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The government would come out with the proforma of buyer-seller agreement under the Real Estate (Regulation and Development) Bill, 2013, which would form the basis of all the future sale contracts between developers and prospective buyers.
“It will be a standardised agreement but a balanced one…and states will an option to modify it,” minister for housing and urban development Ajay Maken said, a day after Cabinet cleared the Real Estate Bill, which was in the making for about five years.
The real estate sector has remained unregulated so far. The Bill will safeguard buyers against scrupulous builders and check the delays in the realty projects which have become a common trend nowadays. Moreover, it would try to bring in a transparent environment.
The Bill will now be placed before the Parliament in the coming Monsoon session, Maken said adding this will enable more funds to flow into the sector as the banks and financial institutions will not be wary of lending to real estate developers now.
As many as 22 states, including Madhya Pradesh, Gujarat, Andhra Pradesh and Rajasthan have supported the Bill, the minister said. 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'.
The real estate agents will have to register themselves or through developers, which will easily establish money trail and help in curbing money laundering, Maken said. This clause was added on the recommendations of the Department of Revenue, ministry of finance.
The projects over and above with an area of 1000 square metre or 12 dwelling units will have to be registered with the proposed regulator.
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.
It also makes it mandatory for developers to launch projects only after acquiring all the statutory clearances from relevant authorities. Besides, it 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% 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 70% 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 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.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.
Reactions on Bill
Tata Housing MD & CEO Brotin Banerjee
The proposed setup of a regulator will not only protect consumer interests but will also ensure fair practices and accountability on the part of industry players. However, the Bill should be more balanced and should include clauses that protect developers as well. Government should ensure setting up of a single window clearance mechanism to avoid unnecessary delays.
The notion that industry is not regulated is debatable. It is in-fact over-regulated given that a multitude of government agencies need to approve projects leading to inordinate delays. Even government officials should be held accountable for an efficient and transparent approval process.
Supertech CMD R K Arora
The regulator is going to address issues which will benefit consumers, investors and the real estate industry. The mandatory registration process for any new projects will help consumers and bring confidence and transparency in buying or investing in projects, besides improving sector's credibility.
However, setting up of a single window system definitely would have helped in getting fast clearances, which is one of the major reasons of delays in construction. Currently, it takes about 12-18 months in getting various approvals which also leads to increase in costs.
Knight Frank India Senior Executive Director Naushad Panjwani
It is a welcome and a long awaited measure.However, while consumers have a lot to gain from this, the realtors will have mixed feelings.Even though progressive developers and trade chambers have welcomed it, the Bill appears to be a tad harsh for relators.
DTZ India Research Head Rohit Kumar
It is welcome move and has the potential to protect a home buyer from unscrupulous builders. One of good provision is that the developers are now required to sell on carpet areas and not the earlier super built up area.
This will clear a lot of haze around what constituted super built up area. To ensure the funds generated through sales are safe, 70% of such funds are to be deposited into a separate bank account thereby ensuring developers do not roll funds for other projects.
This Bill hopes to bring in the much needed transparency in the sector which is plagued by negative image both within the country and in the investor community outside India.
