Real estate projects to be regulated

 

Though housing is one of the basic needs of habitants, yet the Parliament could not pass any legislation on this subject since independence, possibly because ‘Land‘, which is essential for housing, is in the State List of the Constitution of India. In the absence of any legislation in this regard, the consumers are being exploited in the hands of unscrupulous builders. However, consumer grievances were/are being redressed under the erstwhile Monopolies and Restrictive Trade Practices Act, 1969, and the Consumer Protection Act, 1986 by including Real Estate/Housing constructions within the definition of ‘Service’ under the respective Central legislations. Taking a cue from the above, perhaps the Central Government has now exercised its powers under the Concurrent List of the Constitution of India dealing with ‘contractual obligation and transfer of property‘.

In order to enact a law on this subject, the Real Estate (Regulation and Development) Bill, 2009 was presented in the Parliament after which it underwent numerous changes. Finally, the Real Estate (Regulation and Development) Bill, 2013 (said Bill) was presented to the Parliament and was referred to the ‘Standing Committee’ which suggested over 100 amendments. Thereafter, the said Bill was re-introduced in the Parliament and was further referred to the ‘Select Committee’ on May 06, 2015 which has submitted its Report on July 30, 2015. The Report suggests that the regulation of the real estate industry will not only protect buyers’ interests, it will also ensure growth of the sector through better flow of finances from Foreign Direct Investment and Indian financial institutions.

The Report recommends the mandatory registration of the projects where the plot size is 500 square meters or the number of apartments is 8, instead of plot size of 1000 square meters or 12 apartments as per the said Bill. However, the dissenting view suggests that it will exclude the bulk of urban middle and lower class home buyers from the protection of the said Bill and therefore, in the interest of the public at large, there should be no minimum size for plot nor should there be a minimum number of apartments in the project, keeping in view the lower strata of our society.

The Report also recommends that 50% of the project cost shall be kept in escrow account which shall only be used for the purpose of construction, whereas the Bill suggested that such percentage should be 70%.

The Report further recommends that for effective dispute resolution mechanism, state-level Real Estate Regulatory Authorities (RERA) and quasi-judicial Appellate Tribunal shall be empowered to impose penalty up to 10% of the project cost and/or imprisonment for a term up to 3 years and in order to ensure transparency, the builder shall disclose the status of all his projects over the last 5 years on the Regulator’s website.

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