Cabinet approves Real Estate (Regulation and Development) Bill

The Union Cabinet, chaired by the Prime Minister Narendra Modi, has approved the Real Estate (Regulation and Development) Bill, 2015, which was forwarded by a select committee of Rajya Sabha which has done some modifications from the original draft.

The Bill will now be taken up for consideration and passing by the Parliament, a PIB release said. 

The Real Estate Bill is a pioneering initiative to protect the interest of consumers, promote fair play in real estate transactions and to ensure timely execution of projects. 

The Bill provides uniform regulatory environment to ensure speedy adjudication of disputes and orderly growth of the real estate sector. It will boost domestic and foreign investment in the Real Estate sector and help achieve the objective of Government of India to provide ‘Housing for All’ by enhanced private participation. 

The Bill ensures mandatory disclosure by promoters to the customers through registration of real estate projects as well as real estate agents with the Real Estate Regulatory Authority. 

The Bill aims at restoring confidence of consumers in the real estate sector; by institutionalizing transparency and accountability in real estate and housing transactions which will further enable the sector to access capital and financial markets. 

The Bill will promote orderly growth through consequent efficient project execution, professionalism and standardization. 

The salient features of the Realty regulatory Bill are as under: 

• Applicable both for commercial and residential real estate projects. 

• Establishment of ‘Real Estate Regulatory Authority’ in States/UTs to regulate real estate transactions. 

• Registration of real estate projects and real estate agents with the Authority. 

• Mandatory disclosure of all registered projects, including details of the promoter, project, layout plan, land status, approvals, agreements along with details of real estate agents, contractors, architect, structural engineer etc. 

• Deposit of specified amount in a separate bank account to cover the construction cost of the project for timely completion of the project. 

• Establishment of fast track dispute resolution mechanisms for settlement of disputes through adjudicating officers and Appellate Tribunal. 

• Civil courts jurisdiction prohibited from taking up matters defined in Bill, however, consumer court allowed to hear real estate matters. 

• Promoters barred from changing plans and design without consent of consumers. 

• Provision of Appropriate Government to make rules for the matters specified in the Bill, and the Regulatory Authority to make necessary regulations.

Realty Bill will ensure transparent transactions

By imposing strict regulations on the Promoter, the Bill looks to ensure that construction is not only completed in a timely manner but that on completion the buyer gets the property as per the specifications that he had been promised, says Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India.

 The Cabinet has finally approved the long-pending RE Bill paving the way for providing the much-needed transparency by seeking to regulate the hitherto largely unregulated housing sector in India. By applying this bill on all projects over 4000 sq mtrs in size, the ambit if quite large and seeks to cover all major private residential developments across the country.

As and when the Bill gets enacted, it will look to provide considerable relief to the ordinary buyer and investor who goes through innumerable obstacles when buying a property and at times is duped by even small developers, builders and brokers.

By imposing strict regulations on the Promoter, the Bill looks to ensure that construction is not only completed in a timely manner but that on completion the buyer gets the property as per the specifications that he had been promised.

Further, by seeking to establish the Regulatory Authority and the Appellate Tribunal, the Bill aims to create a dispute resolution mechanism and provide a specialized forum for hearing disputes related to property matters and address the grievances of the consumer who otherwise has had recourse to either a prolonged litigation process in a court of law or consumer courts.

The Bill also seeks to prevent developers from putting out misleading advertisements, which make promises which are not backed by the real development on ground. They also need to clearly mention the sanctions and approvals they have obtained and cannot market the project unless the necessary approvals are in place. By making registration of the project compulsory with the Regulatory Authority, the Bill aims to provide greater transparency in project marketing and execution.

All plans, approvals need to be put up by the developer on the Regulator’s website. The developer needs to set aside 70% or less percentage in a separate account which shall consist of the monies collected from the allottees and this amount shall be utilized only towards he particular project and cannot be diverted. The developer is required to declare the time frame for developing the project and has to adhere to such timelines.

The Bill in its latest form has agreed to certain suggestions made by the states, such as the percentage amount of 70% or less being maintained in a separate account. The Bill also seeks to impose monetary penalties on the promoter with repeat offences also liable for a jail term.

The Bill works both ways. While it aims to hold the developers accountable, it also looks to ensure that the allottees do not default in making payments. Thus, by providing penalties for both the promoters and the allottees, the Bill seeks to ensure that non-compliance is minimal. On enactment, the Bill seeks to ensure that real estate transactions are carried out in a just and equitable manner.

The category of real estate brokers has also been brought under the ambit of this Bill by making their registration mandatory when the promoter provides the project details to the Authority.

The Bill also seeks to define the carpet area which shall be a standard definition across the country.

The Bill also seeks to provide model Agreement to Sell under which the promoter is liable to furnish the necessary project details to the allottee while also becoming responsible for providing project level details as demanded by the buyer.

The Bill will establish a central Appellate Tribunal with the individual states responsible for setting up the Regulatory Authority at the state level.

Though the Bill will turn out to be a boon for the property purchasers and the consumers, it has received a lot of criticism from developers for not being inclusive in its approach towards them. 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.

It has been a constant complaint by developers in India that they experience long and inordinate delays besides the difficulty in obtaining approvals for construction from the multi-headed Government agencies, and they have stressed on the need for a single-window clearance to cut through the red tape. This issue does not find any mention in the Bill.

Also, though the list of disclosures to be furnished by the Promoter is fairly exhaustive, it could still be benchmarked against the best practices of the developed markets so as to bring the real estate markets in India in more conformity with such markets where regulations have been existing for some time with relevant lessons to be learnt from their experiences.

The Bill has received the Cabinet Approval and could either be brought in by passing an Ordinance, while the Parliament and other parties could insist on a discussion in the legislature and then putting the Bill to vote. It then requires the signature of the President. The road to becoming an Act is still being paved.

Will the Real Estate Bill Protect Home Buyers?

MUMBAI:  Property buyers in India have much to cheer about as the Parliament is all set to discuss and pass the much-awaited Real Estate (Regulation and Development) Bill in the current Budget session.

N.Nandakumar

Will the Bill be beneficial to the buyers and protect their rights from the errant developers and fraudulent means of transactions?

“The Real estate Bill will surely protect buyers from errant developers,” says N.Nandakumar  Managing Director, Devinarayan Housing & Property Developments Ltd and executive committee member of CREDAI, Chennai.

However, Nandakumar points out that the cost of administering the regulations by developers will lead to a significant increase in the price of the dwelling unit. “Even already compliant developer companies of repute who are self-regulated are compelled to take the additional admin of the regulatory bill compliances burden resulting in extended project tenure and costs thereof.”

According to property experts, a strong legislation would put a restrain on unethical and unscrupulous practices in the real estate industry, which from the outside looks very fascinating when the skyline of several Indian cities is changing.

“While the penal interest provision could hurt realty players; the Bill if it goes through would indeed in the interest of several buyers - especially the middle class, for whom purchasing a property has been a herculean task (due to skyrocketing prices) and unscrupulous practice adopted by some developers,'' said Ramesh Prabhu, a consumer activist.

Ruing that the Bill should have been passed a few years earlier, V Padmanabhan, an IT consultant in Chennai, says, “I bought a flat from a moderately sized builder who has his presence in west Chennai two years ago. Within one year, we have seen a lot of cracks on the walls of all six flats, all the bathroom fittings have turned rusty and seepages in two flats. On approaching the builder, he refused to entertain any of our grievances. Now, we have found that the sump too small and not properly built. As a result, stagnated water from the neighbouring vacant land gets leaked into the tank. We are now reconstructing the tank at our own cost. Had the bill be passed a few years ago, we could have approached the appropriate authority against the builder for redressal.”

The Bill has been framed under provisions dealing with "property transactions" in the concurrent list of the Constitution that applies to states, making the proposed legislation more than a model law.

Agreeing Prabhu’s view that the Bill would filter out the non-serious players in the industry, Nandakumar,  further says, “ It is also perceived that the challenges likely to be faced by developers in adhering to the regulatory bill, will dissuade entrepreneurs lacking core competency in the building industry to move away from this Industry, thereby leaving more room for serious long term players.”

The Real Estate (Regulation and Development) Bill has proposed the following, which intends to protect the interest of property buyers:

 -- Developers will have to disclose project and contractual details to ensure transparent, fair and ethical business practices. Hence, there could be model agreement which could reduce ambiguities in realty transactions, which buyers may not be familiar with.

-- Moreover, the regulation will make it mandatory for private developers to register all projects before they sell it to buyers. The property shall be registered with all necessary clearances from local authorities.

-- If a developer fails to declare the status of clearances, the Bill provides for levying a fine that can amount to 10% of cost of project or three years of imprisonment.

-- Also ensuring that the developer adhere to timelines, the Bill states that the realty player will have to park 70% of funds for the project in a particular bank account, thereby preventing the  money being diverted to other projects and thus safeguarding property buyers.

-- The Bill also enunciates that developers should sell a residential property on the basis of "carpet area", instead of the current practice of "super area", thereby ensuring that buyers get a better deal and transparency. People know the exact livable area in their flat excluding the common and plinth areas.