The Lok Sabha recently passed the landmark Real Estate (Regulation & Development) Bill, 2013 in order to equally protect the interests of buyers and realty developers. It also strives to promote fair play in real estate transactions by eliminating corruption and project delays.
Introduced in 2013, the bill underwent several amendments and progressive changes over time until in December 2015, the Union Cabinet approved it with 20 major amendments.
In this article, we will discuss the salient features of the bill and analyse it in depth.
Core objectives:
● To secure the interests of property buyers as well as project developers.
● To make real estate a corruption-free sector.
● To enhance efficiency by ensuring timely execution of projects.
● To ensure speedy settlement of disputes between stakeholders.
● To boost domestic and foreign investment in the sector.
● To enable the government to realise its ‘Housing for all by 2022’ mission with private partnership.
Highlights of the Real Estate Bill, 2013
1. State-level regulatory authorities called Real Estate Regulatory Authorities (RERAs) will be established to monitor and regulate transactions between buyers and promoters of residential real estate projects.
2. As per the provisions of the bill, the Appropriate Government will have the authority to frame rules for the subjects specified in the bill.
3. This bill is applicable for commercial and residential realty projects.
4. RERAs will register residential real estate projects, with some exceptions. Promoters cannot book or offer these projects for sale before registering them. Real estate agents intending to sell any plot, apartment or building will also have to mandatorily register with the RERAs.
5. The draft bill required developers to maintain 70% of the amount collected from buyers for a project in a separate bank account and this was to be used only to meet construction costs. However, as per the current bill, only 50% of the amount has to be allocated to meet construction costs.
6. The bill mandates the establishment of Real Estate Appellate Tribunals in order enable developers/buyers to appeal against decision of the RERAs.
7. If developers delay the transfer of property to buyers, the Real Estate Appellate Tribunals are vested with the authority to intervene and impose fines on the developers within 60 days.
8. The bill prohibits civil courts from taking up real estate-related cases. However, aggrieved buyers can approach consumer courts which are allowed to hear real estate matters.
9. Project developers are ordained to disclose all information regarding registered projects, including details of promoters, layout plan, land status, schedule of execution and status of various approvals.
10. As per the bill, a developer cannot change the registered plan in a project unless two-third of the allottees agree to the change.
11. Builders will be responsible for correcting structural defects and settle other problems for five years after transfer of the property to the buyer.
12. The bill has provisions for imprisonment of developers up to 3 years in case they are found guilty of fraud.
13. The quoted price of the project will now be on the basis of carpet area instead of super built-up area.
Pros and cons
The real estate sector contributes around 9% of the nation’s GDP and the new major amendments will have a sure impact on our economy. Also, perspectives of buyers and developers vary as per provisions of the bill.
Pros: Power to buyers
1. The establishment of a designated regulatory authority is a new ray of hope for buyers as earlier, due to absence of such authority, transactions were mostly carried out on goodwill or based on experiences of friends/family. However, now the RERAs will ensure more security in transactions.
2. In addition, mandatory registration of projects and real estate agents and disclosure of project-related information will reduce the possibility of frauds, thereby increasing consumer advantage.
3. The compulsory use of 50% of amount collected from buyers to meet construction costs of a particular project will ensure that developers do not delay completion of the property by diverting funds for other projects.
4. In case of delay, the Real Estate Appellate Tribunals is authorised to impose fines on the developers which is further beneficial for buyers.
5. As a developer cannot change the registered plan in a project unless 2/3rd of the allottees agree to the change, buyers have some assurance of getting what they originally paid for.
6. As builders have to fix structural defects for five years after transferring the property, buyers need have to spend more money by turning to other sources. Further, this provision will ensure quality construction work.
7. The bill clearly defines ‘carpet area’ and mandates buyers to pay only for the carpet area and not the super built-up area.
Cons: Ambiguity in provisions
1. The authority granted to Parliament to make real estate laws is questionable as the subject ‘land’ comes under the State List in the Constitution.
2. The real estate sector grapples with issues that fall under the State List like lengthy procedures for project approvals, lack of clear land titles and prevalence of black money. A few states already have laws to regulate realty projects. However, the new bill differs from state laws on several grounds and will overrule such state laws.
3. Though the bill provides for penalising developers for delay, it does not specify punitive action that should be taken on government officials and agencies who might delay project approvals.
4. The original bill required developers to keep 70% of amount collected from buyers for a project. Though this bill has reduced it to 50%, many developers have argued that this will adversely impact their liquidity and eventually lead to an increase in the selling price.
5. The bill states that only ‘minor alterations’ are allowed in the registered plan. However, the extent and nature of changes has not been specified. Builders are known to intimidate buyers to agree to changes in the registered project. However, there is no mechanism in the bill to counter such high-handedness.
6. The original bill empowered tribunals to punish real estate company officials in case of wrongdoings. However, the amended bill removes this provision.
We would also like to hear your opinions about this bill. You can share your views in the comment box below.