Ever wondered why stocks, mutual funds and insurance investments are all regulated to death, but not property purchases? Well, that’s what the Real Estate (Regulation and Development) Bill, seeks to do. Last week, a Parliamentary panel submitted a crucial report on the Bill to the Rajya Sabha.
What is it?The Bill seeks to set up a regulatory framework that will govern contracts between real estate buyers and sellers. So far, home buyers were forced to take what they got from builders — one-sided contract terms, delays running into years, cost escalations, arbitrary changes to the plan — you name it. But this bill proposes to put a stop to such practices by setting up of Real Estate Regulatory Authorities across states, which will maintain records of projects, promoters and agents, and a database of violators. This information will be available to buyers. There will be strict guidelines on advertisements too.
Before launching any project, a developer has to provide details such as layout plan, approvals, names of promoters and contractors, and time frame for project completion on his website and register it with the authority. All approvals must be obtained before the project is marketed. The consent of at least two-thirds of customers would be needed to change the project specifications post-sale. Developers also have to keep 50 per cent of the amount received in a separate bank account to be used in the same project. Complaints about violations can be taken up with the regulatory authority and appellate tribunal, which will have powers to punish defaulters. Existing options such as consumer courts will also be available. Punishments for defaults by developers can be high — from 5-10 per cent of the project cost to cancellation of registration to imprisonment. Buyers will be entitled to refunds and compensation in case of defaults by developers. Quality defects also have to be set right by the developer.
The Bill also covers real estate agents and commercial developments. To address promoter concerns of lengthy approval process causing delays, the Parliamentary panel is reported to have recommended single-window clearances by State governments.
On one hand, India faces a severe housing shortage and on the other, buyers are put off by sky-high real estate prices and the unscrupulous practices of many developers. A law which brings transparency in the sector can not only bring in more investments but it also has the potential to moderate costs and make housing affordable. This will be essential for the success of the ‘Housing for all by 2022’ vision of the government.
Why should I care?Given the steep equated monthly instalments we all pay on your home loans, it is only fair that there are some rules in place, to prevent the builder from gypping you. So far, buyers aggrieved by delays, changes or unfair contracts on property purchases have been knocking at doors of the Competition Commission of India’s for bringing defaulters to book. But a specialised real estate regulator could speed up such redress.
The bottomlineReal estate prices are already on their way down across Indian cities. If lower prices could be accompanied by a clean-up of the sector too, that would be icing on the cake.
A weekly column that puts the fun into learning