RESIDENTIAL BUILDER FINANCE WITH BUYER GUARANTEE (RBBG) SCHEME
Context: State Bank of India (SBI), the country’s largest public sector bank, has announced a ‘residential builder finance with buyer guarantee’ (RBBG) scheme to give a push to residential sales and improve homebuyers’ confidence.
Key features of the Scheme As part of the scheme, the SBI will issue a guarantee for completion of select residential projects to customers who have availed home loans from it. The scheme will focus on affordable housing projects priced up to 2.50 crore rupees in 10 cities initially. Under the scheme, the guarantee would be given by the bank till the project gets the occupation certificate (OC). The guarantee will be available for RERA registered projects and a project will be considered stuck after it crosses the RERA deadline. Under this product, reputed builders who fulfill the prescribed criteria, including Star rating and CIBIL score, can avail loan between Rs 50 crore to Rs 400 crore. About RERA Act, 2016 Real Estate (Regulation and Development) Act (RERA) is an act passed by the Parliament in 2016 that came into effect fully from 1st May, 2017. The Act basically seeks to protect home-buyers as well as help boost investments in the real estate sector by bringing efficiency and transparency in the sale/purchase of real estate. It establishes Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution. Key Provisions of Real Estate Regulation Act
- Establishment of state level regulatory authorities- Real Estate Regulatory Authority (RERA): The Act provides for State governments to establish more than one regulatory authority with the following mandate:
- Register and maintain a database of real estate projects; publish it on its website for public viewing,
- Protection of interest of promoters, buyers and real estate agents
- Development of sustainable and affordable housing,
- Render advice to the government and ensure compliance with its Regulations and the Act.
- Establishment of Real Estate Appellate Tribunal- Decisions of RERAs can be appealed in these tribunals.
- Mandatory Registration: All projects with plot size of minimum 500 sq.mt or eight apartments need to be registered with Regulatory Authorities.
- Deposits: Depositing 70% of the funds collected from buyers in a separate escrow bank account for construction of that project only.
- Liability: Developer’s liability to repair structural defects for five years.
- Penal interest in case of default: Both promoter and buyer are liable to pay an equal rate of interest in case of any default from either side.
- Cap on Advance Payments: A promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale.
- Defines Carpet Area as net usable floor area of flat. Buyers will be charged for the carpet area and not super built-up area.
- Punishment: Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.