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The second draft by the Ministry of Urban Development and Construction for real estate development and transaction indicates that renewal of real estate developers business license will depend on how well they perform according to their original schedule.
The draft proclamation that was tabled for discussion with the relevant stakeholders reveals that the real estate development license that will be given to the developer shall serve only for the time frame until a specific project is completed according to the scheduled by the developer.
Moreover it is indicated that the “urban/ regional administration may, where it finds sufficient reason, can renew the license for an additional year upon the request of the developer”.
The law also does not allow real estate developers to make announcements about their construction works through the mass media, or through any other activities nor does it allow them to register clients and collect down payments before receiving title deed of the land that is to be used for building houses from the appropriate body. In addition to that, the developers will not be able to register clients beyond the accommodating capacity of the land they obtained lawfully. The draft proclamation that is hailed by the general public as it protects clients further states “The extension of the time limit for the delivery may not under any circumstance be extend for more than 50% of the time limit stipulated in the contract.”
The proclamation further states that the party requesting for an extension will be liable for damages sustained on the other party.
Previously when real estate projects were delayed, that happens mostly by the failure of the developers, the amount that customers expected to pay will be raised from the original price.
The proclamation further indicates that any contract of sale made between a real estate developer and clients for the construction and delivery of houses will have to be submitted and authenticated by the appropriate government entity, which is not applied currently.
According to the drafted proclamation it will also be a requirement for the real estate developer to provide genuine copies of title deed issued by the appropriate and authorised government entity, a building permit and the real estate development license along with the contract signed with the client.
The draft proclamation that is expected to be approved before the end of this budget year indicates that all real estate developers shall hold license in accordance with the proclamation by having their project registered within one year from the publication of the proclamation in the Negarit Gazette provided that the developers have already been engaged in development activities before the proclamation is implemented.
“Each project shall be registered and obtain license independently where such project is carried out in phases and at different places,” the proclamation further states.
The proclamation also gave hints about public private partnership in relation with housing development projects which is an issue raised by developers on different occasions. Public private partnership in relation with housing development projects has been highly recommended by experts for narrowing the big housing demand. “Areas about a real estate development carried out through public-private-partnership shall be specified by regulation issued by the Council of Ministers,” part three of the draft proclamation article six indicates.
The good news for real estate developers that is included in the draft proclamation is the stated maximum period to transfer land from the appropriate authorities for development. It indicated that the relevant governmental body shall hand over the land within 30 days from the date of the first payment after such land requested by the real estate developer is permitted to upon fulfilling the necessary requirements.
According to the new law, the real estate developer has a responsibility to notify the time schedule set for the respective phases of the construction.
The other significant article added on the draft proclamation is that the real estate developer shall give legitimate receipt or a warranty approved by bank guarantee against any payment effected by the client.
The other area noted on the draft is the percentage of apartments and villas that have to be built on one real estate development area.
The proclamation also indicates that apartments shall be 60 percent of the total project and the rest 40 percent for villa houses.
Finally the draft proclamation stated about the formation of real estate executive desk, which will be established by the government, to control the sector closely in every areas.