The cabinet cleared the Real Estate regulatory Bill 2015 on the December 9th with retrospective effect. Now the builders need to maintain 70 percent of the sale proceeds of the project in the escrow account with retrospective effect. The bill also includes the projects that are under construction. This has made the developers and the builders more worried. Earlier according to the proposed bill the amount to be deposited in the escrow account was 50 percent of the sale proceeds but now under the passed bill by the cabinet the limit has been increased to 70 percent. The developers feel this will essentially block the cash and limit the cash flow in the business.

The experts opine that the realtors will be forced to increase the cost of the flats and apartments in order to pass this higher cost of capital and the lack of cash flow that they will have to manage by levying a higher price. Thus evidently the builders will price the apartments high and the consumers will have to pay more for the same property than earlier. The developers claim that this will not protect the common consumers and instead will end up in escalating the product prices.

Know On : Legalities-Of-A-Sale-Deed

Among the other amendments of the bill the promoters and the builders can be imprisoned for a term up to three years and the agents and the buyers will be prisoned for a term of up to one year. There are monetary penalties too that they are penalized with in contravention of the rules or the orders of the appellate tribunal. However the realtors are more concerned about the money that is to be deposited and maintained in the escrow account for projects under construction as the bill proposes retrospective effect.

A large section of the developers and the builders state that they were prepared for setting aside 50 percent of the sale proceeds in the escrow account but this sudden increase of the additional 20 percent is a concern for them.  They think that big and large sized developers can still manage but it will be very arduous for the small scale developers to maintain this account and go by the regulations.  But the experts opine that there is no reason for the builders to be too concerned about the new provisions in the law.  They opined that currently they may feel the pinch as the law states with retrospective effect but in the long run all will be well. It will rather be a win-win situation as the developers will anyway divert their attention for the completion of the projects which the provisions of the law help.  But a section of the builders feel that the developers having projects under construction will be under more pressure to manage the finances.

On the other hand considerable number of experts feel that the law becoming stringent, the best of the developers and builders will be singled out by the market for their quality and the timely completion of the projects which will bring goodwill for them in the market. Later on the market will have to adjust with these forces and this will ensure that the majority of the developers will favour the common consumers who are in most cases exploited now by most of the developers in some way or the other. This will also create a positive consumer grievance redressal procedure and this mechanism so set out will help the consumers at the end.

7 Responses

  1. Praveen

    With this decision Government putting pressure on builder to complete quickly. And it will be helps to increase the customer confidence on real estate.

  2. Chandru

    It is really a good step of Govt. to pressurize the builders to complete the project within a time. Now onwards, customers can be happy with this new bill and no need worry about the delay in completion of the project. If the delay in the construction Govt. will take an action against the builder.

  3. Vinodh

    It is a good decision by the Govt. in favor of consumers and pressurizes the builder to timely completion of the project. This will helps the consumer to get their homes within a committed time without any delay.

  4. nilesh

    I think its good move by government. This will pressurise builders to complete the project on or before the time so that whatever profit he will get from it he can invest somewhere else. Good for buyers.

    • Mahesh

      Yah you are right, This is a right step from the government. It will useful for us to know more details to buy flats.

  5. Muni Krishna

    The value of the property is based on the decisions taken by the Government. Recently the govt. raised the Escrow limit, it effects on the property value. You mentioned clearly in this article.

  6. Muni

    This is a nice article to know more latest updates regarding Realtors and real estate marketing. Keep posting more articles relating to real estate.


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