Customer woes in real estate sector are unlikely to get addressed soon. The delay in setting up a regulatory authority to regulate, control and promote construction of residential and commercial properties is causing heartburns for customers. However, the good news is that the fresh changes that are being introduced in the bill now will nail all errant builders. The government has brought in harsh penalties on promoters to ensure fair play in the market.
The much-talked about Real Estate Bill drafted by the union housing and urban poverty alleviation ministry, and that was originally scheduled to be introduced during the recently-concluded session, is still hanging fire, thanks to stiff opposition from various quarters. The ministry held a fresh round of consultations with all the states last month to try and get them on board. It had set May 18 as the deadline for states to send in their comments on the draft bill. However, many states have opposed the bill while a few others have yet to respond. The original Model Real Estate bill has now been modified into the new Real Estate Regulation bill.
The confederation of real estate developers’ associations of India (Credai), the representative body of realty developers in the country, had put up its views and comments on the same responding to requests from the concerned ministry. The ministry was reportedly evaluating all these comments and the revised draft may be presented in the next session of parliament. The bill may be tabled before the union cabinet shortly.
Anuj Puri, chairman and country head, Jones Lang LaSalle India, told FC Build that it is time to bring Indian real estate up to higher standards. “In the corporate sector, tried and tested best practices in governance are already being applied in India,” he says, adding that the real estate sector is among a few that have not raised the bar yet.
“The bill proposes to establish a regulatory authority and appellate tribunal to regulate, control and promote real estate construction, keeping in view the interest of the buyer and to enable smooth and speedy construction. All properties being developed on land greater than 1,000 sq m or have a proposed number of residential units greater than four are supposed to come under the purview of this act and would need to be registered with the regulatory authority. All details regarding the property would be maintained on a website, and the promoter of the project would be responsible for recording and entering the project details within a stipulated timeframe. Such a system would definitely get Indian real estate closer to the global benchmark of transparency,” says Puri.
But what were the main objections then? The major objection of the states was that they claimed that the bill infringes on federal structure and that land was a state subject and the central government does not have the mandate to legislate on the issue. Hence the government has incorporated a provision in the draft bill stating that they could have their own regulatory authority – if they wish.
According to Naushad Panjwani, executive director, Knight Frank (India), this is the first such bill at the central level which will directly regulate the real estate sector and adjudicate any dispute between the buyer, promoter and the government authority. “The bill, in its new avatar, attempts to overcome the shortcomings of the existing system in the real estate market where buyer’s interest is frequently ignored by the promoter as well as the government. The bill tries to identify these problem areas and fix time bound responsibility on the promoters to disclose certain necessary information regarding their projects in order to bring in greater level of transparency. Promoters will be required to seek registration of their projects from the regulator before advertising, booking or taking any advance from buyers,” says Panjwani.
That’s not all. For registration purpose, promoters will have to submit a declaration stating that the legal title of the land is in their name and the project will be completed within the stipulated time. Additionally, 70 per cent of the amount realised for the project will have to be deposited in a separate bank account, which will be used specifically for the purpose of meeting the costs of the project. Post registration of the project, details such as layout plan, sanctions received, proforma of agreement, carpet area of each unit, list of bookings and development work will have to be updated on the regulator’s website. These provisions will ensure that transparency is maintained at every step of the project and buyers are not shortchanged in any way.
The bill aims to protect buyer’s interest even after possession is granted. “The promoters will be responsible to repair any structural defects in the project within a period of one year from possession. In addition to this, they will be required to take all necessary steps to execute a registered conveyance deed in favour of the allottee. The recent cases of home buyers being cheated or receiving deficient service from developers has prompted the government to include harsh penalties on promoters to deter them from committing such acts,” says Panjwani.
Home buyers have reasons to be happy and relieved as under the proposed new bill, if any promoter willfully fails to register their project with the regulator, he can be punished with imprisonment of up to three years or a penalty up to 10 per cent of the estimated cost of the project. For any other violation, the penalty can go up to 5 per cent of the estimated cost of the project.
However, the bill is silent on the wrong doings, if any, committed by a sanctioning or government authority. Punishment of up to three years seems too harsh for such an offence and, at present, no other regulator imposes such a severe penalty for similar offence. From the legal perspective, the eeal estate regulatory authority will have the same powers as are vested in a civil court.
“The bill seems to focus more on regulation of the real estate sector rather than development, which is the need of the hour. The developer community fears that this bill will manage to add one more layer of red-tapes to the already existing plethora of permissions or approvals that they have to obtain,” says Panjwani.
Kalpesh Shah, past president of AREA Group and president-elect, NAR India, an association of realtors, also has some reservations. “I think we need to re-visit the bill, and understand its title in entirety: It is the bill relating to the real estate (regulation & development) Act. So, it is not just about regulation, but also about development. Any regulation, if observed properly, helps industry grow and develop in the best manner. The RERA Act, I am sure, will bring about greater transparency in the real estate business, and needs to be viewed in a positive manner,” Shah told FCBuild.
Largely, Credai’s point was that the bill provided for penalties on developers, for example, in the event of delayed possession – even if the delay was caused by factors beyond the control of the developers. “I would think the new amended draft would keep such aspects in mind,” hopes Shah.
Real estate customers hope that the opposition and delays won’t throttle the bill. Everyone believes that the bill will help the sector come up with transparent business practices that can be globally benchmarked.
Puri believes that the bill will pave the way for a more transparent and attractive real estate market. “Our collective job is to find and enforce ways in which the government and developers reach a clear understanding of what constitutes fair business practices, and what does not. As more refined and focused regulations are brought into play by the government, it is to be hoped that the real estate community clearly sees the chain of cause and effect. The ultimate goal of the sector is and must be a cleaner, more transparent and more attractive real estate market place. All this is happening because we really have no choice. Indian real estate has to globalise, or we will have serious problems with international capital inflows and general opportunity leveraging in the coming years,” he adds.
India can’t afford to delay the bill, any more.
Source:wrd.mydigitalfc.com
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