Currently, the real estate and housing sector is largely unregulated and opaque, with consumers often being unable to procure complete information, or to enforce accountability against builders and developers in the absence of effective regulation.
The Real Estate (Regulation and Development) Bill, 2015 is set up to create state-level regulatory authority body to whom buyers can take their queries to. The Bill seeks to set up a regulatory framework that will govern contracts between real estate buyers and sellers. The authorities will be empowered to punish or prosecute developers. The Bill, first introduced in Rajya Sabha in 2013, has crossed a select committee and the new version was reworked.
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, amongst others. But this bill proposes to put a stop to malpractices by developers in setting up the 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.
Is it important?
Yes. With a severe housing shortage, 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.
What are the Salient Features of the Bill?
Benefits of the Bill?
- 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.
- Establishment of “Real Estate Regulatory Authority” (RERA) in States/UTs to regulate real estate transactions.
- Real estate projects and real estate agents must be registered with the Authority.
- Mandatory public disclosure norms for all registered projects such as details of promoters, project, layout plan, plan of development works, land status, status of statutory approvals and disclosure of proforma agreements, names and addresses of real estate agents, contractors, architect, structural engineer etc.
- Compulsory for builders to deposit 70% of the amount raised from buyers into an escrow account in a scheduled bank within a period of 15 days to cover the construction cost of the project for timely completion of the project.
- Establishment of fast track dispute resolution mechanisms for settlement of disputes through adjudicating officers and Appellate Tribunal. To appoint one or more adjudicating officers to settle disputes and impose compensation and interest.
- Inclusion of equal rate of interest to be paid by the promoters and buyers in case of default or delays. Currently it is in the favour of builder.
- Civil courts jurisdiction prohibited from taking up matters defined in Bill, however, consumer court allowed to hear real estate matters.
- Insists on adherence to declared plans, or bar the promoter from altering plans, structural designs and specifications of the plot, apartment or building without the consent of two-third allotted after disclosure.
- Proposed jail term of upto 3 years or penalty or both in case of builders
Among other benefits, the bill will not only clean the market, it will also control the realty prices. In turn, more investors, in domestic and foreign investment are likely to enter the market as the environment will be more conducive for business and achieve the objective of Government of India to provide “Housing for All” by enhanced private participation.
Builders often demand part payment in cash, making many ordinary buyers party to corruption. The Bill will help curb undeclared "black money" in property markets that costs the government billions of rupees in lost taxable income.
It aims at restoring confidence of consumers in the real estate sector by institutionalizing transparency and accountability in real estate and housing transactions which will further enable the sector to access capital and financial markets.