The draft real estate Bill calls for stringent disclosure norms and mandatory registration for every new housing project. The legislation could lead to a major overhaul of the real estate sector and curb unfair practices. Builders, however, argue that some provisions in the Bill — including one that stipulates up to three-year imprisonment for not registering projects — are too harsh. Mr Arun Kumar Misra , Secretary, Ministry of Housing & Urban Poverty Alleviation, spoke to Business Lineon the latest draft which incorporates crucial changes into the original draft of 2009. Excerpts:

What are the key changes between the drafts of 2009 and 2011?

The original draft had envisaged some form of a bank guarantee, but the new version doesn't have that concept. Originally, it was thought that the bank guarantee could be used to complete an incomplete project — but that wasn't a tenable proposition. Instead, the new Bill advocates that in order to finish the incomplete works, if any, separate efforts will have to be made by municipalities, development authorities and some other partners. The States will have to take the lead. So the bank guarantee has been done away with.

The new Bill has also introduced a concept of ‘escrow account', wherein the money collected from buyers has to be kept reserved, and cannot be diverted.

The 2009 draft had provided for inspection of accounts (of builders) and their books, which has been done away with in the new version. The regulator isn't really concerned with the financial dealings of the promoter. But the regulator is interested that the commitment given to buyers for completion of a project should be maintained.

The property market is fraught with complaints regarding the conduct of builders. Why did it take so long for the Government to come out with the draft Bill?

The major reason could have been that the Central Government took some time to clearly define what its role will be. Finally, it is clear now that land will continue to be under the purview of the State Governments, but that transactions are under the purview of the Central Government. Once that clarity came in, some changes had to be made to the draft.

Builders have opposed the imprisonment clause pertaining to Section 3 of the Bill. They say IPC already deals with such cases. What is your view?

Section 3 (which mandates the registration of every project before construction begins), is the heart of the Bill. It basically fixes the responsibility on what needs to be done. If Section 3 isn't complied with, the Bill has no meaning. That is why we have recommended it. But as the Minister has said, we are open to having a discussion on these issues with stakeholders. Also, we have stated it (the punishment) can be a penalty or imprisonment, or both.

The draft mentions a threshold of 4000 square metres, for provisions to be applicable. Does that mean construction in smaller towns will go unchecked?

Obviously, a regulator cannot be expected to look into small developments. There has to be a critical mass, below which there shouldn't be so many conditions.

So, we have suggested 4000 square metres.

Will the regulator also be responsible for verifying the documents that a builder submits?

The documents that are required to be furnished would have already been cleared by various development authorities at some stage. And then the regulator would have to again send it to the authorities for vetting. So, intentionally, we haven't used the word ‘scrutiny'. We presume that the builder has given the correct document, and in case something is found to be wrong, then he will be penalised.

What is your message to the real estate companies, many of who say that provisions of the Bill could impede growth?

I have seen a few reports by real estate advisors who say that this is a good Bill, and that it will bring a lot of investment into the sector. Their interpretation is that it will promote large-scale development; make all transactions, above the board. It is a tremendous opportunity for the sector to change its perception and image. There is nothing harsh, it is a balanced Bill.

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