The Rajya Sabha on Thursday passed by voice vote a real estate regulation Bill, aiming to protect homebuyers from erring developers besides bringing transparency in the sector.
Except All India Anna Dravida Munnetra Kazhagam (AIADMK), all Opposition parties, including the Congress, voted for the Bill in a rare display of bonhomie. This is the first key Bill that the Rajya Sabha, where the government is in a minority, has passed in the last two sessions. The government is keen to ensure the passage of the Bill in the Lok Sabha before the Budget session goes into a 40-day recess from March 17. The government hopes to find similar support from the Opposition for the Aadhaar Bill, which has been listed for discussion and passage for Friday in the revised list of business of the Lok Sabha.
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Former urban development minister and Congress MP Kumari Selja told the House that Sonia Gandhi and Rahul Gandhi supported the Bill.
Last week, Congress vice-president had met consumers to understand their problems. Selja said that the UPA had initiated the efforts to bring the Bill. “But take all the credit (for ensuring the passage of the Bill). We stand by this Bill,” Selja said looking at treasury benches. She lauded the government for incorporating the suggestions by her party and rest of the Opposition in the new Bill. The Bill was referred to a Select Committee of the Rajya Sabha, headed by BJP’s Anil Dave, in May 2015. The committee submitted its report in end July. Congress’ Jairam Ramesh suggested that all Bills should be referred to parliamentary standing or select committees.
Dave said the committee members resisted enormous pressure from builders’ lobbies to come up with a Bill that protects consumers’ interests. Urban Development Minister M Venkaiah Naidu said the consumer, after the passage of the Bill, would be the king. “When there is a king, there got to be a queen also. The queen obviously is the developer. And there shall be a happy marriage between the king and the queen, for both to live happily ever after,” he said. Naidu also sought the support of AIADMK members who had opposed the Bill arguing that land was a state subject. Later in the day, Prime Minister Narendra Modi said the Bill was “great news” for aspiring homebuyers. The PM said the Bill envisages effective regulatory mechanism that will lead to orderly growth of the sector and give a strong impetus to his government’s vision of ‘Housing for All’.
Over the last few years, several developers have gone back on their commitment of delivering projects on time because of various reasons ranging from economic slowdown to delay in project approvals. So far, homebuyers had no forum to approach except consumer courts as the sector was devoid of regulation. According to Real Estate Regulator Bill, developers will now have to deposit 70 per cent of the sale proceeds including the land cost in a separate escrow account, which was earlier brought down to 50 per cent by the NDA government. They would also need consent of two-third buyers for changing project plans.
The Bill also provides for imprisonment of up to three years in case of promoters and up to one year in case of real estate agents and buyers for any violation of orders of Appellate Tribunals or monetary penalties or both. In case of structural defects, promoters could face imprisonment up to five years.
Also, an equal rate of interest has to be paid by promoters and buyers in case of default or delays. This will clear the anomaly between the two parties and put them on a level-playing field. Developers have been framing biased buyer-seller agreements where they pay only 2-3 per cent interest in case of default while a buyer has to pay 16-18 per cent interest for a default. “This Bill is need of the hour. It will prohibit unaccounted money from being pumped into the sector,” Naidu said while moving the Real Estate (Regulation and Development) Bill, 2015. He added: “It brings in only a regulation and not strangulation. This Bill is not against anyone… Real Estate Bill will renew investors’ confidence and ensure timely completion of projects and create more opportunities.”
Once the Bill becomes a law, a Real Estate Regulatory Authority will have to be set up in each state. Both commercial and residential segments will come under its purview.
“The Bill will place Indian real estate market, which currently is fragmented and unorganised, at par with that of other developed countries with clear accountability of developers through the establishment of the Real Estate Regulatory Authority (RERA). Additionally, buyers and developers will now finally be on a level-playing field with respect to penalties on delays,” said Sanjay Dutt, managing director, India, Cushman & Wakefield.
In December last year, the Cabinet had approved 20 major amendments to the Bill based on the recommendations of the Rajya Sabha Select Committee. Under the Bill, developers will have to register projects with 500 sqmt area or eight flats with the regulatory authority instead of 1,000 sqmt and 12 flats earlier. A minimum of 70 per cent of sale proceeds will have to be kept in a separate bank account and used for construction of the project. In April 2015, the government had also cleared a few amendments to the Bill. The Bill was tabled in the Rajya Sabha but was referred to the Select Committee after the Opposition called the Bill pro-developers.
About 10 lakh people buy houses every year with an investment of about Rs 3.5 lakh crore. As per available information for 27 major cities including 15 state capitals, 2,349 to 4,488 new housing projects were launched every year between 2011 and 2015. In these 27 cities, during these last five years, a total of 17,526 projects were launched with a total investment value of Rs 13,69,820 crore, Naidu said in the Rajya Sabha.
“Delay in implementation of housing projects due to lack of transparency and accountability has been the bane of real estate sector in our country. This results in huge cost and time overruns, resulting in increased cost of houses. This is a matter of serious concern in the context of every citizen aspiring to own a house of his or her own,” Naidu said.
A total of 76,044 companies were involved in realty sector. Real estate is the second largest employer in the country, next only to agriculture and accounts for about nine per cent of GDP and the construction sector supports 250 ancillary industries.
