SPOTLIGHT – The Real Estate (Regulation And Development) Bill, 2013

SPOTLIGHT – The Real Estate (Regulation And Development) Bill, 2013

The bill was introduced and approved by the Union Cabinet on June 4, 2013. While the bill is still to be passed, it offers some hope to the hapless homebuyers who have suffered for long in the hands of many a builder.  Our SineEdge Mortgage Specialists view this as a welcome development. Let’s see what this offers…

Some of the positive highlights of the bill …………..

- It is applicable only to residential properties. Commercial properties are not yet included. The logic for excluding commercial units is not clear – as they suffer from many similar perils as that of a residential unit – but still for the ‘homebuyer’, it is still better than nothing.

- The bill proposes to appoint a regulatory authority for Real estate. The authority would be appointed at the state level or UT level. Is likely to have powers to enforce governance on real estate industry in the state.

- The bill proposes penalties for misleading information provided by the developers on the advertisements / prospectus.
The penalty goes upto 10% of the cost of the project. It is indeed the market experience that most builders give out advertisements that promise a lot but deliver less.

- The builder can take not more than 10% advance from the buyer before signing of the agreement. This means, projects seeking huge down-payments get a thumbs down.

- The bill in some form states that if there is a delay in completion of the project, the builder would be liable to give a full refund.

- All critical information of the project should be disclosed by the developer on the website of the regulatory Authority. This is a big one. This disclosure would include information such as Carpet Area (as against super built up area), status of all the approvals that are required to be taken to commence the project, details of no. of apartments in the project (along with their approvals), layout plans, details of promoters, contractors, brokers and all other related parties. With the introduction of the Carpet Area mandatory disclosure, the chances of builders swindling money through announcing unverifiable Super Built up area gets ruled out.
- The bill mandates that prior to any launch or advertisement regarding the project, the builder must have obtained all approvals for the project.

- The bill tries to prevent fund diversion from one project to the other. It proposes that the builder must deposit UPTO 70% of the cost (or any lesser specified amount) of construction of the project in a separate account. This is to help timely completion / prevent fund diversion.

- Mandatory registration of projects and brokers with the regulatory authority: If the project is more than 1000 sq.mtrs / 12 apartments, the project needs to be registered with the regulatory authority. And so must the real estate agents who market the project.

- There are news reports that say that the government is trying to pass the bill. However, the developers as expected have raised concerns. The government has responded through the Minister of Housing and Urban Poverty Alleviation that it would address all the concerns of the developers.

The bill was referred to the Standing Committee on Urban Development (Chaired by Sharad Yadav) for its recommendations. The Standing Committee has come back with its recommendations in February 2014. If anything, the Standing Committee has tightened some of the items mentioned in the bill. Some of the recommendations of the committee are :

- Include Commercial properties as well.
- Reduced the minimum cut off area for coverage under the bill from 1000 sq.mtrs to 100 sq.mtrs. This will bring in all the smaller projects also under the purview of the bill.
- While the bill requires registration of brokers facilitating the sale of a particular project, the committee recommends that all real estate agents must be registered with the Real Estate Regulatory Authority.
- The committee recommends establishing a single window system of providing approvals and proposals for the projects.
- There is a recommendation that the agreements should include ‘Common Areas’ clearly mentioned. It also advises placing a model agreement as a part of the bill.
- The bill specifies a time of 15 days within which the regulatory authority should either approve or reject a project. If no answer, the project is deemed approved. The committee recommends to increase this deadline to 30 days.
- Appeals against revocation of approvals of the projects to be decided within 45 days (as against 90 days suggested in the bill).
- Structural defects in the building as brought to the notice of the builder, should be rectified within 5 years (as against 2 yrs proposed in the bill).

The above are some of the key recommendations of the Standing Committee.

In the interest of the homebuyers, it is high-time that a bill such as this is passed. It would be a good beginning in terms of regulation of the real estate if the bill is passed by the parliament, even if it be in the present form.

However the big question is, ‘Will it ever see the light of the day?’ Let’s keep the fingers crossed.

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