A delayed passage of Real Estate bill can be improvised further to make it more functional
The clearance of the Bill in this last session would have heralded a happy opening in 2016 for the real estate community as well as consumers
Alas, the winter session of Parliament has ended for the year 2015 without the passage of the Real Estate (Regulation and Development) Bill 2015. The bill held the key to transform the entire real estate ecosystem. The clearance of the Bill in this last session would have heralded a happy opening in 2016 for the real estate community as well as consumers with a promise of timely delivery and ease of transaction.
All the hue and cry by the builders about government authorities not giving approvals on time may perhaps be true for this is a live example of one more delay- with a possibility of a major push back to the revival process of the sector for a longer period.
Government’s other massive plans to revive the sector, among them, the “Housing for All by 2022” demands providing 2 crore homes within 7 years, and to achieve the target, quick and consistent on-ground action is required. Besides, other initiatives like Smart Cities and AMRUT plans are also dependent on a regulatory body to carry out the desired implementation.
The current Bill that was revised with 20 amendments is proposed basically to buffer the system through a slew of measures to bring in the much needed transparency in procedures, efficiency in functioning and accountability of all stakeholders.
However, the Bill has attracted dissenting voices on the following grounds:
The harshness in the Bill
One amendment that has drawn flak among the builder community is to make it mandatory for developers to deposit 70% of the cash collected from buyers into an escrow account (within 15 days) so that the builders do not face a project completion hassle through a lack of funds issue.
For many small and mid-size developers, keeping the money in the escrow account will be a pain as finance has always been a major deterrent for them.
“They have included under-construction projects also. It is a nightmare. Also, escrow money limit has increased from 50% to 70%. This will lock the cash of the builders," rued Irfan Razack, chairman of Confederation of Real Estate Developers Association of India.
Now that the Parliament has more time to scrutinise the bill, this aspect of the bill will be heavily debated upon as the builder community has expressed its unhappiness over this clause.
The major bone of contention- Govt authorities with no accountability
One anomaly in the Bill, developers are crying about is that it has laid out harsh punishment for them as defaulters, but has left the whole clout of sanctioning authorities totally unaccountable. Developers fear that many a times delay in civic approvals can lead to a situation where timelines get missed.
“We wish the sanctioning authorities in the estate were included in the real estate bill because without bringing them on board delays would continue in the implementation of projects. And we wish the project escrow account should have been at a lower realistic level as per actuals,” pointed out Navin Raheja, Chairman, Naredco Advisory Council and real estate committee, FICCI and MD, Raheja Developers.
Also, the revised bill increases the jail term for builders in case of structural defects, if the builders are found liable for violation of norms, they could be imprisoned for five years now, instead of two years as stipulated earlier. The term of imprisonment for property brokers and buyers could be up to one year.
This aspect too, may require deep thinking by the promoters of the bill for in no way can the authorities be unaccountable.
One can see that a major role will be played by the government authorities in the near future, to plug in the loophole in the real estate construction and transaction business. With the amended bill seeking to set up Real Estate Regulatory Authority in states and union territories, their role takes on an all-important stature. To ensure transparency, the officials will have to see that the developer complies with the stipulated rules.
Faster approvals-the only way forward
The government authorities will now have to get rid of their laid-back attitude, of which they are often labelled with, and would need to prepare to get into their respective roles to kick-start real estate, as and when the Bill clears up.
They would need to get doubly active as their purview of regulations would increase with the inclusion of 500 sq metre projects or eight apartments under the law, from the earlier 1,000 sq m projects and above.
By bringing commercial real estate under its regulatory ambit, the bill takes into account the quantum of growth expected in this segment in future, and at the same time, increases the workload of its officials.
Perhaps the most noteworthy inclusion in the bill which will be the yardstick of government efficiency is the establishment of fast track dispute resolution mechanisms for settlement of disputes through adjudicating officers and Appellate Tribunal. Allowing consumer courts to take up real estate issues would essentially mean quick disposal of cases and lower litigation costs for the buyers. The appellate tribunals and regulatory authorities will now have to deliver judgement in 60 days as against 90 days proposed earlier.
Also, the revision in the bill proposes shorter adherence timelines. For the regulatory authorities it spells out faster action as their task will now be to make regulations within three months of its formation as against six months earlier proposed. As for states, the authorities will now have to make rules within six months of notification of the proposed Act as against one year earlier proposed.
Clearly, the Bill in its amended form intends to promote growth of the sector in a systematic manner. Hopefully, the delay will lead to further improvisation of the bill to make it more functional. Well, whenever the bill becomes an Act with modifications, its true strength will rest upon how well it is implemented by the respective authorities.