MUMBAI: 1) Project Registration
When the Real Estate (Regulation and Development) Bill 2013 comes into effect, all projects will have to be registered with a real estate regulatory authority.
Promoters will have to disclose details about the project (name, type, plans, partnership companies, names of persons involved with construction etc). Will have to specify what kind of area is for sale (based on standardised markers).
All brokers and agents will have to be registered with the regulator before they can practise. Builder will have to provide a list of agents who will represent each project.
Once the project is registered, all details will have to be put on the website and updated every quarter. This includes disclosing the extent of project completion.
What This Means
A) Buyers can take informed decisions. "Today, it's impossible to compare properties because square footage, amenities, floor-space index consumed and even delivery schedules are different for different builders," says Pranay Vakil of Praron Consulting. "Standardising this will allow consumers to make apples-toapples comparisons."
B) Which standards to follow? "The Bureau of Indian Standards has laid down standards for the construction industry, and clearly defined things like carpet area, plinth area or how to calculate the difference between the balcony and room area," says consumer rights advocate Anand Patwardhan. "If the bill brings in a new set of definitions, it will create a conflict."
C) Do away with middlemen: When all the details are on the website, housing rights activists feel there is no need for brokers and agents; buyers can get in touch with promoters directly. Also, if the regulatory authority is going to insist on brokers being registered with it, to what extent will it be liable for their actions? Activists say this is not clear.
D) "Having access to the relevant information will help de-risk lending," says VK Sharma, MD and CEO of LIC HousingBSE -2.84 % Finance. At the moment, buying a house is like groping in the dark, he adds. "Even with the most trusted builder, you don't know what you will get. This kind of transparency will boost buyer confidence."
Builders will not be able to sell — or advertise — a project till it receives the requisite approvals. These range from land titles and amenities, to provisions for water, electricity and sanitation. This means pre-launch sales are out. Brokers will be barred from trying to sell an unregistered project, or one that has not received the necessary approvals.
The regulatory authority will get 15 days — after receiving an application for registration from a promoter — to either clear it, or reject it. Reasons for rejection will have to be put down in writing. If the regulator fails to do either of these, the project will be considered as registered.
What This Means
A) "Ensuring prior permissions is the only good thing I see in this bill," says Patwardhan. "But this will open the window to more corruption. Builders will stop at nothing to get clearances."
B) Regulator for 'some': "We would welcome a regulator if it's going to regulate all the players in the real estate industry," says Vimal Shah, president of the Maharashtra Chamber of Housing Industry (MCHI). "Right now, the bill appears to only hold the developer responsible." Adds Navin M Raheja, managing director of Raheja Builders: "Developers will be penalised for delays, but what about the delays created by government departments in providing clearance for projects? If there is a delay in giving approvals, the government official should also be made accountable for it."
C) Approvals come in phases, and never all at one go, says MCHI's Shah. If a developer has to wait to launch a project only after all the approvals are in, this would only mean further delays in handing over the house. "We wanted this to be an automated registration process so that there is no human interface, and therefore no chance of corruption," says Lalit Kumar Jain, president of the Confederation of Real Estate Developers of India (Credai).
D) Smaller builders will be hit harder. After putting down money for all the clearances at one shot, they may not have much left over to start construction right away - especially since pre-launch sales are discouraged. "This will only mean delays in launching projects and escalated costs," says a promoter. Which may get passed on to the buyer.
3) Funds From Buyers
Builders have to open a separate bank account for every project and set aside 70 % (or less, as designated by the local authority) of buyers' money, to be channelled only into the construction of that property.