NEW DELHI:The upper house of the Indian parliament today passed the Real Estate (Regulation and Development) Bill that empowers home buyers in making an informed choice about buying home, ensures timely delivery, and provides swift options for legal recourse in case a developer fails to deliver on his promises.
The bill bars developers from advertising and selling homes in projects till they have obtained all approvals from local authorities and they are registered with the regulatory authorities that will be set up in every state, alongside appellate tribunals for dispute resolution. Even ongoing projects, over 17,000 of them, will have to register with the authority.
At the time of the registration, the developer will have to disclose all project information including details of promoter, project plans, including implementation schedule, land status, layout plan, status of approvals, agreements, details of real estate agents, among many others, empowering buyers.
It also mandates that builders deposit 70% of money collected from buyers into a separate escrow account that will be utilized only for construction and payment for land, ensuring that money collected is not diverted to other projects or uses as has been the case with many builders in the past.
According to data from property research firm Liases Foras, a third of more than 25 lakh apartments launched between 2008 and 2014 were delayed by at least a year. The delays have led to several home buyers agitating against builders over the last few years.
So far most developers measured and sold homes based on a term called super area, which is conventionally at least 30% more than the carpet area that a buyer can use. Now the term carpet area has been clearly defined to eliminate any scope for malpractices in transactions.
The bill brings parity on that front saying both consumers and developers will now have to pay same interest rate for any delays on their part. The builder buyer contracts so far have been grossly one-sided in many cases, asking buyers to pay much higher rate of interest for any delays on their part but allowed the builder to pay a very small amount.
Urban development minister Venkaiah Naidu said in the Rajya Sabha that the telecom sector which has only a handful of operators has a regulator today and the real estate sector with over 76,000 companies needs one immediately.
“The consumer should be king here too” he said.
He pointed out that the demand for infrastructure status to the industry can only be taken up when a regulatory mechanism is in place.
After the smooth passage in the Rajya Sabha, the bill is expected to be listed in the Lok Sabha on Monday and is likely to be cleared without much opposition as the government enjoys a comfortable majority there. Rahul Gandhi, vice president of the principal opposition Congress had assured home buyers earlier in the week that his party would support the bill.
The amended bill has also increased the liability of developers for structural defects from a period of two years to five and project plans can only be changed with consent from at least two thirds of the allottees.
Rajeev Talwar, CEO of DLF said setting up of the Real Estate Regulatory Authority will usher in much needed transparency and pave the way for implementation of standard practices across the sector.
He pointed out that the bill does not touch the issue of single window clearance for approvals
“It also needs to hold local bodies / authorities, banks, contractors, financial institutions accountable and we hope they will come under its ambit in future”, he said.
One clause that would help both buyers and builders is insurance of land title, which is currently not available in the market.
Specific and reduced time frames have been prescribed for disposal of complaints by the Appellate Tribunals and Regulatory Authorities. While regulatory authorities will have to dispose complaintswithin 60 days, tribunals too will have to adjudicate casesin 60 daysas opposed to 90 days in the earlier form of the bill.
There is also a provision for imprisonment of up to 3 years for developers and up to one year in case of real estate agents and consumers as well for any violation of orders of tribunals and regulatory authorities.
Real Estate industry body Confederation of Real Estate Developers’ Associations of India (CREDAI) welcomed the bill but said bringing ongoing projects under the legislation would mean stopping work and ensuring compliance of ongoing projects with the new legislation.
“This is not only time consuming but also poses insurmountable difficulties in determining the nature and scope of regulation for ongoing projects. If a project has already been sold to the extent of 50% and construction is underway, it is practically impossible to make 50% of the project compliant with the Act. On the other hand, making the project fully compliant would be absurdly inconvenient and prohibitively expensive,” it said.
Sanjay Dutt, managing director, India at property advisory firm Cushman & Wakefield said the Bill aims to bring in transparency in the real estate sector, thereby, encouraging investments from foreign and domestic financial institutions and protecting the interest of the home buyers.
Credits ET Realty