He lauded the intent of the housing minister but said that the discretionary powers for registering or deregistering projects and adjudication by a bureaucrat could become breeding grounds for corruption. Moreover, the provision for criminal prosecution of developers could lead to the exit of professional and qualified developers.
"Our fear is that those with expertise to handle political influencers will only survive, thus leaving the all important industry in the hands of corrupt people," Jain said and called for regulator covering all stakeholders like defaulting customers, the approving authorities and financial institutions that fund projects.
"How can anyone blame the developer if a project is held up due to approval delays or funds for that matter?" he asked.
"CREDAI has worked hard to advise the ministry to come out with appropriate comprehensive Bill with teeth to direct all stakeholders including approving authorities which will protect consumers while enhancing quality environment for the business," he pointed out. Otherwise it will be an added establishment with huge costs, serving no purpose other than adding cost, thereby making tenements costlier.
Jain welcomed the statement of Mr. Ajay Maken, Union Minister for Housing and Urban Poverty Alleviation, that the Bill provides for a uniform regulatory environment to protect consumer interests, help speedy adjudication of disputes and ensure orderly growth of the real estate sector.
"Also, the promotional role of the proposed Regulator like standardization in the sector carpet area, checking money trail and curbing money laundering, professionalism and promoting planned development are music to our ears," he quipped.
On the provision in the Bill for mandatory deposit of 70% of the cost in an escrow account, Jain pointed out: "This is impractical."
The construction cost of the project varies in different markets. For instance, in micro markets as in prime areas, the cost of construction may be around 30% where as in suburban areas it could be a high at 80% of the entire cost elements. The provision should be based on the ratio of the extent of the construction cost so as to ensure timely completion of projects, and prevent fund diversion. Otherwise, the growth in the sector will get arrested as the reality of the day is that funding for land purchase is just not available from banks, thanks to the negative weightage given by the RBI for real estate finance.
He explained that the Bill provides for a speedy and specialized adjudication mechanism to settle disputes by an officer of the rank of joint secretary. This is also not practical since the judicial process is a specialized task and hence an expert of the field only can redress the disputes. Or, it should be left to a judicial officer and not bureaucrats, in any case, who may be influenced by higher-ups or corruption.
The Bill should have aimed at catalyzing domestic and foreign investment into the real estate, thereby contributing to enhance economic activity and increase in GDP growth. Sadly, this is missing, Jain added.