India’s new law to protect home buyers

GREATER NOIDA: In 2010, Neena Nagpal and her husband spent their life savings on a flat outside Delhi that was never built. Now, a new law seeks to protect thousands of home buyers like her from unscrupulous property developers.

“The entire experience has been painful,” says the 54-year-old, whose husband recently died, leaving her to take care of their partially deaf son alone in a two-room house in a run-down part of the Indian capital.

From the mid-2000’s onward, millions of middle class Indians eager to own their own homes poured cash into new building projects on the outskirts of major cities as a property boom took hold across the country. Many were young workers in the burgeoning IT sector eager to break away from the traditional joint family setup. But the industry was riddled with problems and buyers were almost always the victims.

Developers could face jail sentences of up to three years and substantial fines under the new law, which took effect on May 1 and applies to ongoing as well as new projects.

State governments will be responsible for keeping tabs on developers’ progress and ensuring they stick to their plans for everything from the number and size of apartments to the construction schedule.

Buyers’ money will have to be deposited in an escrow-like account and can only be used for the property they are investing in – not to launch the developer’s next project.

If the flats are not delivered on time, the developer will have to pay the monthly interest on the buyers’ bank loans.

The Confederation of Real Estate Developers’ Associations of India, a trade body, welcomed the new law saying it had been calling for better regulation. – AFP