REAL ESTATE BILL - GREEN SIGNAL WITHIN SIGHT?

By Ruma Dubey

The biggest anticipation today – the Real Estate Bill might get through the Rajya Sabha. If not today surely in this session; that’s the mood on the street.

But the passing of the Real Estate Bill, does it in any way mean that you will now be able to own your dream home at affordable price? (real estate and affordable, saying in the same breath is a misnomer in itself!) Or is there protection against indiscriminate price hikes by realtors?  Well, the answer to these very crucial questions is – NO.  But it is at least a beginning and the attempt is to bring about some transparency in this highly unregulated sector.

Last year, some amendments were proposed in the Bill. The recommendations of the Standing Committee of Parliament on Urban Development and suggestions of various stakeholders (consumer organizations, industry associations, academia, experts etc.) were also included after extensive consultations.

So let us look at the amendments/changes:

• Pertains mainly to residential realty and not commercial – It will now cover residential as well as commercial.

• Setting up a regulator for the realty sector , to be set up in each state – to set up one or more ‘Real Estate Regulatory Authority’ in each State/ Union Territory (UT), or one Authority for two or more States/UT, by the Appropriate Government for oversight of real estate transactions. Additionally, it has been proposed to appoint one or more adjudicating officers to settle disputes and impose compensation and interest.

• Mandatory for private developers to get all their projects registered with the regulator before sale and only after obtaining all necessary clearances – Not just the promoter but the real estate agent also has to get himself/herself registered.

• To usher in transparency, it has been made mandatory for public disclosure of all project details like credentials of promoters, lay out plan, land status, carpet area and number of apartments booked and status of statutory approvals – This stands as it is but at the same time, he will also need to provide proforma agreements, names and addresses of real estate agents, contractors, architect, structural engineer etc.

• Clear definition of carpet area and prohibits developers from selling houses or flats on the basis of ambiguous ‘super area’ – This remains as it is

• Builders cannot publish misleading ads to pure buyers – actual project pictures and not what the builder imagines. Failure to do so for the first time would attract a penalty that may be up to 10% of the project cost and a repeat offence could land the developer in jail – This too remains as it is.

• To curb the ongoing ponzi schemes – developer has to deposit 70% of funds received for a particular project in a separate escrow bank account to cover the construction cost of the project. This means money collected for one particular project will have to be used for that only and not for the buying of land and launch of other new projects – This has been reduced to 50% or even lesser as notified by the Appropriate Government.

• Another major change is that promoters cannot change or alter plans and structural designs without consent of 2/3rd of allottees after disclosure. However, minor additions or alterations permissible due to architectural and structural reasons.

• To protect the Rights of the allottees, the Bill has stated that they have the right to obtain stage-wise time schedule of project; · Claim possession as per promoter declaration; get a refund with interest and compensation for default by the promoter and duty of the allottee - make payments and fulfill responsibilities as per agreement.

• Real Estate Appellate Tribunal to hear appeals from orders of the Authority and the adjudicating officer. The Appellate Tribunal is to be headed by a sitting or retired Judge of the High Court, with one judicial and one administrative/technical member.

The intentions of the Bill are indeed very noble but one does not know if it will be as effective as it is made it out to be. When it comes to flouting norms, some of the best brains exist in the realty sector and these rules will be broken. Like one builder says, “these rules mean we will now have to grease more palms, over and above what we are already paying ‘unofficially”. It also means that if we needed around 28 approvals, running into indefinite time spans, will now need more approvals and that means more delays. And in this sector, any cost which the builder has to bear, be assured, it is passed on promptly to the customer.” One hopes that existing projects do not come under this purview or else, projects which have already been delayed for over 2-3 years, will now take a life time.

The attempt being made to curb misleading of public with ads is a good move. Making it mandatory for builders to use only pictures from the actual project site is a very good move. The move made to curb the ponzi schemes by bringing in the deposit of 70% in escrow account is good but adherence is questionable as each state will have its own realty prices, own construction costs. And yes, public disclosure of all project details is a very good move as it clears the ambiguity over land titles and makes the entire project transparent.

There are quite a few things lacking in the bill. Like why couldn’t it have made it mandatory for the developer to have first built a few floors of the project before getting approval to sell? We would also like to know if the upcoming Regulatory authority will provide a rating on the project – not just on the builder but also on the project; something akin to what CRISIL and the likes of CARE do. Bringing in more professional, external agencies will ensure full disclosures, even on litigations, liabilities and other incomplete projects.

Once again, Bills are always introduced with good intentions but all problems arise due to non adherence, poor implementation and lack of stringent punitive measures. Somehow, this too seems to be headed the same way… this is not a cynical view but a view based on past experiences.