Cabinet Approved the Amendments in the Real Estate Bill..!

Cabinet Approved the Amendments in the Real Estate Bill 2013..!

The Union cabinet approved the amendments in the Real Estate (Regulation and Development) Bill, 2013, on 7 April, 2015. It will now be tabled in Parliament.

Earlier, the bill, which has been in the works since 2007, was applicable only for residential real estate.

Now it is proposed that commercial real estate, too, should be brought under it.

“The inclusion of commercial segment will expand the scope of the regulator, thereby benefitting the industry as a whole,” said Mr. Shishir Baijal, chairman and managing director, Knight Frank India. But the biggest impact will be felt by retail customers.

When the bill was introduced earlier in Rajya Sabha, in 2013, it was sent to the Standing Committee of Parliament on Urban Development for recommendations based on inputs from various stakeholders such as consumer representatives, industry bodies, and other experts. Most of these have now been included in the bill.

Real estate regulator

* According to the bill, the real estate regulator is expected to work as a watchdog, and strengthen buyer rights, which are, till now confined to the heavily skewed builder-buyer agreement. If a developer defaults, there is little that a buyer can do.

* Strong nexus between builders and property agents, and lack of reliable information makes the exercise even more difficult for a homebuyer. The real estate bill now requires mandatory registration of all real estate agents with the regulator.

* All projects that are under construction will also have to be registered within three months of the regulator being set up. If this is not done, the developer will have to pay a penalty of 10% on the overall project cost. Apart from this, there will be an additional penalty of 10 % and /or a three-year prison term in case of continued non-compliance.

More transparency

* To bring about more transparency, the bill makes it mandatory to submit project details like names of promoters, project layout, plan of development works, land status, status of statutory approvals, disclosure of proforma agreements, and names and addresses of real estate agents, contractors, architects and structural engineers to the authority at the time of registration of the project.

* Incorrect or incomplete disclosure will attract a penalty of 5% of project cost.

In fact, the project may even be cancelled if rules are regularly not followed.

* Apart from more disclosures, developers are also required to deposit 50% (this could be lesser) of the amount realized for a project from homebuyers, in a separate account in a scheduled bank within 15 days of money received. This step is being proposed because, often, projects get delayed when funds are diverted. The money deposited can be used only towards the particular project.

* Apart from diverting funds, developers change project layouts and offer homebuyers houses at time of possession that are different from what was booked.

* The real estate bill now restrict the developer from altering plans, structural designs and specifications of the plot, apartment or / building without the consent of two-thirds of the buyers.

* The bill also specifically mentions rights of a homebuyer. She will have the right to obtain a stage-wise schedule of a project; and claim possession as per developer declaration.

If a builder defaults, she will have the right to receive refund of what she has invested, with interest, and compensation.

* Although the bill tries to cover issues of real estate developers & other industry participants, some feel that it lacks in places.

Mr. R.K. Arora, chairman, Supertech Ltd, said: “The usefulness of setting up such bodies (real estate regulator) without addressing long pending issues such as creation of a single-window clearance system, giving industry status to real estate, which are the basic reasons behind most customer grievances, is still unclear.”

Developers also want government authorities related to providing services to housing to be covered under the bill, and thus, under the real estate regulator.

Homebuyers pay external development charges, for instance, which are then paid to local authorities to ensure timely delivery of infrastructure services.

Moreover, promoters / builders want that urban local bodies should also be brought under the ambit of the regulator since they issue occupation and completion certificates.

The bill has been in the making for long. It is expected to bring in transparency in the real estate sector, and move the pieces in homebuyers’ favour.

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