Not-so-rousing welcome for real estate regulatory bill

Not-so-rousing welcome for real estate regulatory bill
The Cabinet approves real estate bill. Beware developers, repeat offences may land you in jail
The Cabinet cleared the Real Estate (Regulation and Development) Bill which seeks to provide a uniform regulatory environment to the real estate sector in the country. The long-pending bill will pave the way for providing the much needed transparency with provisions like a jail term of up to 3 years for developers who mislead advertisements about projects repeatedly.
The bill, by seeking to establish the Regulatory Authority and the Appellate Tribunal, aims to create a dispute resolution mechanism and provide a specialised forum for hearing disputes related to property matters. Imposing strict regulations on promoters, the bill looks to ensure that construction is not only completed timely, on completion the buyer gets the property as per the specifications that he had been promised.
Positive vibes“We welcome the move by the government to set up the real estate regulator,” Shilpa Shetty Kundra, Chairman, Groupco Developers, said in a statement. “It is an extremely proactive and a long awaited move to bring transparency and accountability to the home buying process. It will protect the interest of the homebuyers and at the same time, keep a check on the unscrupulous elements.”
According to Sanjay Dutt, Executive, Managing Director, South Asia, Cushman & Wakefield, “This bill will help institutionalise the sector, giving it the necessary fillip to move to a new phase of growth and development. Hopefully, this would also be a positive step in the direction of providing ‘industry status’ to the sector — another long-awaited demand of stakeholders involved in real estate.”
Keeping customers in mind“The bill will look to provide considerable relief to the ordinary buyer and investor who go through innumerable obstacles when buying a property and at times is duped by even small developers, builders and brokers,” explained Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India.
“Provision in the bill pertaining to return of money to customer with interest in case of delay is well meant,” commented Firdose Vandrevala, Chairman, CII National Committee. “It should also be borne in mind that any regulatory frame work should cover all stake holders: promoter, customer [allottee] and competent authority, and all obligations should be evenly distributed.”
Developers’ dilemmaThe bill seeks to prevent developers from putting out misleading advertisements which make promises which are not backed by the real development on ground. They also need to clearly mention the sanctions and approvals they have obtained and cannot market the project unless the necessary approvals are in place.
From now on, developers need to put all the approvals on the regulator’s website. The developer needs to set aside 70 per cent or less percentage in a separate account which shall consist of the money collected from the allottees and this amount shall be used only towards he particular project and cannot be diverted. The developer is required to declare the time frame for developing the project and has to adhere to such timelines.
Dear agentsIt is also heartening to note that all the real estate agents are required to be registered with the proposed authority as it will help detect money trail and curb money laundering. The bill also seeks to provide model agreement to sell under which the promoter is liable to furnish the necessary project details to the allottee while also becoming responsible for providing project level details as demanded by the buyer.
“The bill, however, works both ways,” said Mr Puri. While it aims to hold the developers accountable, it also looks to ensure that the allottees do not default in making payments. Thus, by providing penalties for both the promoters and the allottees, the bill seeks to ensure that non-compliance is minimal. On enactment, the bill seeks to ensure that real estate transactions are carried out in a just and equitable manner.

The bill will look to provide considerable relief to the ordinary buyer and investor who go through innumerable obstacles when buying a property and at times is duped by even small developers, builders and brokers
Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India.
Investments through domestic and international funds Apart from protecting end users’ or home buyers’ interest and bringing the credibility to the developer community, this bill can attract investments from domestic and international funds that have harboured scepticism toward investing in Indian real estate, largely on account of lack of regulation. With the safety features now proposed in the bill, RBI’s negative perception of lending to the housing projects as being risky will be dispelled, and developers will find it easier to access formal funding. Mr Dutt said, “The bill will essentially change the way in which funding of housing development has been approached for a very long time as it’ll require the developers to invest their own capital and launch only those projects that are well funded and have a time bound construction plans in place.”

It is an extremely proactive and a long awaited move to bring transparency and accountability to the home buying process. It will protect the interest of the homebuyers and at the same time, keep a check on the unscrupulous elements
Shilpa Shetty Kundra, Chairman, Groupco Developers
The backlashesWhile consumers have a lot to gain from this, the realtors will have mixed feelings. Naushad Panjwani, Senior Executive Director, Knight Frank India, emphasized, “Even though progressive developers and trade chambers have welcomed it, the bill appears to be a tad harsh for realtors.”Although, the Confederation of Indian Industry has always favoured setting of an institutional mechanism to improve the image of this crucial sector, the confederation seems in two minds. “Though we must also keep in mind that multiple Acts and Rules exist for protection of consumer interests for any deficient services in any sector and hence it needs to be ensured that the proposed Real Estate Regulatory Authority (RERA) does not end up merely replicating various functional roles,” said Mr Firdose.
In the short to medium term, after the Bill is enforced, we may see a noticeable slowdown in launches of new projects, as getting all the necessary permissions in place is a long and tedious process, which may delay the entire process of launching a project, unless the Government follows up with much-needed administrative reforms that speed up the entire process. Hence, the Bill may create an upward pressure on prices as there will also be some cost implications as developers wait to launch their projects with due approvals in place.
Missing linksIt has been a constant complaint by developers in India that they experience long, inordinate delays besides difficulty in obtaining approvals for construction from the multiheaded government agencies, and they have stressed on the need for a single-window clearance to cut through the red tape. This issue does not find any mention in the bill.
Questions remainAlthough the bill will turn out to be a boon for the property purchasers, several question remains. Projects can’t be launched before all construction plans passed and approvals in place. Will this delay the project cycle further? Will this be practical keeping in mind that the biggest reason for delays in any project is getting plans approved?

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