Deconstructing the regulatory bill
Project approval processes will be faster but authorities will not be held accountable for delays
The Cabinet has finally cleared the real estate bill which had been pending for six years. It seeks to promote a uniform regulatory environment and protect consumer interests by ensuring transparency and fair play in real estate transactions. Builders developing a project exceeding 1,000 square metre will now have to register with the regulatory authority before launching or even advertising a housing scheme.
Cabinet cleared the proposal to set up a real estate regulatory authority (RERA). All real estate projects and agents now have to be registered with the Real Estate Regulatory Authority. Functions and duties of promoters and allottees are now made clear. Even government agencies such as Delhi Development Authority and National Buildings Construction Corporation, will have to register with RERA.
According to Getamber Anand, president, Confederation of Real Estate Developers’ Association of India, registrations will be done online and would be deemed to have taken place in 15 days but the regulator will subsequently allot a user ID until which proper- ties cannot be sold. “How will deemed registration in 15 days help if you still have to wait for the login ID? Registrations can also be cancelled if documents are not found in order after scrutiny. This will open another window for delay and dilute the deemed concept.”
“The bill would have been more effective had all the approving authorities been brought under its purview. It should also provide for holding authorities accountable for delays in approval processes that impact project timelines,” says Shishir Baijal, chairman and managing director, Knight Frank India.
Other reforms such as digitisation of land records, easier land acquisition procedures and faster environmental clearances should also be looked into, says Anshuman Magazine, CMD, CBRE.
under-construction projects have to be compulsorily registered within three months of setting up of the regulator, and developers would not be allowed to make changes to original plans or the structural design unless they get the consent of two-thirds of the customers. “Whatever the builders commit in their brochures will now have to be executed. They may not be able to make
changes easily,” says Devender Kumar of NEFOMA ( Noida Extension Flat Owners and Members Association).
have to set up regulatory bodies within one year of the bill’s enactment and, after another year, set up a web-based online registration facility.
penalty: Failure to register a project will cause the developer to attract a penalty of 10% of the overall project cost, and an additional penalty of 10% and/or a three-year prison term in case of continued non-compliance. Incorrect or incomplete disclosures will attract a penalty of 5% of the project cost. Project cancellation has been stated as possibility in case of continued non-compliance.
earlier bill had mandated that a developer put 70% of the buyer’s investment into an escrow account that would be used only for the construction of that project, which has been brought down to 50% According to Anuj Puri, chairman & country head, JLL India, this amount from the money collected from the buyers must be placed in an escrow account within 15 days. This provision will effectively allow developers to continue their practice of diverting funds collected for a project towards land acquisition or other projects, and will work in their favour by also allowing them to grow their land and/or project portfolio. However, the 50% mandate will still place enough restrictions on developers to divert funds elsewhere and ensure better completion records. For the buyers, the concerns regarding funds diversion will be higher now.
Supreme Court advocate SK Pal says the escrow percentage can be further reduced or increased, depending on cost of land, by the state governments as real estate is a state subject. For example, if a builder pays an amount upfront to acquire land, this percentage is fine but if has to pay, say ₹ 25 crore, spread across five years (which is ₹ 5 crore a year), this percentage will only leave room for diversion of funds. Therefore, this percentage should be dependent on how the land is procured for a project. The bill should also define clearly what constitutes “wilful default” by builder, otherwise it will lead to litigations. Pal says the bill should have clearly called for enforcement of a model builder-buyer agreement. Instead, it only mentions that the document should be close to the model agreement, leaving room for misuse.
this bill, buyers can knock the doors of any other consumer forums. In case the buyer is not satisfied with RERA’s decision they can approach the appellate tribunal. One issue pointed out in the bill by stakeholders was that it aimed to place itself as the sole course of action for redressal of grievances or customers, who will have no recourse to other consumer forums. It was correctly pointed out that such a stance could lead to pressure on this regulatory body in terms of an increased log of cases. As per the bill, customers can now seek help from other consumer courts and forums as well.
projects which have not received completion certificates will be now covered under the bill. What this means is that if a builder’s project has not been completed or has not received a completion certificate in five to six years, it will still be considered incomplete and fall under the ambit of this bill. Creation and management of a smart city perhaps lies in local ( city) agency domain since local governance is their mandate and it is in their hands to demonstrate smart governance. This means that development and long-term vision regarding technology-driven public utilities and their acceptance by the public becomes the responsibility of the local government agencies. The current municipal operations need to undergo a systemic overhaul to get around creating a ‘sustained smart’ city architecture. This requires not only acceptance of technology as a means to regulate public services and city infrastructure but also requires a sustained investment environment into such technological platforms.
Capacity building in municipal governance and local selfgovernment departments is needed across all levels. Local bodies can invest in such technology is through encouraging private enterprises which have such platfor ms ready for integration at a city level. Implementation and running costs need to be covered through an efficient tax collection system and innovative fundraising to ensure long-term investments and relevant upgrades.
The role of the local agencies hence becomes paramount in this regard. Swifter decisionmaking, cutting across time delays and defining roles and responsibilities of involved stakeholders becomes an evident need. Similarly, training of personnel and maintaining the technology platforms through continuous engagement also rests on the shoulders of the municipal agency. Creating longterm technology infrastructure to enable real-time data availability and analysis and enabling redundancies to create multiple neural networks which devolve in to the master network also becomes paramount.
The fund allocation and systematic deployment of resources also falls in the purview of these agencies. Creating smarter city level infrastructure across roads, sewage, water, transport, traffic, waste management, power, energy savings, air quality monitoring and information availability are all domains which require an increased level of participation, understanding and expertise in our local government framework.
Technology as an enabler
Technology forms the backbone which provides the structure and form to a smart city. Creating interactive and online platforms to encourage innovation and participation of all stakeholders and engaging with private enterprises who are leaders in technology-driven solutions is essential to bring about a sustained change in the liveability of a city. Transformative possibilities abound with utilisation of big data and analytics instead of using the same looking glass of treating information in compartments.
The need is to create a system of systems, into which is funnelled the data that is collaborated from the different agencies. Innovations such as cloud-based solutions and predictive analytics are great value enhancers which today allow a city to devise forward-looking solutions and enable creation of a sustainable city environment and its resources.
Investing in such technologies along with the current increase in mobile data analytics and social media participation to involve the citizens will allow a synergy of efforts which the main system will be able to utilise effectively to bring about definitive changes in how we live in our cities.
While technology has pervaded all aspects of our lives, the next inevitable step is to increase its penetration across all sections of the demography. User sensitisation towards use of technology stems from making users conversant and comfortable with the technology platforms. Technology has the ability to enable convergence between the various stakeholders to create a modern, dynamic and throbbing living ecosystem in our cities.
Better people interface
The critical component is the users. The contribution of education, training and a yearning to learn and contribute actively towards their living conditions, is what allows a smart city to live and sustain through its citizens. As citizens, we need to be more accepting of diversity and new technology to make a big contribution towards making our cities smarter.
As technology changes the way we live, utilising social media as a change driver, being self- aware and participating through interactive solutions and assimilating technology into the way one lives becomes crucial in defining one’s living environment. Embracing new changes and innovations and contributing towards fostering open-mindedness through evolving thought is the duty of citizens and without this change in psyche, implementation of smart cities will not be complete.
A smart city by inference will thus allow for efficient use of infrastructure and the city’s resources. An increase in transparency levels across decisionmaking, polity, resource allocation and citizen rights and responsibilities will inevitably result and enable weeding out of red tape and corruption which act as impediments to maintaining the balance between sustainability and development.
An Indian experiment
In the Indian context, the current government has announced its intention of setting up 100 smart cities. This importantly seeks to create a smarter city on the existing cities’ framework. Improving the existing cities is definitely a step in the right direction. Intensive capital budgeting is required for implementation of such smart cities in the country. As the engine of economic development chugs along, cities are the real growth enablers acting as magnets for employment and investments. Creating a sustainable living environment, which will make cities grow in a better and planned manner while bearing the strain of urbanisation, thus becomes imperative. It is essential that a clear implementation roadmap which outlines the objectives, the various stakeholders and identifies the funding mechanisms is put in place.
It also becomes crucial that this opportunity is not interpreted as only real estate led development of commercial offices and housing projects; in fact real estate is both the cause and result of smart cities in a way. While economic drivers are paramount for the city’s sustainable growth, the focus should be on creating the required physical infrastructure and implementing technology driven platforms which will allow a seamless interchange of information and management of the city’s resources.