CREDAI’s New Code of Conduct
In the past there have been numerous instances of misrepresentation and concealment of essential information by developers. So, Confederation of Real Estate Developers Association of India (CREDAI) recently introduced a model ‘Code of Conduct’ (“Code”) aimed at promoting transparency between developers and buyers.
- The code stipulates that member developers sell units based on ‘carpet area’ or ‘saleable /built up area’. By defining these terms in its Code and not leaving buyers at the money of developers, CREDAI has taken a welcome step toward improving service delivery.
- At present legislations do not lay down specifications about what comprises ‘super area’, ‘built-up area’ and ‘carpet area’, nor do they lay down the terminology to be used by developers.
- ‘Carpet Area’ refers to wall-to-wall measurements of an apartment while ‘super area’ refers to the entire area of an apartment in addition to proportionate undivided interest common areas and facilities.
- The Terms ‘Carpet Area’ and ‘Saleable/built-up area’ have now been defined in the CREDAI code.
- ‘Carpet Area’ is relevant as it may have a bearing on stamp duty payable on the basis of circle rate that is generally fixed on the basis of built-up area for built-up apartments.
- If total consideration is higher than the value arrived at circle rate, then it may not have implications on stamp duty. Stamp duty on sale/conveyance deeds are calculated purely on the basis of ‘total consideration’ (total purchase money) paid by the buyer or on circle rate as the case may be.
- Besides sale price, other charges such as preferred location charges, external development charges, and infrastructure development charges, if any, are also payable depending on area. The terms ‘super area’ and ‘carpet area’ becomes relevant for this too.
- If a developer has falsified carpet area/super area and has over-charged, the buyer can either opt for an amicable settlement by accepting a refund of the monetary difference from the developer or seek legal recourse by approaching the courts.
Though a welcome development, the CREDAI Code lacks any statutory sanction or legal enforceability – it is in the form of a self regulatory system. However, the Model Real Estate (Regulation of Development) Bill proposed by the central government will promote transparency in the real estate sector. The bill like the CREDAI Code, proposes that prior to taking bookings, developers will provide details pertaining to carpet area, super area and common area.