Strict rules govern development in the West
Builders cannot start a project until their financial status is assessed as no project once approved can be abandoned. Rates for sale of covered area have to be specified
The real estate sector is governed by strict laws and controls in developed countries as compared to India. While investigating the allegations of the Belaire Owner’s Association, the then director general of the Competition Commission of India analysed the real estate building permit procedure of some European countries and the United States. According to the report, In some places like Florida, the deposit with developers is held in escrow to be used for construction. The common conditions that have been seen in some of the countries are following:
Before any property is allowed to be placed in the market for sale, the following have to be cleared (a) Title of land has to be clear and fully paid up, (b) Building plans have to be approved by the appropriate land authorities for development and (c) the financial status of the builder has to be assessed as no project once approved can be abandoned other than on force majeur conditions.
The investigation report further says that once a developer fulfills the above three conditions, only then is he granted a license to announce the project. At the time of announcement he needs to clearly specify: (a) The rates for sale for covered area only. No super area/hidden cost can be demanded other than the set price. (b) Completion period with predetermined date for completion and handing over, (c) There can be no variation in sale price between two customers and no escalation on prices. All prices are posted on the internet and available on public domain.
While delay in delivery is a common practice in India, “No overrun of completion of projects is allowed. However, if the project is delayed for valid reasons it would entail (a) Pre-determined amount of penalties on total project to be paid to the authorities, (b) 10% interest to the customers for the period of delay which is approved, says the report.
Legal experts who deal in real estate say India has almost similar legal provi- sions but the problem comes at the implementation stage. “Development authorities are spineless about penalising the developer for their fault. Pre-launch is a criminal offence in Gurgaon. A developer can’t advertise or sell his project before he gets all the sanctions but even the well-known developers are involved in this practice. The authority is just a mute spectator,” says a senior town and country planning official in Gurgaon.
Another healthy practice that most of the developed countries have adopted is regarding withdrawal of the booking amount. The consumer can book the apartment with payment of 10% and he has three months time (can vary) to either continue or withdraw from the scheme; in case of withdrawal full amount is then returned to him without any forfeitures.