real estate; a year in which the boys of real estate development were separated from the men, and consolidation took place. It will remain the year in which the Indian homebuyer was given his/her due and place in what was seen as a ruthless sector. While the majority of the notable real estate trends of 2017 were marked by regulation, some were infrastructural. The metros (both tier-1 and tier -2 cities) have seen the implementation of massive infrastructure projects, which will …

Real Estate Trends Of 2018 Shaped By Events of 2017: An Analysis

At the start of 2017, the Indian real estate sector was grappling with the after effects of demonetisation which came out of the blue towards the end of 2016. However, 2017 brought even more change in the form of the roll out of Real Estate (Regulation and Development) Act, 2016 (RERA) and implementation of Goods and Services Tax (GST). 2017 will be considered as a watershed year in Indian real estate; a year in which the boys of real estate development were separated from the men, and consolidation took place. It will remain the year in which the Indian homebuyer was given his/her due and place in what was seen as a ruthless sector.

While the majority of the notable real estate trends of 2017 were marked by regulation, some were infrastructural. The metros (both tier-1 and tier -2 cities) have seen the implementation of massive infrastructure projects, which will raise the standard of living in these metros, and as a result draw more people and developers to fulfil this demand. Affordable Housing and PMAY has also given broad hope not just to homebuyers in the lower middle class and low income category but also to developers who have been looking to make inroads into this sub-sector but have lacked the right incentives.

2018 is now underway, and as far as real estate is concerned will be dictated by the upheavals and trends of 2017. Let’s review the year gone by and what it holds for 2018.

RERA Act video
The RERA Act of 2016

Real Estate (Regulation and Development) Act, 2016 (RERA)

It was a long awaited regulation and was expected to be homebuyer-friendly. RERA has introduced many much-anticipated checks and balances to even out the playing field in real estate. Developers have been given space and incentives to adhere to their deadlines and steadily clean up a ‘dirty’ sector. They can now focus on completing under-construction projects and maintain transparency about allocation and usage of funds. Homebuyers on the other hand will have recourse to justice should developers continue to flout the rules.

RERA officials have led the way by ensuring timely approvals and granting registration numbers to projects. Maharashtra has been the standout state in this regard and has set an example for a RERA-fied real estate sector. Most of the other states are struggling to get their act together, however, some like Karnataka and Delhi have finally started issuing RERA approvals. As other state authorities take their cues from these frontrunners, homebuyers can expect timely project deliveries and developers can hope for better housing sector performance in 2018. On the flip side we can also expect to see many more litigations related to RERA in 2018 and for sure these verdicts will bring further clarity in the rules, as pertaining to various states.

Goods and Services Tax (GST)

GST was another long awaited regulation. Meant to replace a bunch of other taxes and streamline the rates on many goods and services across industries, GST shook up the economy. Since its implementation, various iterations were made to different rates. In the real estate sector, under-construction properties are being levied a GST rate of 12% while residential rentals are exempt from GST. Thus, GST brought confusion about application and led to increased prices and delayed possession. This proved to be counterproductive given the opposite effect of RERA. However, some developers took advantage of the situation to push sales of ready-to-move inventory by advertising the attractiveness of such properties sans GST. Moreover, developers are yet to benefit from accruals of input tax credit which can they can in turn, pass on to homebuyers. As this and further iterations happen to various rates in 2018, developers hope the GST rate comes down to stoke homebuyers’ interest in new construction purchase.

How does the GST impact your home buying decision
How does the GST impact your home buying decision (Image credit: Sundayguardianlive.com)

A Cleaner Sector?

Experts as well as critics are unanimous about the winds of change sweeping through the sector. The hope and expectation is that the changes are positive, enabling transparency about capital acquisition and allocation, faster approvals to developers, fewer construction delays and quicker possession for homebuyers. This in turn provides opportunities to developers – big and small – to adopt transparent practices and shed the notorious tag that has dogged the sector for decades. One can say with certainty that trust from customers is something the real estate sector has lacked. This is a big factor in any transaction. With these new regulations, as the grey areas start to fade away, there is hope that developers can begin to earn the trust of homebuyers.

Affordable Housing & PMAY

The Pradhan Mantri Awas Yojana was hailed as an enabler and a welcome government housing scheme. Under this scheme the government rolled out plans in rural as well as urban areas to enable more families to access affordable housing. Projects under this scheme picked up steam in 2017 and in the quarter ended September 2017, home sales increased 5% year on year in the top 8 property markets of the country powered by a 24% surge in affordable housing sales. Significant uptick of 11% was seen in the affordable segment with prices less than Rs 25 lakh. This is attributable to the fact that developers are realising the benefit of increasing supply in a category where demand is driven by financial and fiscal benefits under the ‘PMAY Housing for All’ subsidy scheme.

2018 will see further growth in this particular housing market as the government has approved construction of 112,083 more affordable homes under PMAY with an investment of Rs 8,105 crore. This means the total homes sanctioned under PMAY(Urban) has now gone up to 3,052,828. All of this is good news for developers looking to make a mark in this sector as well as for first home buyers looking for quality and affordable homes.

Indian and Japanese PMs at the laying of the foundation stone
Indian and Japanese PMs at the laying of the foundation stone (Source: The Guardian)

Infrastructure Developments

Across the major cities, huge investments were made in upgrading existing infrastructure as well as installing new ones. This includes expansion of metro projects in Delhi, Bengaluru and Mumbai while Hyderabad will see the launch of metro transport. Additional lines connecting distant suburbs will enhance connectivity and improve travel times and provide better commuter experiences. Simultaneously big ticket projects like the Delhi-Mumbai Industrial Corridor (DMIC), Dwarka Expressway (now provided National highway status), India’s first Bullet Train from Mumbai to Ahmedabad, and the new airports in Navi Mumbai and Jewar are aimed at boosting trade, infrastructure and standard of living across the country. Work on most of these will continue in 2018 and some like the Dwarka Expressway will be completed.

Overall, 2017 can be considered a busy year. It brought upheavals and yet signalled major changes and overhauls in the way the industry was operating. There can be opportunities in change and it is up to the major real estate companies to lead the way even as smaller companies are seen to be adapting quickly and eating into market share. For homebuyers this is a wait and watch period to observe how these changes unravel and what benefits it brings. They also need to focus more on doing their own due diligence and research, before making a decision. Public RERA portals provide access to information like never before thus enabling informed decisions. 2018 is definitely a year to watch out for in Indian real estate.




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RERA Act 2016

Has the Real Estate Act raised eyebrows in Karnataka?

Last updated on July 10, 2017 by Nivedita

Ending months of uncertainty, the Karnataka government finally passed the Real Estate (Regulation and Development) Act 2016. A statement issued by the State law minister, TB Jayachandra, read, “the rules are on the lines of Gujarat and Rajasthan, but the state has largely adopted the central law.” Though touted to be a harbinger of change for the overall realty sector, the notified rules of the Act are being largely debated by the real estate fraternity and real buyers alike. While the Act has been welcomed by industry stalwarts, buyers, on the contrary, are not really satisfied. Few have even gone to the extent of blaming the state government for defeating the whole purpose of a law passed by the Parliament. The seriousness of the matter can be gauged by the fact that the all India chapter of Fight for RERA has decided to file a petition in the Supreme Court …

Has the Real Estate Act raised eyebrows in Karnataka?

Ending months of uncertainty, the Karnataka government finally passed the Real Estate (Regulation and Development) Act 2016. A statement issued by the State law minister, TB Jayachandra, read, “the rules are on the lines of Gujarat and Rajasthan, but the state has largely adopted the central law.” Though touted to be a harbinger of change for the overall realty sector, the notified rules of the Act are being largely debated by the real estate fraternity and real buyers alike.

While the Act has been welcomed by industry stalwarts, buyers, on the contrary, are not really satisfied. Few have even gone to the extent of blaming the state government for defeating the whole purpose of a law passed by the Parliament. The seriousness of the matter can be gauged by the fact that the all India chapter of Fight for RERA has decided to file a petition in the Supreme Court over the dilution of rules by the states (including Karnataka). Further, the Karnataka chapter is also planning to challenge the state government separately. In fact, there is a petition that is being widely circulated in the social media requesting the Chief Minister of Karnataka to include all ongoing projects under the ambit of RERA.

Interestingly, despite being one of the first states to notify the draft rules last year, it failed to set up a state-level regulatory authority and release the final rules within the set deadline. This resulted in denizens getting up in arms against the state government and blaming it for intentionally depriving the consumers of reaping the benefits of RERA.

The government, however, claimed that the delay was on account of ‘prolonged discussion.’ The noted members of the authorities were constantly deliberating on whether to include or exclude ongoing projects under the Act. Buoyed by this delay, thousands of home buyers were waiting with bated breath for the Act to come into place. Finally, the dust of uncertainty settled with the state cabinet passing the bill on July 5, 2017, albeit with a few changes.

First and foremost, the decision to exempt projects that have executed 60 percent of the sale deed has not gone well with the buyers. Why? Well, simply because even after the project is half completed, in many cases, the construction work proceeds at a snail’s pace. In fact, there are certain projects where construction is almost completed but the buyers have not got the possession. The move has been welcomed by the developers as they feel that had all projects come under the ambit of RERA, it would have adversely impacted the property values and construction progress.

The decision, however, raises several serious concerns. To begin with, there is no clear mechanism as to how the stage of completion of a project will be defined. Developers can potentially manipulate it in their favor as the topic is clearly subjective. Moreover, if the final decision of this determination is left to the builders, many fear that the Act will just be another useless law.

The decision has also drawn flak as aggrieved citizens strongly believe that it has been announced keeping in mind BDA and Karnataka Housing Board. Had all projects were brought under RERA, the government would have been forced to pay huge penalties to allottees in layouts such as Kempe Gowda Layout, where basic infrastructure including sanitary and water lines is a distant cry from reality.

The move is also likely to result in developers focusing more on new projects rather than the ongoing ones. The new projects will have to follow the stringent guidelines and meet the set deadlines without any fail. Thus, the chances of projects that are 60 percent completed getting delayed cannot be ruled out.

All said and done, the Act could have definitely been better and more in favor of consumers. As we wait for a Gazette Notification to be issued, let’s take solace in the words of Venkaiah Naidu, “the Real Estate Act is coming into force after a nine-year wait and marks a new beginning of a new era.”




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Gautam Chatterjee

RERA Is A Paradigm Shift For The Better: Gautam Chatterjee

Last updated on July 7, 2017 by Nikita Shrawagi

The chairman of the Maharashtra Real Estate Regulatory Authority which implements the Real Estate (Regulation and Development) Act (RERA), Gautam Chatterjee is quickly gaining a reputation for being a tough taskmaster in implementing RERA in Maharashtra. A retired bureaucrat, Mr. Chatterjee is an authority in urban housing and played an important role in framing the housing rules in the state. He has previously also headed the Slum Rehabilitation Authority (SRA), Maharashtra Housing and Area Development Authority (MHADA), Dharavi Redevelopment Authority (DRA) and was also a housing secretary in the past. The Real Estate (Regulations and Development) Act, popularly referred to as the RERA Act of 2016 has come into force from May 1, 2017 and is said to bring about a sense of clarity and order to the Indian Real Estate sector. The Act has defined a set of stringent norms for the real estate developer, the intermediary, as well …

RERA Is A Paradigm Shift For The Better: Gautam Chatterjee

The chairman of the Maharashtra Real Estate Regulatory Authority which implements the Real Estate (Regulation and Development) Act (RERA), Gautam Chatterjee is quickly gaining a reputation for being a tough taskmaster in implementing RERA in Maharashtra. A retired bureaucrat, Mr. Chatterjee is an authority in urban housing and played an important role in framing the housing rules in the state. He has previously also headed the Slum Rehabilitation Authority (SRA), Maharashtra Housing and Area Development Authority (MHADA), Dharavi Redevelopment Authority (DRA) and was also a housing secretary in the past.

The Real Estate (Regulations and Development) Act, popularly referred to as the RERA Act of 2016 has come into force from May 1, 2017 and is said to bring about a sense of clarity and order to the Indian Real Estate sector. The Act has defined a set of stringent norms for the real estate developer, the intermediary, as well as the consumer. Chatterjee believes his aim is to make the system favorable to the buyer. He says,

RERA will ensure that builders give the buyer whatever product he has promised. It will encourage transparency, fiscal discipline and better implementation of regulations.

The fact that Maharashtra’s RERA will borrow from the state’s own regulatory proposal of 2012 was also revealed.

At the 9th edition of the CII Realty and Infrastructure Conclave on 7th July in Mumbai, Mr. Chatterjee was vociferous in his plea to developers to get their projects registered before the July 31st deadline. He has promised to ensure full cooperation from the regulator as well as faster approvals. To the customer, he has promised transparency in the availability of all approvals on the Maha RERA portal.

In an interview with NDTV he stated that there are several provisions in Maharashtra’s RERA, of which the home buyers will be the beneficiary, some of which are discussed below:

  1. RERA’s Retrospective Effect:

Since Maha RERA has made it mandatory for all ongoing projects without Occupation Certificate (OC), to be registered within three months, the effect is retrospective and signifies hope for homebuyers who feel duped due to project delays and developer malpractices.

  1. Full disclosure Expected from Developers:

Developers will be expected to disclose timelines for project delivery, a method of calculation of project prices, details of materials used, among other specifications. This is to ensure buyers know what are getting into when they choose a future home.

  1. Regulation of Real Estate Ads:

Developers will no longer be allowed to lavishly advertise their projects without proper approvals. All false claims will be penalized as per provisions in the Act.

The most recent reports are that MOFA may be a thing of the past. The Maharashtra Ownership Flat Act (MOFA) 1963 is the state’s oldest legislation that safeguards the interests of consumers.  Gautam Chatterjee has written a letter to the State Housing Department, asking for MOFA to be repealed. According to Chatterjee, RERA has provisions that override all other real estate acts. At a housing event organized by Zee 24taas and DNA with CREDAI-MCHI, he said, “I have written to the government (housing department) on repealing MOFA.” He suggested, “a Maharashtra Transfer Act 2017 needs to be brought in.” Chatterjee said that such an act could cover projects that do not require registration and hence are outside the realm of RERA. “The new act will cover three aspects – liability, conveyance, and creation of a legal entity,” he said.




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Home loan interest rates are reduced

Lower interest rates – Bringing one closer to their dream home

Last updated on April 29, 2017 by Manish Kumar

High-interest rates and a slowing economy led most end users of property to reconsider their purchase decisions in the recent years. Further, 2016 saw the government delivering a ‘triple whammy’, comprising of the introduction of the Real Estate (Regulation and Development) Act, the Goods and Services Tax (GST) and the demonetization initiative. However, the year 2017 has seen some welcome moves that indicate things are looking up in this sector. Moreover, all the three measures listed above will create a much transparent economy, foster its long-term prospects and create more employment, pushing up demand for quality housing. With the demonetization drive coming to an end, banks and lending institutions have seen a massive accumulation of liquidity, building expectations around a sharp fall in lending rates. Around the start of the year, India’s largest lender, the State Bank of India (SBI), has taken the initiative to cut its marginal cost of …

Lower interest rates – Bringing one closer to their dream home

High-interest rates and a slowing economy led most end users of property to reconsider their purchase decisions in the recent years. Further, 2016 saw the government delivering a ‘triple whammy’, comprising of the introduction of the Real Estate (Regulation and Development) Act, the Goods and Services Tax (GST) and the demonetization initiative. However, the year 2017 has seen some welcome moves that indicate things are looking up in this sector. Moreover, all the three measures listed above will create a much transparent economy, foster its long-term prospects and create more employment, pushing up demand for quality housing.

With the demonetization drive coming to an end, banks and lending institutions have seen a massive accumulation of liquidity, building expectations around a sharp fall in lending rates. Around the start of the year, India’s largest lender, the State Bank of India (SBI), has taken the initiative to cut its marginal cost of lending by 90 basis points and home loan interest rates by 45-50 basis points. It was soon followed by other biggies, such as PNB, ICICI, and HDFC. Such rates were last available 6 years ago, post which both real estate demand and capital values appreciated. For an end user, this represents a very good opportunity to purchase one’s dream home now. The reasons for this are not hard to see:

Lower interest rates = Lower EMIs

Lower interest rates means lower EMIs to be paid by home buyers
Lower interest rates mean lower EMIs to be paid by home buyers

Most end users are professionals and avail home loans to buy their homes. Therefore, a significant reduction in home loan interest rates translates into lower payouts against the mortgage. For example, if one is looking to purchase an apartment for a high-end project and avails a loan of Rs. 1 crore for the purpose. Assuming loan tenure of 20 years (240 months), the savings on equated monthly installment (EMI) under the applicable rate of 8.25% would come to Rs. 13.80 lakh approximately over life of the loan. Rs. 20.70 lakh approximately accrue as savings for one who goes for a loan of Rs. 1.50 crore in the same period (assuming the floating rate of interest remains the same). The table below further elaborates the numbers:

A hypothetical housing project having a starting price of Rs. 1.30 Crs.

IMPACT ON EMI

Loan amount in Cr. EMI at 9.15% New EMI at 8.25%  Saving in EMI (Rs.) Net Saving (Rs.)
1 90,940 85,207 5,733 13,75,920
1.5 1,36,409 1,27,810 8,599 20,63,760
1.75 1,59,144 1,49,111 10,033 24,07,920

 

Another hypothetical project, offering homes starting at: Rs. 4.2 Crs.

IMPACT ON EMI

Loan amount in Cr. EMI at 9.15% New EMI at 8.25%  Saving in EMI (Rs.) Net Saving (Rs.)
3 2,72,819 2,55,620 17,199 41,27,760
4 3,63,758 3,40,826 22,932 55,03,680
5 4,54,698 4,26,033 28,665 68,79,600

*Loan tenure = 240 months, i.e. 20 years

In addition, with banks having surplus liquidity and the benign inflation rate prevailing in the economy, interest rates may well come down further. As discussed earlier lower rates will further boost demand for housing which will push up property prices in due course.

Cuts in taxation

The Union Budget 2017 saw a reduction in income tax rates doing the rounds. Also, tax breaks and lower interest rates have been provided for the affordable housing sector. End users, hence, will have greater purchasing power and this should greatly boost economic growth. Higher incomes also mean higher needs for investments and real estate is a favored asset class for investors. Thus, the home that one wishes to purchase may not be available at these prices in coming time since it is likely to become expensive when demand revives.

Higher investment in infrastructure

During the demonetization drive, numerous government departments at various levels, which were allowed to collect their dues in the form of discontinued bank notes, have seen their hitherto empty coffers overflowing. A major chunk of these massive funds is expected to be invested in enhancing the infrastructure of towns and cities, in order to drive growth. Faster development of upcoming real estate hotspots along the further reaches of major cities such as Wagholi in Pune, Nallagandla in Hyderabad and Dwarka Expressway in Gurgaon will translate into higher property prices for the same area in the future.

Availability of Quality housing

Lowering interest rates on home loans makes purchasing a home cheaper
Lowering interest rates on home loans makes purchasing a home cheaper

The twin strikes of the RERA Act and demonetization have clearly emphasized the need for end users to go for projects by reputed developers. It is more important than ever to look for a property having a developer, who has built a strong track record for timely delivery and quality. These regulatory moves are expected to clear fly by night operators from the real estate sector, with only the serious players expanding their presence. Hence, the oversupply, leading to excess unsold inventory in the hands of developers, one sees today is unlikely to last long, which will again lead to a hike in property prices. Hence, for an end user, now is a great time to get better quality homes at a more suitable rate.

Primary market to do better than secondary

It was often found that secondary sales in residences used to be conducted through a mix of black money and legitimate funds. With demonetization, the former is no more in availability, hence hurting demand in the secondary market. Thus, end users who primarily dealt with legitimate funds are unlikely to see much supply in the secondary market. This will result in them flocking to primary market i.e. under construction projects of reliable developers, hence pushing up demand for it.

Conclusion

There is a famous English saying, “Strike when the iron is hot”. For an end user, events in the recent past and the possibilities in the near future clearly indicate that this is among the best times for one to take the plunge and purchase the home they have long desired, at a price which suits them. A combination of a crackdown on unscrupulous operators and transactions, more customer-friendly regulations, and financial incentives is a welcome indicator for home buyers to step in and make the purchase they were compelled to defer till recently.




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House Construction

10 things to know before constructing a house

Last updated on February 21, 2017 by Sejal Mathur

With different cities differ the real estate scenario and their rulebooks. Depending upon the area, the respective building bye-laws, development control regulations, permissible FSI, ground coverage and other common jargons with city-specific standards should all be taken into consideration before you decide a house construction. Also, the recent changes or amendments in the real estate bills and acts, any updates or allowances made in this respect must be carefully noted to avoid any inconvenience, unanticipated costs or delay in sanction of plan and to ensure maximum transparency. 1. Appointing a reputable developer, a reliable contractor and efficient architect for construction of your house is of utmost importance which will determine construction from the scratch to the finishing touches. One should select a building project plan for bungalow or row house with the help of a good architect who has made successful projects of the same. If you have never been involved …

10 things to know before constructing a house


With different cities differ the real estate scenario and their rulebooks. Depending upon the area, the respective building bye-laws, development control regulations, permissible FSI, ground coverage and other common jargons with city-specific standards should all be taken into consideration before you decide a house construction. Also, the recent changes or amendments in the real estate bills and acts, any updates or allowances made in this respect must be carefully noted to avoid any inconvenience, unanticipated costs or delay in sanction of plan and to ensure maximum transparency.

1. Appointing a reputable developer, a reliable contractor and efficient architect for construction of your house is of utmost importance which will determine construction from the scratch to the finishing touches. One should select a building project plan for bungalow or row house with the help of a good architect who has made successful projects of the same. If you have never been involved in overseeing the construction of a house and are new to act or supervise, hire a building contractor to supervise you and the building of your new home for a much smaller fee than their nominal fee. You may ask your friends or relatives for a reputed builder who has a good experience in the construction business and carefully employ the one whose name is repeatedly suggested by a few.

2. Compliance of Vaastu & Feng Shui factors in designing of a house can be considered if one attaches importance to these sciences that are believed to facilitate positive energy inflow, and thereby create the plan accordingly as such changes are difficult to make once the construction is completed. Moreover, to avoid any misbeliefs later due to luck and misalignment of the house as may be stated by fortune tellers/pandits, it is better to contemplate over them beforehand.

3. It is imperative to decide whether to hire a builder or to be an owner-builder. One can hire a builder according to the house plan with or without material and personally supervise the house to see that proper quality of materials as fixed/decided is being utilized.

4. Getting documents ready, agreements signed, plans sanctioned – A clear title from the seller must be bought which should state the land use as non-agricultural (NA) where construction can be started immediately with or without a construction loan. Additionally, improvised drawings, designs layouts, height, carpet area, FSI being availed of, built up area being provided, necessary approvals for construction or extension, consultation with an advocate for registration and legal purposes, sales deeds, sales agreement, material costing must be properly executed.

Checklist to check before constructing a house
Checklist to check before constructing a house

5. Area, dimensions, design, space requirements – It is necessary to finalize your own requirements, size and number of bedrooms, chart out and place them before the architect to show your minimum requirement. Try to make the best use of natural sunlight and ventilation to minimize the need for artificial lights during daytime. Try to keep the lift, staircase etc. with large glasses on one side to avoid the requirement of lighting during daytime. These days, architects make use of 3D visualization software to showcase how the house would look like so you can take the advantage to cross-check for elevation/section/dimensions on paper and virtually so as to make changes as per your taste, since what may seem good on paper may not necessarily look good after construction.

6. Electrical fitting, plumbing and other fixtures – Contracts with various contractors should cover a period of 3 years after the house construction is over so that any problems arising out of faulty construction is taken care of by the contractor even after completion. Since the pipelines are laid when there is no water in the lines there is a great chance of mix-up between the hot and cold lines. Hence, it must be made sure that these connections are properly checked after the water supply connection has been provided. Also, one must ensure that the water and electricity meters are installed for each dwelling unit separately to avoid any conflicts later. The contract with the building contractor should provide for rectification of leakages, damp spots, seepage of water for the maximum period of 2-3 years. The guarantee cards must also be retained in case any of them become defective and for future maintenance purposes as well.

7. Man, materials, and money- Managing contractors to finish the House Construction in time have to be administered as there are times that labor does not show up for work or if work has to be paused due to the shortage of raw materials. More time means more money required and which correspondingly defines the need to borrow more money or refinance your construction loan. 

8. Valuation and comparison of prices- Take out an estimated cost breakup of your home of each cost of construction such as foundation, RCC, brickwork, plaster, electrical work, plumbing, woodwork, door frames, kitchen, trolleys, interiors etc. Good builders will give you all the cost breakup and come up with the total cost to build your new home. One must remember that extra costs may be incurred which are sometimes unpredictable and vary according to the market situation. Make a contract with the builder and architect about the time schedule for stages of payment to be given with delay clauses. It must be seen that the cost of construction is under our control as it tends to increase over time. Also, if they have more money they have a tendency to delay your work and most of the disputes arise because the contractor has taken more money than dues.

9. Consideration for the environment while constructing a house is attached high importance these days. Techniques like rainwater harvesting and solar water heating can also be considered while constructing a home so that you may save money and energy for you as well as the society in the long-term.

10. Last but not the least for House Construction, the thing to be considered is the insurance while constructing the house thereby enabling a safe game. One must also periodically supervise the construction of the house, list out and convey to the respective contractor about these shortcomings and the required modifications accordingly.




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Conversations with Incor Group – What Does RERA Act Mean For Home Buyer – Part 2

Last updated on February 12, 2017 by Manish Kumar

Continuing our ‘Conversations with Incor Group’ series, this is the second part of the questions a prospective real estate customer may have regarding the Real Estate (Regulations and Development) Act, 2016. Q7. I am planning to purchase an apartment in Phase 3 of a project, of which Phase 1 is complete and Phase 2 is underway. Do the original plans and timelines submitted by the developer hold true for Phase 3? A. It depends on whether the developer registered the entire property at one go with the Real Estate Regulatory Authority (RERA) or is registering phase wise. In case of the former, the developer cannot change his original plans and/or timelines for Phase 3 without consent of 2/3rd customers of this phase, as well as RERA’s approval. However, it is most likely that developers will go in for the latter approach, wherein they shall register each phase separately with RERA …

Conversations with Incor Group – What Does RERA Act Mean For Home Buyer – Part 2

Continuing our ‘Conversations with Incor Group’ series, this is the second part of the questions a prospective real estate customer may have regarding the Real Estate (Regulations and Development) Act, 2016.

Q7. I am planning to purchase an apartment in Phase 3 of a project, of which Phase 1 is complete and Phase 2 is underway. Do the original plans and timelines submitted by the developer hold true for Phase 3?

A. It depends on whether the developer registered the entire property at one go with the Real Estate Regulatory Authority (RERA) or is registering phase wise. In case of the former, the developer cannot change his original plans and/or timelines for Phase 3 without consent of 2/3rd customers of this phase, as well as RERA’s approval.

However, it is most likely that developers will go in for the latter approach, wherein they shall register each phase separately with RERA as a new project. Doing so provides the developers flexibility as well as a hedge against any unforeseen situations at the time of beginning a major multi-phase project, often spanning multiple years. Though this increases the cost of compliance for a developer, its benefits to them outweigh this increase in cost. Large, integrated townships too are likely to see its developers take the same approach.

Q8. The developer, from whom I purchased my unit, has sold it to another developer, with plenty of work still remaining to be done on the project. As a customer, what are my rights?

A. The Act has considered such a scenario where the developer is unable to complete the project and sells it to another developer or consortium midway. Post the Act, the developer cannot take such a decision, without the consent of at least 2/3rd of the project’s customers as well as approval from RERA. Again, should a customer own multiple units, he/she would be considered as a single customer only and will not have any additional voice compared to a single unit owner. The new developer would inherit all the rights, responsibilities and timelines mentioned in the agreement by the original developer and would need to register accordingly with RERA.

Q9. I am planning to purchase an apartment in an upcoming project. I am, however, apprehensive about the quality of construction of the apartment and do not wish to pay for major repairs 2-3 years down the line due to poor quality. Is there any recourse for me?

A. A major feature of the Act is the formulation of a defect liability clause, which states that the developers of all projects covered under RERA are liable for fixing any issues related to the construction of their project for a 5 year period, post-handover. This is good news for both customers and developers. Customers get an assurance that developers will use good quality materials and techniques for construction, hence, ensuring they won’t have to spend a fortune later on for repairs. For developers, this can serve as a key differentiator, helping them attract more customers while driving unscrupulous players out at the same time.

It is likely that apartment prices will increase, as a result of this clause. Customers should look at this increase as an insurance or warranty payment being made to keep their home looking as great as it was when they took possession.

Q10. I am considering purchasing an apartment in an under-construction project in Hyderabad, while my cousin is planning to make a purchase in an upcoming project in Bangalore. Does the same Act and its provisions apply to both our properties?

A. No. Real estate is a state subject under the Constitution and each state will have to, based on its own needs and circumstances, come out with their own version of the central Act. It’s this state version, which will be applicable to all projects within the state’s boundaries. Similarly, the Union Territories of Delhi and Puducherry, which have their own state governments, also need to come out with their own version of the Act, while the remaining Union Territories have to adhere to the central Act.

The central Act lays down a set of guidelines, which states are free to modify. At the same time, the state governments are expected to adhere to the broad essence of the central Act and not tinker with the same. However, one needs to wait for the states to come up with their Acts to assess the impact of the same.

Q11. I am planning to sell my apartment to another buyer. Will the Act apply to this resale transaction and if so, must I too quote the carpet area of the apartment?

A. The secondary (resale) market is out of scope of the Act, which primarily deals with transactions between developers and customers. At the same time, the implications of the Act are far-reaching, prescribing changes to certain existing practices in the sector. Keeping in mind that post-implementation of the Act, all primary transactions are to be sold on the basis of the carpet area, it is quite likely that resale transactions will follow the same practice.

Q12. While purchasing an apartment, the developer has, apart from the basic sales price of the apartment itself, separately charged me for the amenities provided such as the parking, clubhouse etc. which all adds up to the final overall cost for me. Does the Act have any stipulation in this regard?

A. The Act is silent on how such infrastructure facilities (both internal and external) should be charged by the builder. The Act only mentions that the Basic Sales Price (BSP) shall be based on the Carpet Area, instead of the Saleable Area. Hence, one can assume that the infrastructure charges will continue to be part of the overall project cost to be paid by the customer, rather than the BSP. However, one must wait for the respective state’s version of the Act, before coming to a definitive conclusion on this point.

Conclusion

This is a good time to be a home buyer. The Real Estate (Regulations and Development) Act has come up with a number of provisions, which benefit both customers and reputed developers and along with demonetization, should push the fly by night operators out of business. Add to this, the recent reduction in home loan rates by major banks and housing finance companies offers a great financial incentive for home buyers.

Considering the increasing demand for quality housing, the upcoming implementation of the Goods and Services Tax (GST) on 1st July 2017 and the inflation in the economy, home prices are likely to rise in the near future. For a home buyer, this is as good an opportunity as any to go in for their dream home, which they will get with an assurance of quality and at a good rate, provided the right opportunity presents itself.




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