Realty regulator finally becomes a reality
The much-awaited legislation is aimed at protecting the interest of the home buyers and bring in transparency to the system
+In what could finally turn out to become a reality for the existing and future homebuyers of India, both the houses of Parliament recently gave a green signal to the much-awaited Real Estate (Regulation and Development) Bill, 2013. The stage is now all set with the ball in President Pranab Mukherjee’s court to put a final stamp on the Bill to convert it into an act. The development, which had been long overdue for political reasons, is itself extremely important for all; buyers, developers and the realty sector as well which has been reeling under the heavy burden of misconduct for a long time.
The Bill, which aims at protecting the interest of the buyers and bring in transparency to the system, has been waiting in the wings for the nearly 10 years. Strange though it may sound, but India’s Rs 12 lakh crore real estate sector was a largely unregulated sector till date and would only now get a regulator as a result of the Bill. The legislation even though not full proof would guard the home buyers from any unscrupulous activity of builders and would bring in the much-needed confidence and investment in the real estate in India.
As per the proposed law, each state will get a real estate regulator who will help in settlement and imposition of compensation. All residential and commercial projects will have to compulsorily be registered with the regulator so that buyers can have access to valid projects. Even the ongoing projects that have not received the completion certificate will be covered under the bill. Without a prior registration with the real estate authority, developers cannot advertise or launch projects. Besides, the developers will have to sell property on the basis of carpet area and not super area.
In order to ensure transparency about the projects, the developers will have to disclose layout plans, submit clearances and name the associates, architect, contractor and others with the regulator. For timely completion of the projects, promoters will have to deposit 70 per cent of the amounts released from the buyers in a separate bank account within 15 days, for construction purposes. Consent of two-third buyers will be required to alter plans, structural designs and specifications of the building. In this case, each buyer, no matter how many properties they hold in one project, will be counted as one vote only. Developers will be responsible to rectify structural defects and refund money in cases of default.
In order to save buyers from any sort of dupery, the brokers will also have to be registered with the real estate regulator; non-compliance of which will be punishable. Importantly, the developers will have to deliver projects on the promised date mentioned by them. In case of failure of timely delivery of projects, the buyers can claim refund with interest and compensation. In cases of violation of rules by the developers, projects will be de-registered and attract heavy penalties. Non-compliance will invite fine up to 10 per cent of project cost and misinformation will cause a fine of 5 per cent of project cost. Meanwhile, the fine for the agents is Rs 10,000 for each day during the tenure of violation of provisions. The loss in taxable income caused by builders asking the buyers to pay certain amount in cash will now be curbed, thus eradicating corruption. The legislation will regulate both residential and commercial projects.
Replying to debate on the Bill, Union Urban Development Minister M Venkaiah Naidu said the legislation envisages that “What you are committing, what you are promising, please fulfil. What you are promising through advertisements, please fulfil that. That is the purpose of this bill.” The minister also sought cooperation from the states for faster clearances to projects to make this Bill, which will override all state legislations, a success. “We are trying to make the beautiful advertisements given by developers in front page of newspapers dutiful. Our ultimate intension is to ensure consumer satisfaction. Once the Bill is notified, you will get more investments in the real estate sector, early clearances and property prices will come down,” Naidu stated.
The legislation, which finally saw the light of day, has been warmly welcomed by different industry bodies. While FICCI called the passing of the Real Estate Bill as a landmark step towards enhancing the credibility of realty sector by bringing in transparency and accountability in execution of projects, ASSOCHAM said it would help in resolving key issues that are hampering the growth of the real estate sector. FICCI President Harshvardhan Neotia said the passing of Bill should enable timely approval and execution of projects, which will raise the confidence of consumers and also give a huge boost to the growth of real estate sector. ASSOCHAM President Sunil Kanoria, on the other hand, felt the Bill would lead to institutional reforms in land acquisition, approval processes and taxation that are much needed to expedite development of affordable housing.
According to Kushagr Ansal, director of Ansal Housing, “The developers will now have to park 70 per cent of the amount collected from the buyers of the project in a separate bank account. Also, marketing and selling of the projects will be based on carpet area basis and not super area basis, thus justifying the amount which the buyers pay for a property.” Vikas Bhasin, MD of Saya Group, feels, “With the new amendments in place, even the existing projects will be counted in for justice. The market sentiments will now witness a huge boost and gradually the demand for housing in the country will pick up pace.”
As per Rakesh Yadav of Antriksh India, “With the President to give a final word on the Bill, there will then be a sudden filtration process which will become visible where all the dishonest players in the sector will become eradicated.” Ashok Gupta, CMD of Ajnara India, said, “It is very imperative to understand that the demand and respect of real estate sector has been moving downward for several years now attributing to the negatives pertaining in this sector such as fraud committed by several builders, possession delays and absence of a monitoring body, and this will continue if proper action is not taken. With this bill in place, every state will have a regulator who will be continuously supervising and monitoring. Moreover, the projects will now be completed on time and developers will have to submit all the layouts, plans and documents with the regulator who will ensure transparency and hence, customers will feel more secure while transacting.”
Confederation of Real Estate Developers’ Associations of India (CREDAI), on the other hand, has demanded that existing projects should not be brought under the new legislation. “Bringing ongoing projects under the legislation would mean stopping the work and ensuring the 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 project,” it said in a statement.
It may be noted that without a tough housing regulator, it is difficult to differentiate a good builder from a bad one. Such a body would therefore be bad news only for the unscrupulous ones.
The legislation comes at a time when potential purchasers are simply avoiding under-construction projects, drying up a source of interest-free funds for debt-ridden realty firms.
The Bill will also ensure that unreliable operators and land grabbers/investors are screened. As a result, there will be fewer competitive bidders vying for the limited supply of land. That will check land prices. Timely completion of projects also means there would be a steady increase in supply of homes. Timely completion of projects also means there would be a steady increase in supply of homes. All these factors will gradually bring down home prices and increase demand. That will be good for the overall economy too as the housing sector has strong backward (cement, steel and other building material industries) and forward (furniture and furnishings, interior decoration, electrical and electronics) linkages with other industries. That would also mean creation of more jobs.