Both stakeholders – property purchasers and developers – are likely to benefit if the proposed Real Estate Regulatory Bill gets Parliamentary nod, says RAJIV DOGRA After almost two years when the first draft of the proposed Real Estate Regulatory Bill was introduced in Parliament in September 2009, it is likely to get the nod during the upcoming monsoon session. The bill is, essentially, supposed to pave the way for housing reforms in the country. Protecting interests of property purchasers and streamlining development clearance processes remain the two key objectives of the bill. According to Pranab Datta, Vice-Chairman and Managing Director, Knight Frank India, the real estate sector is humungous in size, thus it makes a huge impact on the GDP of the country. However, when compared to other developing countries, the regulations are way below standards and “connotations remain not very positive”, he adds. “A better governance is expected if there is a regulation standard,”he says. “Earlier, too, sectors like stock or insurance have done well once brought under (the ambit of) regulations. “Similarly, in the realty industry a positive outcome is expected provided the regulation is enforced with intent in letter and spirit.” The regulation of activities of property developers and builders in India remains a state subject and comes under the purview of the respective state governments, municipal and development authorities, under the provisions of State Town and Country Planning or City Development Authority Acts. This has, however, led to inconsistency with respect to rules and regulations being followed in governing, constructing, purchasing, transferring and leasing of properties across the country. The bill, therefore, aims to mend these inconsistencies and focus on the well-being of the property purchaser. “There has to be a synergy between the state and the government at Centre if it prescribes to implement the bill,” says Datta. “There would be moments when central funding will be required for certain projects, so it will be mandatory for states to confirm to certain legislations.” However, Kumar Gera, Chairman and Managing Director, Gera Developments, raises concerns, asking how a single regulator based out of Delhi can control things in every state. “Land is more of a state subject with different set of rules for every place,” he says. “The bill should essentially take into account various parameters for speedy clearance that are required in the marketing real estate sector successfully.” Additionally, the bill proposes to establish a regulatory authority, to control and promote the construction, sale, transfer and management of colonies, residential buildings, apartments and other properties. The regulatory authority shall consist of a chairperson and two members to be appointed by the government, from among those who have professional knowledge and experience in the field of public administration, urban development, finance, law, or management. The key function of the regulatory authority would be to ensure compliance of the obligations cast upon the property developers and property buyers/ investors under the regulation. “This would bring in some marginal level of comfort to buyers,” admits Gera. The authority would also maintain a website, with the records of all real estate projects with all details, as provided in the application for registration. The real estate regulator would have the important task of evolving a consensus among various stakeholders, such as central or state governments, the Bureau of Indian Standards (BIS), municipal bodies, developers, associations of engineers and architects, on various issues like structural safety, speedy grant of planning permissions, building approvals and licenses, rating of real estate projects and promoters, reliable land title certification system, speedy and transparent registration of properties, statutory framework for equitable and balanced relationship between landlord and tenants and to promote affordable housing. Besides this, the bill provides for the establishment of a real estate appellate tribunal to adjudicate any dispute and to hear and dispose appeals against any direction, decision or order of the regulatory authority. Besides this, the bill has outlined in detail, the role of the developer and its obligation towards the regulatory authority and buyers. The developer, under the bill, is obligated to make available for inspection all documents and information to prospective purchasers. The builder is obligated by the bill to enter into a written agreement of sale, with the prospective purchaser, before taking any advance or deposit. After the execution of the agreement of sale, the developer is not entitled to create a mortgage charge on the plot, building or apartment, without the prior written consent of the buyer of the same. In addition, the developer is expected to file all the details of the project with the regulatory authority and give details of every advertisement/ prospectus and the names of property dealers or middlemen dealing in the project. The proposed legislation, it is hoped, will lead to better information-sharing and decisionmaking, between developers and consumers. “The bill would certainly work like a catalyst,” says Prasad Deshpande, CEO, Pune Vastu. “It would bring in some amount of transparency in a sector that has many elements which a few builder lobbies try to take advantage of. The bill would certainly generate literacy among buyers about the realty sector. Interestingly, this would promote a mindset to look at the realty sector in a positive light.” In order to make the proposed act effective, penalties have been stated for those who fail to comply with or contravene its provisions. The new draft has provisions that protect buyers from flyby-night developers, misleading advertisements, mis-selling ofprojects and undue delay in project completion. However, Gera observes that it would be wrong to put the blame squarely on a developer. “It is true that due to a derailed or delayed project a customer suffers, however, there are many other factors too that come into play like role of service providers, local authorities, among others. In fact, for accountability to come in, all the stakeholders are obliged to play their roles sincerely.” Datta, meanwhile, observes that though the bill should outline the standards to be applied for the realty sector, it shouldn't become a mechanism of bureaucracy. “The unnecessary layering of decisions should be avoided. The bill should fulfill expectations of all stakeholders and should come up with a collaborative way to ensure growth in the realty sector,” he adds.
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