Published : Thursday, 14 May, 2015 04:20 PM
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Real Estate Bill & It’s Impact on Consumers
In order to regulate the real estate business, the Real Estate (Regulation and Development) Bill, 2013 was first introduced by United Progressive Alliance (UPA) government in 2013. On April 7, 2015, the union cabinet of current National Democratic Alliance (NDA) government approved the bill with some amendments for its introduction in the parliament. However, it could not be introduced into the parliament as the opposition and government could not reach an agreement over the provisions of the bill.
Salient Features of the Bill –
- The Bill is meant to regulate the transactions between buyers and promoters of residential real estate projects. It establishes regulatory authorities called Real Estate Regulatory Authorities (RERAs) in every state.
- Residential real estate projects, with some exceptions, need to be registered with RERAs. Promoters and real estate agents cannot book or offer these projects for sale without registering them.
- Promoter must upload every details of the project on the website of the RERA after the registration..
- 70% of the amount collected from buyers for a project must be maintained in a separate bank account and must only be used for construction of that project. The state government can alter this amount to less than 70%.
- Bill also establishes state level tribunals called Real Estate Appellate Tribunals. One can appeal in these tribunals against the orders of the RERAs.
- Regulator will have to decide cases within 60 days.
Amendments to the Bill
The current NDA government made following amendments to the bill –
- The amendment made it mandatory for all developers, including of housing projects, to keep minimum 50 percent of funds collected from buyers in an escrow account to meet construction cost. In original bill, it was 70 percent.
- Applicability of the Bill is extended to commercial real estate also.
- On-going projects that have not received Completion Certificates have also been brought under the purview of the Bill and such projects will need to be registered with a proposed regulator within 3 months.
- Promoters will not be allowed to change plans and structural designs without the consent of two-third consumers of a project.
- Real estate agents also have been made punishable for non-compliance of orders of regulatory authority.
- States have to make rules in this regard within one year.
The proposed law is expected to give a boost to the 'Housing for All by 2022' mission by enabling increased flow of investments through enhanced transparency, accountability and standardization. Though many states consider the act as an infringement over their rights as ‘land’ is a state subject, the primary objective of the act is transfer of property which is a subject in Concurrent List in the Seventh Schedule of the constitution. Both centre and state can legislate over the subjects of the concurrent list. Some major changes which real estate may see by virtue of the act are as under –
- A Uniform regulatory mechanism across the country is aimed at protecting property buyers' interest by bringing in much-needed transparency and accountability into the sector. The promoters will be required to disclose all information of the project, completion time frame, layout plan, land status, status of statutory approvals etc. This leaves very little room for hiding hard facts.
- By virtue of transparency, it would be tough for the people, who had amassed wealth from illegal activities, to park their illegal money in real estate. Once the black money is flushed out of the real estate market, prices are bound to reduce.
- Most analysts feel that provision of setting aside 50 percent of the amount realized from the buyers in a separate account would help in bringing additional investment into the sector. Thus, an era of high growth for the real estate sector is predicted by many players.
- Many property related disputes are in the court of law for several years waiting for the decision. Since the RERAs had to decide on the property related disputes within 60 days, many under-construction stalled projects could see the light of day
- Also, it would safeguard the buyers who face regular delays in the transfer of projects due to the laidback attitude of the developers. Between 2011-14, the average delay in delivering projects across the National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) was reported to be 30 months and 20 months respectively. The Regulator will cancel registration in case developer misses the project completion deadline and buyers will have to be adequately compensated.
- Often, the buyers are charged for super area which includes common areas while buyers have their individual rights over carpet area only. The bill now mandates that the carpet area of the flats be disclosed and homes cannot be sold on super area.
- Another sigh of relief for the buyers is that now the developer cannot make changes to original plans or the structural design, unless he gets the consent of two-third of the customers.
- The developer community too is happy with uniformity and transparency in the real estate sector; however, they feel that few provisions would open the window for the corruption. They are also against the retrospective applications of provisions to the under-construction projects.
The Indian real estate sector is going through the downturn right now mainly because of the fraudulent practices by majority of developers and their nexus with the state authorities in which the only stakeholder who suffers is the buyer. Involvement of black money into the real estate had also increased the price manifold making it out of the reach of the common buyers. In this backdrop, the real estate bill is coming at the right time which would not only safeguard the interests of the buyers but would also help in wiping out the corruption from the sector.
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