Typically if you have booked a flat from a builder, and you are somewhat negligent in making your payments, there are stiff penalties with interest rates of upto 8-12%. The Government is proposing to put a check on these high penalties, and if any real estate developer violates these checks, then they can be penalized. While giving joy to normal people, this has the read estate business up in arms, trying to prevent such a thing from coming to pass. So, what is the plan ?
The government has introduced a clause in the Real Estate Management & Regulation Bill under which penalties have been capped at 1% of the value of a house. Penalties are charged as interest on the defaulted payment. Industry sources say developers charge interest at rates as high as 8-12% in the absence of any regulation.
Developers admit customers have had to pay steep penalties on defaults. “The insertion of the penalty clause in the lease deed is to make sure customers pay installments well in time. In most cases, the whole money is paid without any delay. Thus, there is no need for penalty,” Parsvnath MD Pradeep Jain said.
The real estate regulator would be first set up in Delhi. Other state governments would be free to decide whether to adopt the model, since property is a state subject. “It would be mandatory for Delhi, and other states would subsequently be asked to adopt the model law to regulate real estate in their respective cities. The Maharashtra government is already setting up a real estate regulator,” a senior government official said.