NDA must build consensus on real estate Bill
It is heartening that the Government has reached out to all parties to build consensus on the Real Estate (Regulation and Development Bill), 2013, and may even consider a demand by some Rajya Sabha members to send it to a select committee. The Bill has been on the verge of becoming a political hotspot ever since Congress vice president Rahul Gandhi tried using it as a springboard to reach out to the middle-class votebank. On Saturday, he told the public that he had learnt it was not just the farmers and the rural poor who had ‘land issues' but also that the middle classes were under pressure.
Then he went on to list the many problems faced by prospective homeowners — these may have been a revelation to the Congress scion but were as stale as yesterday's newspapers to the public — and finally, surmised that the real estate Bill, as amended by the Modi Government, was “pro-builder” and “anti-buyer”. Remember that the problems faced by prospective homeowners today did not emerge in this past year alone. This sector has been a cesspool of black money and land sharks for several years and it is the Congress that has been at the helm for much of that time. Yet, it was only in 2013, at the fag end of its second tenure, that the Congress-led UPA regime brought the real estate Bill which seeks to regulate the sector.
The voting public, of course, sees through this political gimmick; however, the problem is that Mr Gandhi's weekend grandstanding has seemingly prompted his party colleagues to harden their positions on the issue. Hence, there is now the possibility that the real estate Bill may become yet another victim of a combative Opposition's obstructionist ways. The onus is on the Government to bring the Opposition on board. It must take the lead in explaining to parliamentarians, and the public at large, why the amendments it has made to the real estate Bill do not weaken the law but make it more practicable.
The big bone of contention here is the escrow account provision. The original Bill mandated that builders deposit 70 per cent of the money, that they collect from buyers, into a separate bank account, which can only be used to meet the construction expenses of the ongoing project. This was to ensure that builders don't divert funds from one incomplete project to another, leaving buyers in the lurch. However, the Modi Government has brought down the 70 per cent requirement to 50 per cent. The Opposition claims that this hurts the interests of the buyer. It would be correct, only if it assumes that the cost of construction is 70 per cent and the cost of land 30 per cent.
However, if the equation is changed — the cost of construction dips and the cost of land rises, as may be the case in commercial properties in prime locations — then the funds in the escrow account will sit unused. This will necessitate external financing and increase the price of the project. Notably, the UPA’s version did not include commercial properties which the current Bill does. Other problematic areas include the amendment allowing builders to make ‘minor alterations' in the sanctioned plan without permission from two-thirds of the buyers and the supposed weakening of the appellate body of the proposed real estate regulator. These issues can, and should be, resolved amicably.