Realty Regulation Bill is finally a reality

In a move that is expected to herald a new era of transparency and accountability in the country’s largely unorganized real estate sector, the Union cabinet has at long last approved the Real Estate (Regulation and Development Bill), a long-standing demand of the realty industry.

The Bill, which seeks to protect the interests of customers, has now cleared the decks for the appointment of regulatory bodies at both the central and state levels to ensure the strict implementation of ethical and transparent business practices in the property sector.
 
Among its many provisions, the Bill now makes it compulsory for all projects and real estate agents involved in the selling of any apartment, building or plot to register with the real estate regulatory authority. The bill also provides for the mandatory disclosure of all crucial information linked to a registered project including the names & details of its promoters, land status, legal status, layout plan and the status of mandatory approvals and clearances.

Other key provisions of this landmark regulation include ensuring the proper implementation of the agreement between a buyer and the developer of a said project and the setting up of a fast track mechanism to resolve disputes between the two principal parties.

This is expected to greatly reduce the risk of frauds and completion delays, two long-standing issues faced by property buyers, while simultaneously encouraging greater efficiency and accountability in the industry. The Bill also includes a key condition that prohibits a developer from changing the original project plan unless he secures the approval of a minimum of 2/3rd of the consumers for such a change.

Explaining the rationale behind the decision, a government release said, ‘These measures are expected to increase both domestic and foreign investment in the real estate sector and help the government in achieving its objective of providing Housing for All by 2022, through enhanced private participation’.

It may be recalled that the Real Estate Regulation Bill, was first introduced in the Upper house in August 2013, by the then UPA government, prior to being referred to a Parliamentary Standing Committee, which subsequently gave its report in February last year.

The new NDA government at the helm of affairs at the centre has since made some important changes to the original bill. The earlier condition that mandated a developer depositing 70 percent of a buyer’s investment into a secure escrow account that could be used only for construction of the said project has now been lowered to 50 percent. A change ostensibly made due to pressure tactics exerted by the strong developer lobby. Further, while the original legislation was limited to only regulating the residential realty segment, the new version has now got the commercial segment into the ambit of the bill as well.

Highlights of the Real Estate (Regulation and Development Bill):

• All developers to keep a minimum 50 percent of funds collected from buyers in an escrow account to meet construction cost.
• The bill prescribes strict penalties including jail, for errant builders.
• The Cabinet has extended the applicability of the Bill to commercial real estate also.
• Ongoing projects that have not received Completion Certificates have also been brought under the purview of the Bill.
• Such projects will need to be registered with a proposed regulator within 3 months.
• Promoters will not be allowed to change plans and structural designs without the consent of 2/3rd of consumers of a project.
• Real estate agents also have been made punishable for non-compliance of orders of regulatory authority.
• Appellate Tribunals will also be set up under the proposed law.
• Under the other new stipulations approved by the Cabinet, states have to make rules in this regard within one year.
• Adjudicating officers will have rank equivalent to that of District Judges.
• An online system for submitting applications for registration of projects will be introduced within one year of the establishment of regulatory authorities.
• Regulator will have to decide cases within 60 days.
• Promoters will now be mandatorily required to disclose all key information regarding promoters, project, layout plan, schedule of development works, land status, status of statutory approvals, proforma agreements, names and addresses of real estate agents, contractors, architect and structural engineer.