The Central government yesterday approved the long pending Real Estate (Regulation & Deelopment) Bill paving the way for providing the much needed transparency by seeking to regulate the hitherto largely unregulated housing sector in India.
By applying this bill on all projects over 4,000 sq mtrs in size, the bill seeks to cover all major private residential developments across the country.
As and when the Bill gets enacted, it will look to provide considerable relief to the ordinary buyer and investor, who goes through innumerable obstacles when buying a property and at times is duped by even small developers, builders and brokers.
By imposing strict regulations on the promoter, the Bill looks to ensure that construction is not only completed in a timely manner but the buyer also gets the property as per the specifications that he had been promised.
Further, by seeking to establish the Regulatory Authority and Appellate Tribunal, the bill aims to create a dispute resolution mechanism and provide a specialised forum for hearing disputes related to property matters and address the grievances of the consumer who otherwise has had recourse to either a prolonged litigation process in a court of law or consumer courts.
The bill also seeks to prevent developers from putting out misleading advertisements which make promises which are not backed by the real development on ground. They also need to clearly mention the sanctions and approvals they have obtained and cannot market the project unless the necessary approvals are in place. By making registration of the project compulsory with the Regulatory Authority, the Bill aims to provide greater transparency in project marketing and execution.
All plans, approvals need to be put up by the developer on the Regulator’s website. The developer needs to set aside 70 percent or less percentage in a separate account which shall consist of the monies collected from the allottees and this amount shall be utilised only towards the particular project and cannot be diverted. The developer is required to declare the time frame for developing the project and has to adhere to such timelines.
The Bill in its latest form has agreed to certain suggestions made by the states, such as the percentage amount of 70 percent or less being maintained in a separate account. The Bill also seeks to impose monetary penalties on the promoter with repeat offences also liable for a jail term.
The Bill works both ways. While it aims to hold the developers accountable, it also looks to ensure that the allottees do not default in making payments. Thus, by providing penalties for both the promoters and the allottees, the Bill seeks to ensure that non-compliance is minimal. On enactment, the Bill seeks to ensure that real estate transactions are carried out in a just and equitable manner.
The category of real estate brokers has also been brought under the ambit of this Bill by making their registration mandatory when the promoter provides the project details to the Authority.
The Bill also seeks to define the carpet area which shall be a standard definition across the country.
The Bill also seeks to provide model agreement to sell under which the promoter is liable to furnish the necessary project details to the allottee while also becoming responsible for providing project level details as demanded by the buyer.
The Bill will establish a central Appellate Tribunal with the individual states responsible for setting up the Regulatory Authority at the state level.
Though the Bill will turn out to be a boon for the property purchasers and the consumers, it has received a lot of criticism from developers for not being inclusive in its approach towards them. The Bill in its current form does not provide for any relief to them in terms of getting through the cumbersome approvals and permissions process in any expeditious manner.
It has been a constant complaint by developers in India that they experience long and inordinate delays besides the difficulty in obtaining approvals for construction from the multi-headed Government agencies, and they have stressed on the need for a single-window clearance to cut through the red tape. This issue does not find any mention in the Bill.
Also, though the list of disclosures to be furnished by the Promoter is fairly exhaustive, it could still be benchmarked against the best practices of the developed markets so as to bring the real estate markets in India in more conformity with such markets where regulations have been existing for some time with relevant lessons to be learnt from their experiences.
The Bill has received the Cabinet Approval and could either be brought in by passing an Ordinance, while Parliament and other parties could insist on a discussion in the legislature and then putting the Bill to vote. It then requires the signature of the President. The road to becoming an Act is still being paved.