Standardized property agreements are a good idea, but some disadvantages remain

However, legal disputes over agreements should be settled by the Real Estate Appellate Tribunal set up under the Real Estate (Regulation and Development) Act of 2016, instead of consumer courts, even though there is a similar buyer-seller agreement scheme in real estate Consumer Affairs Launched by the Ministry of This is because fracturing the judicial process will only lead to further delay.

For all but the tiniest fraction of Indians, saving for a home is the most important financial decision of all. However, for some people the dream of owning a home can turn into a nightmare through no fault of their own. They may pay all their dues and still fail to get possession of their home due to defaults on the part of the builder.

To reduce the chances of such defaults, the government has set up the Real Estate Regulation Authority (RERA). The process of creating such an institution was initiated in 2013, in the last months of the UPA government. It was enacted in 2016 and its rules and sections were notified in 2017. RERA calls for disputes raised to the Real Estate Appellate Tribunal to be disposed of within 60 days – the deadline of 90 days in the original draft was changed at the suggestion of the authority. Parliamentary Committee.

The real estate authority in each state is already empowered to settle disputes between builders and home buyers. Nevertheless, having a standardized agreement will facilitate dispute settlement and speed up resolution.

Amidst all these positives, we must also understand that homebuyers still face potential pitfalls. One of these is the ambiguous title. Land records are chaotic in most states, even those where the records have been computerized. A person can prepare a will bequeathing his listed assets to a chosen heir, proceed to sell some of the listed assets during his lifetime, and die without changing the will. This can lead to a legal dispute between the buyer of the property and his successor.

If a person dies intestate (without making a will), and one of the heirs can sell the inherited property to the other heir only to dispute the sale, the buyer has to fight a long legal battle. If that buyer is a builder, his clients are automatically drawn into litigation. Such problems can be avoided by adopting modern system of land registration. In such a system, called Torrens title, the name of the owner of each piece of land is recorded directly in a government-maintained land registry, and ownership depends on who is named, rather than through any title chain.

Another source of risk for homebuyers is financial indiscipline of the developer. If the builder has a diversified business, and indiscretion or bad luck forces parts of the business to go bankrupt, money owed by the bankrupt part of the business can pull the solvent real estate portion into bankruptcy proceedings, or the builder may find themselves without the resources to complete the promised project. While RERA can try to impose penalties on the builder for delays and deviations from the contract, it is of little use if the builder becomes insolvent.

The solution could be to transplant the holding-company structure in the real-estate sector, which the RBI mandates for diversified financial firms, to protect banks from a possible failure of another financial firm owned by the group. A non-operative financial holding company may own the real estate branch, thus separating it from other parts of the conglomerate.