Rohit Joshi & Ajay Vaishnav / ZRG
Bringing much needed relief and cheers primarily to the ordinary house buyers in the country, the Union Cabinet approved the long pending Real Estate (Regulation & Development) Bill on Tuesday. The Bill’s enactment will pave the way for institutionalising transparent processes in the housing sector, which hitherto remains unregulated.
The Bill would establish a regulatory authority to enforce disclosure, fair practice and accountability norms in the real estate sector. It will also provide adjudication machinery for speedy dispute redressal. It is needless to reiterate that creation of a regulator akin to other sectors such as telecom, insurance, aviation, banking et al will immensely help the common man when buying a property. The developers won’t be able to get away citing terms and conditions in the builder-buyer agreement which is invariably loaded in their favour.
Real estate majors too acknowledge that it is a win-win situation for buyers. Dinesh Gupta, COO at Ansal Properties while acknowledging positives for buyers, takes a grim view of the Bill for developers.
“The Bill in its current form puts the whole onus on developers. The Bill will create security for the buyers. However, financial sector reforms too need to be initiated by the regulator. Institutional funding mechanism needs to be available so that growth in real estate sector can also continue. It is time for us to look into Real estate investment trust and mutual funds where large scale capital can flow into the domestic realty sector,” he stressed.
Hailing the Bill as positive for all, Supertech Chairman and Managing Director R K Arora pointed that it will improve the credibility of housing sector and renew confidence of buyers.
“This is in favour of all and a positive move which has been long pending. The mandatory registration process for any new projects is in favour of customers and will bring confidence and transparency in buying or investing in any such projects and will also improve on the sector’s credibility,” he said.
The bill, however, pertains only to residential realty and keeps out of purview the commercial realty. The Bill also provides for penal action and jail term in case of non-compliance and fraudulent practices. Now, builders can’t put out misleading advertisements about projects. While failure to do so for the first time would attract a penalty which may be up to 10 per cent of the project cost, a repeat offence could land the developer in jail for a period up to three years.
Developers will have to now register all projects on plots measuring 4,000 square metres or more with a regulatory authority. Most significant step is that lakhs of unorganised property agents have also been brought under the purview of the authority. They will have to mandatorily register with the real estate regulator authority.
While the Bill’s pro-buyer approach has been lauded, experts point at its lack of inclusiveness towards problems faced by real estate developers. It doesn’t bring any relief for them in terms of getting official approvals.
“The Bill in its current form does not provide for any relief to them in terms of getting through the cumbersome approvals and permissions process in any expeditious manner,” said Anuj Puri, Chairman & Country Head at Jones Lang LaSalle India in a statement to the PTI.
The delay in the launch of projects will ultimately hit investors and buyers as well.
“The flip side is it will lead to delay in the launch of projects. The price advantage which a customer used to get with an early entry in the project may vanish,” pointed Gupta at Ansal.
Zee Research Group took the opportunity to highlight salient features of the Bill with an aim to improve our reader’s understanding.
• State-wise regulators: A real estate regulator to be set up in every state as land is a state subject.
• Timely Delivery: Developers will have to keep aside 70 per cent of the buyers’ funds received for a particular project in a separate bank account (escrow account) to cover the construction cost of the project. This provision will discourage developers from diverting funds of a particular project to another and ensure timely completion of projects.
• No hidden T&Cs: It has been made mandatory for public disclosure of all project details like credential of promoters, lay out plan, land status, carpet area and number of apartments booked and status of statutory approvals.
• Transparency: Developers will be able to sell property only after getting all necessary clearances from relevant authorities. This means developers cannot offer any pre-launch sales without the regulatory approvals.
• Clarity: The Bill makes it mandatory for builders to define carpet area of the house. Private developers will not be allowed to sell flats on the basis of ambiguous ‘super area’.
-- With inputs from agencies