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The Cabinet today cleared the Real Estate (Regulation and Development) Draft Bill, aimed at organising and monitoring the sector.
The bill, once passed by Parliament, is expected to help protect buyers from erring developers and usher in an era of transparency.
The sector has remained unregulated till now. This is one of the many reasons that the industry has been opposing the Bill in its current form, which proposed stringent penalties and even jail term for a maximum of three years for developers indulging in repeated malpractices.
The Bill assumes importance in the wake of rising consumer complaints against developers for delay in projects by over 4-5 years. While currently there's no mechanism to curb delays, buyers defaulting on payments have to pay high interests.
Also, developers often escape through loopholes in the sale agreements.
The Bill, which has been in the making for about five years now, would make it mandatory for developers to launch projects only after acquiring all the statutory clearances from relevant authorities.
The draft bill has certain tough provisions to deter builders from putting out misleading advertisements related to the projects carrying photographs of actual site. Failure to do so for the first time would attract a penalty which may be up to 10 per cent of the project cost and a repeat offence could land the developer in jail for a maximum of three years.
It also aims to make it mandatory for a developer to set aside 50 per cent of the money collected from buyers to a separate bank account for every project to ensure that the money raised for a particular task is not diverted elsewhere, it is learnt.
It provides for a clear definition of the 'carpet area' and would prohibit private developers from selling houses or flats on the basis of ambiguous 'super area'. It also seeks to establish an Appellate Tribunal to adjudicate disputes and hear appeals from the decisions or orders of the Authority.
The industry has been opposing the Bill and the draft has been revised several times since 2009, when it was first made.
Anil Kumar Sharma, President, CREDAI-NCR, said, “We welcome the thought of Government on bringing the Bill but we are not willing to accept it in its current form. We have been opposing the bill in its current form from the beginning. We are disappointed with the way government is going ahead without addressing our concerns. According to us, the said bill is neither benefitting the Consumers nor other stake holders.”
Anshuman Magazine, Chairman and managing director MD, CBRE South Asia Pvt. Ltd, said, “The real estate regulator bill should have been more balanced taking view of challenges faced by developers and consumer grievances. While consumers need protection, for real estate development to happen more efficiently, and in a transparent manner, administrative reforms are required urgently. “
Echoing similar views, Getamber Anand, CMD, ATS Infrastructure, said the industry is not against a regulator in principle, but any such Bill should not be anti-development and retro grade in nature. “With unilateral provisions it may be misused by people in the power to unnecessarily further delay real estate projects,” he said.
The Bill could also make housing units expensive, according to Vimal Shah, MD, Hubtown and president, Maharashtra Chamber of Housing & Industry.
”The Bill will make housing expensive. In a zeal to put curbs on small section of developers, the government is punishing the whole industry. If industry does not prosper, how can customers benefit. If construction stops, it will make housing costly. How will it be made affordable?, he said.
Within a year of the Act coming into place, Real Estate Regulatory Authorities will have to be constituted by the government of each state and Union Territory. More than one authority in a state is permissible. At the central level, a Real Estate Appellate Tribunal has been proposed.
The legislation is aimed at protecting the interests of ordinary people and home buyers across the country against unscrupulous practices in the sector.
