Govt proposes to set up real estate regulator4 min read . Updated: 12 Nov 2011, 12:23 AM IST
Govt proposes to set up real estate regulator
Govt proposes to set up real estate regulator
New Delhi/Bangalore: The government proposes to set up a real estate regulator to improve transparency in the sector and ensure that developers follow fair practices in their transactions with homebuyers. The proposal is contained in the long-awaited Draft Real Estate (Regulation and Development) Bill, 2011, which was unveiled on Friday.
The 29-page draft Bill, made public by union minister for housing and urban poverty alleviation Kumari Selja in New Delhi, also seeks to provide an adjudicator for quick dispute redressals. The urban development ministry expects to present the legislation in the winter session of Parliament, which starts later this month, after the draft Bill is approved by the cabinet.
“The purpose of the central Bill is two pronged—first, the regulation will protect homebuyers from fly-by-night operators, who run away with buyers’ money, and second, we do not want in any way to put an impediment to the growth of the real estate sector," said Selja. “The Bill focuses on issues pertaining to real estate transactions and applying best practices in property deals."
Currently, the real estate and housing sector is largely unregulated, with consumers often failing to obtain complete information or hold the builders accountable for not meeting their promises in the absence of effective regulation.
Among other points, the draft Bill suggests that 70% of the money collected from buyers from time to time will be put in a separate escrow account within 15 days of its realization and will be used only for the construction of the particular project. In addition, the developer will not be able to sell or book any apartment without prior registration of the project with the authority. The builder will also be barred from taking any deposit or advance without entering into an agreement of sale.
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Housing and urban poverty alleviation minister Kumari Selja says the draft real estate regulation bill is going to ensure transparency and accountability of the real estate sector.
Property analysts endorsed the government’s approach to the draft Bill, saying the Bill has kept all stakeholders in mind.
“The Act, when implemented, will address governance issues that have concerned the sector for a while," said Rajiv Sahni, partner (real estate practice) at Ernst and Young India. “I also see a huge amount of foreign capital coming in once there is more transparency, which ultimately developers will benefit from.".
The Bill also says that developers will be barred from publishing any advertisement or prospectus or invite homebuyers to book flats in projects without obtaining a copy of the certificate of registration from the authority.
For buyers, the biggest advantage that the model real estate Act offers is that there will be an authority available to attend to grievances and redressals, said Anuj Puri, chairman and country head of Jones Lang LaSalle India, a property adviser.
“This is a big step in the direction of recognizing Indian real estate as an industry, since it means that the real estate sector is perceived to have attained a certain degree of scale, which warrants a regulatory agency with transparent rules, regulations, safeguards and redressal systems," he said.
If the promoter fails to complete or is unable to give possession of a plot or building, he will be liable to return the amount received by him with interest and may also have to pay a penalty imposed by the authority, according to the draft Bill. In case any developer wilfully fails to take the necessary registration certificate prior to the launch of its project, he will be punished with imprisonment for a term that may extend to three years, or a penalty of as much as 10% of the estimated cost of the real estate project, or both.
A real estate appellate tribunal to resolve disputes between developers and customers will also be set up. The draft Bill also proposes to form a central advisory council, with the housing minister as ex-officio chairperson and representatives from other ministries as members, that will advise the government on matters concerning the implementation of the real estate law and on policies to protect homebuyers.
Some developers have opposed the Bill, claiming it is against the interests of the real estate sector.
“Due to the result of the provisions of this Bill, the prices will increase, as this will create another window of clearance. The provision of a jail term of three years is detrimental to the sector," said Lalit Kumar Jain, national president of the Confederation of Real Estate Developers’ Associations of India (Credai), a lobby group. “Good business groups will refrain themselves from coming into the sector and setting up businesses."
Reacting to the size of the projects mentioned, Geetambhar Anand, managing director of real estate firm ATS Group and vice-president, Credai, said: “The government has overlooked the smaller developers, who build small colonies in tier II and III cities. Also, the provision of imprisonment is very negative and wrong for the sector. It can be grossly misused by complainants."
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