As the Real Estate (Regulation and Development) Bill, 2013, becomes a reality, the industry believes that this will reduce the number of unprofessional builders operating in the industry even as it boosts confidence among buyers.
The Union Cabinet on Tuesday gave its nod to the amendments to the Bill, which will now be taken up in the Rajya Sabha. The Bill was introduced in the Upper House in August 2013.
The Bill seeks to protect the interests of consumers and establish regulatory bodies at the Centre and States for ethical and transparent business practices in the real estate sector.
But real estate developers feel that the Bill needs modifications and should not be passed in its current form.
Supertech Chairman RK Arora said, “Most complaints on delayed completion/delivery are because of delay in getting clearances. There is no proposal in the Bill to address this situation.” The proposed legislation should not be enforced retrospectively as it is impossible to comply with various rules and regulations for the under-construction projects, Arora added.
Rohit Raj Modi, President, CREDAI NCR, said, “The Bill will reduce the number of ‘one-time developers’ operating in the industry. However, wilful default must be defined in the Bill in order to remove discretion and urban local bodies and development authorities should be brought under the ambit.”
Mohit Goel, CEO, Omaxe Ltd, added that some provisions that the sector had asked for in the amendment remained unattended.
The Bill has strict penalties including jail for errant builders. The amendments seek to make it mandatory for all developers, including of housing projects, to keep a minimum 50 per cent of funds collected from buyers in an escrow account to meet construction cost.
“We would have preferred the escrow limit to be fixed on city basis or project basis (luxury/affordable), instead of a blanket 50 per cent. Developers should be allowed to change the design and structure after the approval of 50 per cent of the consumers since a lot of difficulties arise when a developer begins construction,” Goel said.
But Anuj Puri, Chairman & Country Head, JLL India, had a differing view: “The reduction in the minimum balance to be maintained in the escrow account from 70 per cent to 50 per cent will effectively allow developers to continue their practice of diverting funds collected for a project towards land acquisition or other projects.
“For the buyers, the concerns regarding funds diversion will be higher now. The end result is that the Bill will be slightly less protectionist towards buyers.”
Wrong disclosure of information or not complying with the disclosures and requirements will entail a fine of of 5 per cent of the project cost.
Also, under the proposed law, one or more Regulatory Authorities will be set up in each State/UT or one Authority for two or more States/UT by the governments concerned and real estate developers, both in residential and commercial sectors, will be required to register their projects with them.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said the Bill would have been more effective had all the approving authorities been brought under its purview.
Liquidity boostDevelopers say the presence of the regulator will infuse liquidity into the market. David Walker, MD, SARE Homes, “We welcome the Bill as it will reduce the number of casual, non-professional builders operating in the industry. We also hope that it will give customers the confidence to commit to buying new homes with the comfort that their largest investment decision is now protected by a regulator.”
Sachin Sandhir, Global MD, Emerging Business, RICS, “The secondary market may see a fall in pricing as speculators may look at offloading their inventories as the realty sector moves to a phase with more clarity and sticking to global best practices curbing the role of black-money.”