Hailing the Cabinet's approval of real estate regulatory bill , realtors' body NAREDCO today said the proposed law will bring transparency in the sector, while helping home buyers in redressal of their grievances.
The Cabinet approved the Real Estate (Regulation and Development) Bill on Tuesday which provides for setting up a regulator for the realty sector and has provisions like a jail term of up to three years for developers who put up misleading advertisements about projects repeatedly. Builders will have to use photographs of actual site for advertisements purpose. Failure to do so will attract a penalty which may be up to 10 percent of the project cost.
Now that a real estate regulator will be set up in each state, it will become mandatory for developers under the law to get every project registered with the regulator before selling any immovable property.
For fast tracking settlement of disputes, an adjudicating officer not below joint secretary in the state will be appointed by the authority. There will also be Real Estate Appellate Tribunal that will hear appeals from orders, decisions or directions of regulator and adjudicating officer.
"It is a welcome step. We had been waiting for the same since long as it would bring buyers at ease along with transparency and respect to the sector," National Real Estate Development Council (NAREDCO) President Naveen Raheja said in a statement. The proposed law will protect the interest of all stakeholders and also help check unscrupulous players in the sector, he added.
"This now would help to establish a regulatory authority for enforcing fair practice and accountability norms and fast track dispute resolution mechanism in real estate transactions," Raheja said.
" The bill is good for the sector as it will prevent unorganised developers from entering the sector, said Pradeep Jain, chairman of Parsvnath Developers in an interview with CNBC-TV18. He, however, cautioned that the clause to keep 70 percent of buyers' fund in an escrow account cannot be uniformly implemented across India.
"Across the country this 70 percent is not going to work because somewhere the cost of construction is more, somewhere the cost of construction is less. For example in Mumbai the cost of construction is about Rs 4000-5000 a square feet and the realisation is about Rs 20000-25000 on average. In that scenario 25-30 percent is required for construction," he said.
Commenting on the bill, global realty consultant CBRE South Asia Chairman & MD Anshuman Magazine said: "Real estate regulator bill should have been more balanced (while) taking view of challenges faced by developers and consumer grievances."
"While consumers need protection, for real estate development to happen more efficiently, and in a transparent manner, administrative reforms are required urgently," he added.
The bill intends to make it mandatory for developers to launch projects only after acquiring all statutory clearances from relevant authorities. It also seeks to make it mandatory for builders to clarify the carpet area of the flat.