BANGALORE: With the Union Cabinet approving the Real Estate (Regulation and Development) Bill, the country's highly unregulated and unorganized real estate sector moves a step closer towards greater transparency and compliance.
The Bill, which looks at just the residential market, seeks to create a central regulatory authority and various state levels authorities for the real estate market in a bid to protect buyer interests by providing a uniform regulatory framework.
The Bill seeks to prevent developers from putting out misleading advertisements; ensure that they don't market projects unless necessary approvals are in place; and direct developers to declare a time frame for developing projects. The Bill also seeks to impose monetary penalties on the developer for project delays, with repeat offences liable for a jail term.
Developers are also re quired to keep 70% of the monies realized from sales in to an escrow account towards construction costs, which cannot be diverted to other use. Often it is found that money received for one project is used for other projects, thus delaying the first project. "While the Bill may not impact the large developers, it will definitely raise the 'fiduciary disciplinary' bar for the small and mid-level developers catering to 30% of India's housing sector demand," said Shrinivas Rao, CEO-Asia Pacific of Vestian, a global consultancy company.
The Bill defines the sale of property by 'carpet area' and not 'super-built up area' or any other terminology. The carpet area is normally defined as the actual net usable floor area of a residential unit. Super built-up area is the built-up area (carpet area and wall breadth) in addition to the proportionate area of common areas, such as the lobby, lift shaft, stairs, club, etc.
Rao explains, "Say you are buying a 3-BHK unit with a super built up area of 1,500 sqft. The developer gives you the plans with all the dimensions, but in most cases the buyer is clueless about the carpet area or actual usable area. "Hence, with this safeguard, buyers would get to know upfront what amount of livable space they are buying."
However, RICS, a leading professional body for qualifications and standards in land, property and construction, said that the concern is of the actual definition and measurement standards for 'carpet area', which still haven't been clearly defined. Since the definition mentioned in policies and laws tend to be subjective, carpet area is interpreted and calculated differently.
"This problem is not unique to India as it exists in many parts of the world," said RICS.
The Bill is to be tabled in the monsoon session of Parliament. But developers are already upping the chorus for a simultaneous Bill on project approvals.
"The fear is that the Real Estate Bill will add another layer of bureaucracy in an industry which is heavily burdened by multiple approvals from different agencies which increases the project completion cycle and adds to project costs," said Suraj Asrani, COO, Cornerstone Properties.
Across the country developers experience inordinate delays and difficulty in obtaining project approvals from multi-headed government agencies. These delays range from 8 months to 18 months on an average. "These issues do not find any resolution in the Bill," said Asrani.
Asit Koticha, chief investor at Pashmina Developers, said that the government should simultaneously look at setting up a single-window clearance system to streamline the approval process. "This would ensure timely delivery without project cost escalations and help in strengthening the customerdeveloper relationship," said Koticha.
The Bill seeks to prevent developers from putting out misleading advertisements; ensure that they don't market projects unless necessary approvals are in place; and direct developers to declare a time frame for developing projects
The Bill defines the sale of property by 'carpet area' and not 'super-built up area' or any other terminology. The Bill is to be tabled in the monsoon session of Parliament