By: Ravi Sinha
Track2Realty Exclusive
The much awaited and largely discussed Real Estate (Regulation & Redevelopment) Bill, pending since 2009, is finally been ready and the Government plans to introduce it in the winter session of Parliament after getting Cabinet approval.
The Bill makes it mandatory for developers to register themselves with a real estate regulatory authority to be set up in each state. Developers must also submit project details— approved layout plan, timeline, cost, sale agreement—to the regulator before launching projects. This information will be displayed on the regulator’s website. Only those developers who fulfill this clause will be permitted to advertise their projects.
The Bill also ensures the booking amount is not diverted. The developer will have to create an escrow fund, where a percentage of the money collected from the buyer will be parked, to be used for the specified project.
The Bill comes with stiff penal provisions for errant developers. Defaulting on contract or deviation from the layout plan will lead to the developer being penalised 10% of the project cost or jailed for a maximum of three years. In extreme cases, a developer could even lose his licence.
Speaking from the buyers perspective, Sachin Sandhir, South Asia Managing Director of RICS says, “I think the issue we never really bring up in any discussion, the biggest one facing the industry is not from the developer’s perspective but from the investor’s perspective and delivery or the lack of it. That impacts everything—confidence in the industry and the long term aspirations of being given an industry status. Once we get the industry status, we will have easier access to funds. But all these things are interlinked in some shape or the other. For me the biggest issue is delivery which fuels shortage.”
The draft proposes a two-tier grievance redressal system—the state regulator and an appellate tribunal at the Centre. At present, the only option open to buyers is to move the civil courts, which is a time-consuming process.
“I wish such a regulator would have been in place when we were knocking every possible door to get our grievances addressed,” said Sweta Sinha, a home buyer at Noida Extension. She is one of thousands of buyers caught in the land acquisition stir between developers, authorities and farmers.
However, some developers question the one-sided discipline imposed on the sector. Sunil Dahiya, Sr Vice President of NAREDCO and MD of Vigneshwara Developers says, “Today, there is no act in the Indian law that I can recover my payment from the consumer. There are hundreds of laws in the hands of the consumers that are used to penalize the developer. So the regulation has to come from both sides.”
However, the Bill does have some safeguards for developers. Buyers who default on payments will be fined. According to the sources the Bill is balanced and has clearly defined obligations for both the promoter and the buyer.
Confederation of Real Estate Developers’ Association of India (CREDAI) President Lalit Kumar Jain reacted cautiously, “The bill should protect buyers’ interests but at the same time have safeguards for developers. Otherwise, it would be counter-productive.”
