Real Estate Bill alarm bell for dubious builders
By creating one more department, the government is imposing another set of officials on us, whom perhaps we would need to pay a huge amount to get our projects approved
Jun 12, 2013
Source : The Times of India


LUCKNOW: The Real Estate Regulation and Development Bill will possibly weed out non-serious developers in the business to make easy money, claim big developers of the city. More than 70% projects in the city, big as well as small, have some lacuna or the other in terms of obtaining necessary approvals, claim industry experts. This implies that once the bill gets enacted, a majority of projects would come under the scanner and could possibly be stalled, thereby affecting thousands of people.


The bill ensures developers register all projects with the state regulatory authority and adhere to deadline and specifications promised to the buyer. It could also make provisions for penalising realtors who dupe people through misleading advertisements.


Besides, an important feature is that the developer needs to seek all necessary clearances before selling his property. He cannot collect money from buyers before obtaining important permits from various agencies. This comes as a great relief for end users who are not given clear picture about the land acquisition status by many developers.


The move has been welcome by established players who said setting up an apex regulatory body was the need of the hour to bring the much needed control in the industry.


A senior executive of a real estate major said, "We have been persuading the state housing department to make regulations to put a check on small developers who have recently mushroomed and have been giving bad name to the industry. It is a positive move for end users as also for the industry in longer run."


Experts claimed around 30% projects are being developed in the outskirts by small and fly-by-night operators who have not taken approval from either of the authorities-Lucknow Development Authority or UP Housing and Development Board.


Since the land (mostly agricultural) on which the projects are coming up are on the periphery, developers have got maps conveniently approved by local zila panchayat bodies for lesser rates. These are small projects on about 20-25-30 acres of land.


One can see such projects mushrooming near Barabanki and on Deva Road, Gosainganj on Sitapur Road, Mohanlalganj on Rae Bareli road and the stretch between Amausi airport and Unnao on Kanpur Road. Before obtaining necessary approvals, developers market their projects at attractive rates to lure public.


"Thousands of ignorant people who want to put money into real estate are misled by false advertisements and end up putting money into them without caring whether due approvals are in place or not. A layman would hardly enquire about such formalities. He's interested only investing money for a good deal", said another real estate executive.


With heat turning on small developers, industry senses a temporary slowdown in the real estate sector in near future. With more checks at every stage right from seeking registration, obtaining licence, preparing DPR (detailed project report), acquiring land, completing construction and complying to promises made to a buyer, many non-serious, fly-by-night operators who were dabbling with housing sector for quick profit would disappear.


This slowdown would eventually lead to the sector turning more organised and credible with only a few serious players operating, hopes the industry. Their only concern is, "To make this bill consumer-friendly, government should ensure it is implemented with strictness so that no one gets away with unlawful means. We all know what happens to a law or policy in the country."


Currently, there are about 50-odd developers in the city, both big and small trying to grab a bigger pie of the market. Out of this, about 15 are big and committed players who normally comply with the norms. "Big players can't afford to flout norms as we have to register ourselves with LDA and get their approval from time to time. Besides, we have to deposit to them a huge amount as security before launching any project, lest we drop out of the project halfway through", said a prominent builder of the city.

There are more than 120 projects developing in the city. Interestingly, almost all developers resort to the pre-launch stage where a realtor attracts investors through his chain of trusted brokers to pump money into the project even before it is launched officially. At this stage, a lot of unaccounted money flows in from various investors who are attracted by lower rate of the project.

Once the project kicks off and its price escalates after the hype and hoopla, investors sell it at a higher price, thus sealing their profit. Once the bill is implemented, brokers and such investors would be worst hit as the bill ensures accountability and transparency at every stage of the project.

Ansal API had run into a controversy some time back regarding a disputed stretch of land in their project. They had proposed construction of 'Astha Apartments' on a 104-acre stretch of Barauna village which was disputed with Housing Board. While Housing Board said it had acquired this land in 2004, the developer defended stating there might be some clerical error on the agency's part as they hold documents and an approved plan layout by LDA. It involved money of more than 864 allottees.

The matter was subjudice and has now been referred to the government to take decide on ownership. A company official said, "Had this bill been in place before, such errors and confusions would have probably been avoided. It will raise customers' confidence in real estate."

Moreover, the bill would give much needed credibility to the sector for procuring loans. A resident said, "A prominent national bank refused to give me home loan for a flat in a renowned township project of the city. The realtors are a big name in the industry but the bank denied giving loan saying they don't have necessary approvals, and carry a track record of delay in projects."

Another point is that few developers actually take loans from banks and financial institutions as it requires undergoing a long and cumbersome process. Instead, they prefer routing money from investors for constructing the project. "With the bill coming into force, banks might ease the tedious process and also reduce their interest rates which are steep presently", said a realty company's official.


City's development authority said the bill had been sent to the state government about a year back for their suggestions and recommendations. The bill had been proposed long time back and had been deferred many times in the cabinet. It sought to establish a regulatory authority at the state level.


Another section of the industry, however, said that setting up another government body at the state level would mean abetting corruption and taking more money from big developers, who would now have to pay off more to the officials to get their projects sanctioned.


A developer said, "Real estate involves circulation of big money. Corruption in development authorities and various housing agencies level is well known. By creating one more department, the government is imposing another set of officials on us, whom perhaps we would need to pay a huge amount to get our projects approved."


Big developers also echoed the same fear. They claimed it is big developers who would be impacted the most as every time, it is they who are forced to pay hefty amount to officials to get their projects moving.

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