How serious is the govt about the regulatory bill?
Lawmakers have to realise the need to bring in transparency in the realty sector and make builders, agents accountable
From jail term up to three years for builders and the promise of bringing all real estate brokers under its ambit – the real estate (regulation and development) bill has it all but one has to see how serious the lawmakers are about pursuing it in the winter session of Parliament beginning on November 24.
The bill, introduced in the Rajya Sabha by the UPA government last August, covered only residential real estate and real estate developers. The latest proposals have sought to bring commercial real estate and brokers under its ambit.
It is proposed in the bill that real estate regulators be set up in every state to protect the interests of homebuyers, ensure accountability and fasttrack resolution of disputes. All builders developing projects using land in excess of 1000 sq m will have to register with the proposed real estate regulatory authority or RERA before launching or even advertising their projects. They will, according to the bill, declare building plans, area of the flat, timelines etc before launching the project. Any misleading advertisement by a developer with representative pictures and not actual ones, will be a punishable offence.
Also, by making registration of the project compulsory with the regulatory authority, the bill aims to provide greater transparency in project marketing and execution. Failure to do so for the first time would attract a penalty which may be up to 10% of the project cost and a repeat offence could land the developer in jail.
With incidents galore of property buyers getting duped by agents and brokers, a proposal to make RERA registration mandatory for real estate agents has also been mooted. They will now have to get registered with the proposed real estate regulatory authority and get a licence (renewed periodically) before they set up shop. If the broker were to commit a fraud, the license can be cancelled – as is done in Dubai and Singapore. It also means the end of the fly-bynight property agents.
S K Pal, a Supreme Court advocate, says that since brokers play the most important role in the supply chain – they are the first point of contact before the buyer finalises a property deal – they ought to be made accountable.
In most cases, when problems arise with a project, the broker simply washes his hands off the entire deal. That’s primarily because he has received his commission and the matter is closed.
If brokers are regularised and their licenses renewed from time to time, they will be brought under the tax net and will also have to pay license fee to the government, which means revenue for the latter, Pal added.
The bill also seeks to impose strict regulations on the promoter and ensure that construction is completed on time. Its purpose is to ensure that the buyer gets the property as per the specifications that he had been promised
In its new proposal, the housing ministry also intends to expand the purview of RERA to cover commercial as well as residential real estate.
The bill mandates a compulsory deposit by the developer of 70% of the project cost in a designated separate escrow account. This is to make sure that the money raised for one project is not diverted and utilised far a specific project. There’s also a provision of return of money to the customer with interest in case of delay. The bill also states that the developer will not have to sell an apartment on the basis of the carpet area and not the super area. It also seeks a definition of the carpet area and standardise it across the country.
By seeking to establish a regulatory authority and the appellate tribunal, the bill aims to create a dispute resolution mechanism and provide a specialised forum for hearing disputes related to property matters. The original bill was referred to the parliamentary standing committee, which made several recommendations in its report submitted to the housing and urban poverty alleviation ministry in February 2014.
While most developers had welcomed the passage of the Bill by the cabinet last year as a “watershed development”, many had also claimed that provisions such as launching projects after getting statutory clearances can delay projects and that the government should ensure that the authorities send their approvals on time.