Falling in line with telecom and insurance sector, real estate sector too has finally come under the ambit of the regulation with the Union Cabinet approval of the amendments to the Real Estate Development and Regulation Bill, which was pending since 2013.
Aimed at protecting the interests of residential as well as commercial property buyers, by promoting transparency and accountability into the sector, the Bill makes it mandatory for registration of all projects and real estate agents who intend to sell any plot, apartment or building with the Real Estate Regulatory Authority. It includes ongoing projects too that have not received Completion Certificates so far and these projects, the Bill states, need to be registered with the Regulator within 3 months.
Commenting over the registration clause, Lalit Kumar Jain, CMD, Kumar Urban Development Ltd. said major concerns were ignored like; online registration processes without human interface to avoid corruption, all the stake holders to be governed by the regulator to avoid further delays in approvals and NOCs. “The government seems to have ignored these suggestions and instead come up with a ridiculous concept of revocation of registration, as it will do more harm, promote more corruption and developers will have to tackle such knee-jerk situations.”
Navin Raheja, Chairman, National Real Estate Development Council (NAREDCO) commenting on the Cabinet decision said, “Local Bodies, an important stakeholder in the development process, have been left out but Development Authorities have been included. The Real Estate Bill once enacted by Parliament and thereafter implemented in the States is expected to promote development of a mature responsive Real Estate sector in the country.”
“With the approval of the Real Estate Development and Regulation Bill, the government has been successful in addressing some of the major concerns from an end user’s point of view and has brought in a wave of positive sentiments in the market. I feel that acts like the compulsory registration of all the Real Estate projects and Real Estate Agents with the Real Estate Regulatory Authority will change this outlook,” said Sam Chopra, Founder & Chairman, RE/MAX India.
Following its several major provisioned obligations, builders will have to deposit 50 per cent of funds collected from buyers within 15 days in a separate bank account to meet construction costs. It would be mandatory for the disclosure of all information for registered projects like details of promoters, layout plan, land status, schedule of execution and status of various approvals.
“The Bill has brought positive sentiments for both buyers and the Industry. We, being in real estate sector believe that customers should be given utmost importance. The long registration procedures and amendments like submitting 50 per cent construction cost is way too higher for developers and would indirectly become a roadblock for the success of developers and industry,” viewed Gurgaon-based Amarjit Bakshi, Founder & MD, Central Park.
The Bill also prohibits a developer from changing the plan in a project unless 2/3rd of the allottees have agreed for such a change. The bill enforces the contract between the developer and buyer and a fast-track mechanism to settle disputes.
Under the penalised provisions, the errant builder will have to pay 10 per cent of project cost for non-registration and payment of additional 10 per cent of project cost or 3-year imprisonment or both if still not complied with. The property brokers have also been made punishable for non-compliance of the orders of Regulatory Authority and Appellate Tribunals to be set under the proposed law.
In case of wrong disclosure of information or for not complying with the disclosures and requirements, payment of 5 per cent of project cost will be imposed. Hence, the Bill provides regulatory authorities the power to cancel project registration in case of persistent violations and decide on the further course of action regarding completion of such projects.
“The Bill gives more power to the sanctioning authorities as they are still not put under the scrutiny of a regulator. The ongoing projects have been brought under the purview of the Bill and might result in further project delays. Also, as the cost for the builder will now increase, it is likely that the property rates will also increase,” observed Ganesh Vasudevan, CEO, IndiaProperty.com.
“Even after two years, the cabinet tapered down a lot of strong recommendations such as not checking antecedents of promoters, limited diligence on track record, and most importantly, no blacklisting in case of 2 prior defaults,” acknowledged Tanuj Shori, Co-Founder & CEO, Square Yards.
For fast-track dispute settlement, one or more adjudicating officers will be appointed to settle disputes and impose compensation and interest. Appeals against adjudicating officer and Regulatory Authority will lie with the Appellate Tribunals and final appeals will lie only with High Courts. Also, one or more Regulatory Authorities will be set up in each State and Union Territory or one Authority for two or more States or Union Territories by the concerned Governments for oversight of real estate transactions. Finally, the effectiveness of the regulatory authority remains to be seen with the government seems too pro-business and overburdened with the expectations of India Inc.