DELHI: The Real Estate (Regulation and Development) Bill, 2013, which seeks to regulate the housing market and protect the interest of homebuyers and developers has been cleared by the Union Cabinet and will be placed in Parliament for its approval.
The bill is not flawless. All the stakeholders are hoping that once this bill is enacted, it would be supplemented with all the necessary rules and regulations, which would clarify ambiguities or gaps that exist in the bill. The bill, in its current form, could have been more balanced and clearer on issues relating to dispute resolution and project clearances, some stakeholders said.
RICS, India, a premier institution that addresses professional regulation in the property sector, says: “The bill should be termed as ‘housing regulation bill’ rather than ‘real estate regulation bill’ because it applies only to primary residential market, leaving out the secondary market and also leaving out the commercial property market.”
Taking a risk-based approach, the bill has been modelled taking into account appropriate checkpoints in key stages of a property transaction where regulation is most required, given the history of fraudulent practices and unfulfilled promises.
A common complaint is that developers and builders do not deliver what they promise when selling apartments. While their advertisements show buildings and landscaping that match international quality, in a majority of cases, the ground reality is far different leaving the buyers feeling cheated. The regulatory body envisaged under the draft bill would ensure that developers are held accountable for what they promise and provide recourse to the customers in case these promises are not fulfilled.
Guidelines in the bill
Provisions like restricting launch of projects or advertisements unless all approvals are received, maintaining separate account for customer monies, sale of projects based on carpet area will help bring in transparency.
Other provisions like the mandatory registration of projects (within 15 days) and registration of brokers are well intentioned but unless objective guidelines and rules are stipulated regarding the registration criteria, there is a danger of subjectivity creeping into the registration process.
Stipulation of ‘carpet area’ as the only measurement unit will limit fraudulent practices arising from use of measurement units like saleable area, super builtup area, etc.
The provision will no doubt protect customer interest and create more transparency in transactions. However, a bigger concern that still remains unaddressed is the definition and measurement standards for carpet area. Since the definition mentioned in policies and laws tend to be subjective, the carpet area is interpreted differently and calculated such that it amounts to a higher area than actual. And this problem is not unique to India – it exists in many parts of the world.
The bill proposes to set up a real estate appellate tribunal, headed by a sitting or a retired judge, for adjudicating disputes. However, the complaint handling mechanism outlined in the bill is not as robust as it ought to be considering it does not clarify how the processes will work, what would happen at the state and the city level, etc.
Therefore, these details need to be ironed out further, where the regulator could look at identifying an ombudsman who would be responsible for adjudicating all disputes, much on the lines of the SEBI ombudsman regulations and Banking Ombudsman Scheme set up under the aegis of the RBI.
Anju Sharma, who works in a PR firm and bought a house in Noida Extension recently, says: “The realty regulator is definitely going to address issues which will benefit buyers like us; it could also help investors and the real estate industry too. I believe this bill favours all – builders, investors, end users like me – and is a step in the right direction. This will bring transparency and boost the confidence of buyers and investors and improve the sector’s credibility.”
What developers say
Navin M Raheja, president of Naredco and CMD of Raheja Developers, says: “It is a welcome step. We have been waiting for this legislation for a long time. The proposed bill will bring transparency into the sector and improve the confidence of buyers. It will protect the interest of all the stakeholders – buyers and developers – and also help check unscrupulous players by streamlining the functioning of the whole sector. The bill also ensures housing for the urban poor by making it compulsory for developers to provide some portion of their township projects for the lower-income groups.”
Anil Sharma, president of Credai-NCR and CMD of Amrapali Group, says: “We welcome the regulatory bill; but, the bill would have given the right direction to the realty sector if the status of industry and single-window system were clearly pronounced. We have been opposing the bill in its current form from the beginning. The sector is facing numerous problems and bringing in a regulatory bill at this stage may further worsen the growth in real estate industry. We feel that the current bill does not benefit anybody – neither buyers nor other stakeholders. If this bill had included other regulatory and approving authorities within its ambit, it would have been much more beneficial for everybody.”
Getamber Anand, CMD of ATS Infrastructure and president (elect) of Credai, says: “We are not against a regulator in principle, but any such bill should not be anti-development and retrograde in nature. It can be misused by people in power to act unilaterally and delay real estate projects further. For example, registration with the regulator should be deemed done once applied for rather than given a 30-day lever to the sanctioning authority to delay the application on flimsy grounds, as was provided for in an earlier version of this bill.”
Prashant Solomon, managing director of Chintels Limited, says: “I am in favour of regulation, as it will bring transparency and respect to the industry in the long run. But I have certain reservations about the Real Estate (Regulation and Development) Bill in its current form. All related government authorities like the DDA should also be included within the ambit of the bill. The approval process of the government bodies should also come under regulation and there should be a stipulated time frame for such approvals; many of our projects get delayed indefinitely due to the tedious process of getting government approvals.”
Pranav Ansal, vice-chairman of Ansal API, says: “The bill, and the idea of a regulator, is positive steps and in the interest of all the stakeholders associated with the realty sector; however certain provisions like protecting the builders’ interest by giving time-bound statutory clearances and having homogeneous state policies to ease implementation of projects seem to have been ignored in this bill.”
Deepak Kapoor, director of Gulshan Homz, says: “The regulatory bill is a welcome step but we hope the single-window clearance is put in place as early as possible, as getting all the necessary approvals consumes a lot of time and adversely affects the pricing of our project, especially as the cost of input materials have been rocketing in last couple of years.”
Rakesh Yadav, managing director of Antriksh Group, says: “The bill aids in a uniform regulatory environment and will curb fraudulent land acquisitions, delays in fund transfers, and money laundering. This bill, I feel, was long needed in the sector, which has become notorious for unscrupulous deals. This law will not just eliminate the apprehension felt by homebuyers, but also lift the image of the real estate sector.”
“A real estate regulator should not limit itself to addressing the problems of consumers alone, but lay a parallel emphasis in resolving the issues of the developers too, so that the industry can move ahead smoothly,” a realtor said.
Ravi Saund, COO of CHD Developers Ltd, said: “We are extremely happy that the Cabinet has finally given a nod to the real estate regulator bill and laid down norms to safeguard the interest of homebuyers. We have been long advocating the need of a regulator to streamline the processes and infuse transparency into the system. We maintain a ‘Blue Book’ for each of our projects, which preserve all the permissions, layout maps, and clearances that we have received for each project. In this way we remove even the smallest of doubts that buyers have before investing in our projects.”