Government eyes model realty contract

According to Union Consumer Affairs Secretary Rohit Kumar Singh, the government intends to develop a model contract for real estate transactions that will standardise sale agreements, narrow expectation gaps, and increase transparency, allowing consumers to make informed decisions. The model contract is expected to reduce the burden on Indian consumer courts, which currently have approximately 550,000 cases pending, many of which are related to the country's real estate sector. Because the agreement between the builder and the buyer is not standardised in India, we have decided to create a model framework of engagement between the seller and the buyer, Singh said. The move aims to protect consumers who are investing their life savings in homes, particularly those that are under construction, while also reducing grey areas in the sale agreement so that fewer disputes end up in consumer courts. This model contract will be a preventive measure, not a curative measure, and it will ensure that the buyer is not duped, Singh added. The proposed template will include consumer checklists to compare against developer contracts, ensuring transparency and encouraging informed purchases. The consumer affairs ministry also advises homebuyers to carefully read the sale agreement before signing it. According to Singh, market competition may encourage developers to follow the government's template, providing additional comfort to buyers. The decision came as a result of a round table discussion in Maharashtra late last month that included central and state officials, Real Estate Regulation and Development Act (Rera) authorities, judges, and real estate developers and activists. Delayed projects are one of the most common issues that homebuyers face, as they must pay EMIs and rent while waiting for their homes to be completed. Chronic project delays caused significant loss and distress to homebuyers in previous years, according to Prashant Thakur, senior director and head of research at Anarock Group, a real estate consulting firm. “Most delayed projects were by under-capitalized smaller developers who could not complete them on time owing to the lack of funds. This issue worsened after the meltdown in the non-bank financial company (NBFC) sector in 2018 because most smaller developers depended on funds from NBFCs, Thakur said. “Over the last two-three years, largely because of this problem, demand has shifted to large, listed and well-funded developers with good records of timely project completion. The sale share of these developers, who take their commitments to their customers seriously, has increased tremendously, he said. Of the around 6,200 companies that have gone into bankruptcy under the Insolvency and Bankruptcy Code (IBC), around 21% are in the real estate sector, according to official records. The move to develop the model contract results from analyzing cases landing up in consumer courts. The department's efforts are based on the principle that consumers have a right to all relevant information in order to avoid exploitation and make informed purchasing decisions. The department is also in the process of deploying artificial intelligence to help consumers file complaints and improve their quality of life. Given the high number of consumer complaints, the Centre issued the Real Estate (Regulation and Development) Act in 2016, which paved the way for the establishment of state-level regulatory agencies to oversee both residential and commercial real estate transactions. Under this regime, the developer cannot make any changes to the plan that was sold without the buyer's written consent. Every project measuring more than 500 sq. m or more than eight apartments will have to be registered with the Rera. Also Read MoRTH extends the deadline for bids for the Jara bypass project KKR makes $250 million investment in Serentica Renewables