RICS welcomes Real Estate Regulation Bill

Royal Institution of Chartered Surveyors (RICS) says that the Cabinet’s decision to clear the long-pending real estate regulation bill is aimed at regulating the housing market and protecting home buyers’ interest. 

Whilst the bill is not flawless, it is certainly a step in the right direction and we hope that this legislation will be supplemented with necessary rules and regulations, which will clarify any ambiguities or gaps that exist in the bill. The bill could have been more balanced and clearer on issues relating to dispute resolution and project clearances.

In some ways, the bill should be termed as ‘housing regulation bill’ rather than ‘real estate regulation bill’ because it does apply only to primary residential market, leaving out the secondary market and also leaving out the commercial property market.

Taking a risk based approach; the bill has been modelled taking into account appropriate checkpoints in key stages of a property transaction where regulation is most required, given the history of fraudulent practices and unfulfilled promises. A common complain is that developers and builders do not deliver what is promised when selling apartments.

While their advertisements show buildings and landscaping to match international quality, in a majority of cases, the ground reality is far different leaving buyers feeling cheated. And the regulatory body envisaged under the draft bill would ensure that the developers are held accountable for what they promise and provide recourse to the customers incase these promises are not fulfilled.

Provisions such as restricting launch of projects or advertisements unless all approvals are received, maintaining separate account for customer monies, sale of projects based on carpet area will indeed help bring in transparency. Other provisions such as mandatory registration of projects (within 15 days) and registration of brokers are well intentioned but unless objective guidelines and rules are stipulated regarding the registration criteria, there is a danger of subjectivity creeping into the registration process. Rules should be made which can be enforced for certain. We do believe that the deterrent to unprofessional behaviour should not be judged by the severity of the punishment but by the certainty of it.

Stipulation of ‘carpet area’ as the only measurement unit will limit fraudulent practices arising from use of measurement units such as saleable area, super built up area etc. The provision will no doubt protect customer interest and create more transparency in transactions. However, a bigger concern that still remains unaddressed is the definition and measurement standards for carpet area. Since the definition mentioned in policies and laws tend to be subjective, the carpet area is interpreted differently and calculated such that it amounts to a higher area than actual. And this problem is not unique to India – it exists in many parts of the world.

The Bill has a national advisory council, which we believe can be responsible for prescribing national standards and best practices in different areas eg property measurement, builder buyer agreements, brokerage standards etc. The same can also be implemented by state regulators. This will go a long way in ensuring standardisation in line with international best practices.
 

The Bill proposes to set a real estate appellate tribunal, headed by a sitting or a retired      judge, for adjudicating disputes. However, the complaint handling mechanism outlined in the Bill is not as robust as it ought to be considering it does not clarify how the processes will work, what would happen at the state and the city level. Therefore these details need to be ironed out further, where the regulator could look at identifying an ombudsman who would be responsible for adjudicating all dispute cases, much on the lines of the SEBI Ombudsman regulations and Banking Ombudsman Scheme set up under the aegis of RBI.