Good news for home buyers, and realty sector
With The Real Estate (Regulation and Development) Bill, 2013, having been passed in Rajya Sabha on Thursday, it is now only a matter of days before it is adopted by the lok Sabha and receives Presidential assent to become an Act. The new law will be a major achievement for the BJP-led NDA regime and a significant legislative victory for the nation. Since the beginning of its term, the ruling coalition has struggled to get reform measures passed in the upper House, where it does not have a majority. Thus, the opposition parties deserve compliment for helping in the Bill’s passage. It indicates that the Government and the Opposition are working together at least on some important issues. From a governance point of view, the real estate Bill, which was introduced in Parliament in 2013, will go a long way in making the sector more transparent and accountable. Currently, the realty industry is poorly regulated and rather opaque. Consumers have little protection and are routinely duped by unscrupulous agents. Builders and property developers, often seen as the villains, do not have it easy either they too have to constantly bribe their way around the system and are often threatened by sudden changes to local building rules and regulations. The housing industry will now get to be bracketed in the infrastructure sector. And, then there is the issue of black money. It is no secret that the real estate sector is where black money is made white; worse still, the system has taken such a grotesque shape now, that those without black money are compelled into loss-making deals.
The real estate Bill will help mitigate some of these issues. Once the sector is cleaned up, it will attract more investment as well as allow for the smooth implementation of some of the Government's flagship schemes such as Smart Cities and Housing for All by 2022. Importantly, the new law will protect the interests of home buyers as well as offer a level playing field to property developers. The State-level regulators that have been envisioned in the Bill will be game-changers in this regard. Any project that is more than 500 square metre or comprising more than eight apartments will have to be registered with the regulatory body, which in turn will keep an eye on construction and compliance. The regulator will also be empowered to set up single-window systems for clearances, grade projects and promoters, push for digitisation of land records etc, making property-related transactions simpler and efficient. The real estate Bill also makes it mandatory for project developers to deposit at least 70 per cent of their funds in a separate escrow account — this will protect consumers from housing fraud. Another important effort towards consumer protection is the requirement that the project's carpet area should be clearly defined in the beginning, and any change to that plan will require the consent of two-thirds of the buyers. But then, a law or rule is only as good as its enforcement. Towards this end, the Bill calls for up to three years of imprisonment for promoters and up to one year for agents and buyers who violate the orders of appellate tribunals. These tribunals will also be required to adjudicate cases within 60 days. This is welcome since both builders and consumers will not be on tenterhooks for unending periods of time.