The real estate sector in India is highly unorganized and largely unregulated. The implementation of a good Real estate bill is long impending.
The Real Estate Regulation and Development Bill – 2013, was initially drafted and approved by the then UPA (The United Progressive Alliance) cabinet in 2013. This bill has been lying in Parliament and recommendations / suggestions were sought to make it better and exhaustive.
On 7th April 2015, the new Union Cabinet (NDA) gave its approval to the amendments to the Real Estate Regulation & Development Bill. The recommendations of the Standing Committee of Parliament on Urban Development, and suggestions of various stakeholders have also been included after extensive consultations.
One of the aims of Narendra Modi’s government is to provide ‘Housing for All by 2022’. In this context the real estate bill assumes significant importance.
The main objective of the Real Estate Bill is to protect the interest of consumers (property buyers), to promote fair play in real estate transactions and to ensure timely execution of projects.
Highlights of The Real Estate Regulation and Development Bill
- Scope / Applicability of the Bill – In 2013 the proposed draft bill included residential projects only. It is now proposed to include both residential as well as commercial real estate projects.
- Establishment of Real Estate Regulatory Authority – Real Estate Regulatory Authority bodies will be set up in each State / Union Territory. Adjudicating officers will also be appointed to settle disputes (if any) and impose penalties / compensation.
- Registration & Public Disclosure of Real Estate Projects – The bill makes it mandatory to register all the real estate projects with the respective State Regulatory Authorities. The builders or real estate companies will have to mandatorily disclose the details of all the registered projects such as; details of promoters, project, layout plan, plan of development works, land status, status of statutory approvals and disclosure of agreements, names and addresses of real estate agents, contractors, architect, structural engineer etc., For wrong disclosure of information or for not complying with the disclosures and requirements, payment of 5% of project cost will be imposed as penalty. The Regulatory authority can even cancel the project approval.
- Registration of Real Estate Agents – The real estate agents who intend to sell any plot or flat of a registered project have to register with the Real Estate Regulatory Authority. The agents or property consultants have to maintain books of accounts, records and project documents.
- Responsibilities of Promoter or Builder –
- Disclosure of all relevant information of project;
- Adherence to approved plans and project specifications
- Obligations regarding veracity of the advertisement for sale or prospectus;
- Rectify structural defects
- Refund money in cases of default
- Compulsory Deposit of 50% percent – The Realty Developers has to compulsorily deposit 50 percent of the amounts (advances) realized for the real estate project from the allottees (buyers) in a separate Escrow account within a period of fifteen days. This account has to be maintained in a scheduled bank. This amount has to be used to cover the cost of construction of that specific project only.
- Adherence to Project Plans (layout / design) – To alter a project plan, structural design & specifications of the plot, apartment or a building, the Promoter has to get the consent of minimum two-third allottees (buyers) after the necessary disclosures.
- Rights & Duties of Allottees – The property buyer has the right to obtain stage-wise time schedule of the real estate project and claim possession as per the declaration / agreement. If the promoter defaults, the buyer can claim refund (with interest) and compensation . The allottees have to make all the payments on time as per the signed agreement.
Currently, the bill is in Parliament. Once it is tabled and approved in Parliament, the Bill will become an Act. After that, the States have to set up the Regulatory bodies within a year of the Bill’s enactment. The web-based online Registration facility (for the promoters to register their projects) has to be enabled within a further period of one year from setting up the bodies. The under-construction projects will also come under the purview of this bill.
The home buyers have many reasons to cheer. The bill is expected to ease the concerns related to ‘delay in project execution, change in project layout without any disclosure etc.,
The bill is beneficial to real estate companies or promoters too. The bill may ensure transparency and accountability of the promoters, which in turn may attract investments into the sector. There is a chance that the credibility of the real estate sector may be enhanced.
I believe that the use of black money in real estate deals is very rampant. It should have been made compulsory for the Realty developers to accept only non-cash payments. Sadly, this is not covered in the bill.
Also, the bill should have included the local authorities (like municipalities, water boards, electricity boards, registration departments, Town planning authorities etc.,) in the bill. The non-inclusion of the local government agencies may lead to delay in project approvals.
The Real Estate Regulation and Development Bill has been in the making for long. Let’s hope the bill is implemented in its true sense and gets evolved over a period of time.
Latest News (09-Dec-2015) : Real Estate Bill has been approved by the Central Cabinet and will now be taken up for consideration & passing by the Parliament. Below are the latest amendments to the bill as on 09-Dec-2015;
- The updated bill now mandates projects on 500 sq metres of area or with eight flats to also be registered with the regulatory authority instead of 1,000 sq metres or 12 flats as proposed earlier, bringing in a larger number of projects under the regulator’s ambit
- The bill now mandates that 70% of the Sale proceeds to be deposited in the Escrow Account. Earlier proposal was 50% or less of sale proceeds.
- The liability of builders for structural defects has been increased from the earlier two to five years now.
- The builders will now have to pay equal rate of interest in case of default or delays as home buyers.
- The bill now clearly defines what is ‘carpet area’. Usable spaces like kitchen & toilets have been included in the definition of ‘carpet area’.
- Garage is now kept out of the purview of definition of the apartment.
- If majority of the flats in the apartment have been allotted / sold, ‘welfare association’ has to be formed within 3 months.
- A new provision has been created for imprisonment up to three years in case of promoters and up to one year in case of real estate agents and buyers for violation of orders of Appellate Tribunals or monetary penalties or both.
- The appellate tribunals now have to adjudicate cases in 60 days as against 90 days proposed earlier.
- The bill also mentions that property buyers can also approach 644 consumer courts (available at district level) for any grievance redressal.
Latest Update (10-March-2016) : Real Estate bill has been passed in Rajya Sabha.
(Reference – Press Information Bureau) (Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net)