MILLENNIUM POST (1st July 2013) NEW DELHI: Consumers willing to invest in property from their hard earned money will finally get relief from frauds and misleading information by some misleading bodies in the real estate sector. The long-pending real estate bill, approved by the Cabinet recently, will pave the way for providing much needed transparency by seeking to regulate India’s largely unregulated housing sector. By applying this bill to all projects above 4,000 sq mtrs, the ambit is quite large and seeks to cover all major private residential developments across the country.
By imposing strict regulations on the promoter, the Bill looks to ensure that construction is not only completed in a timely manner but that on completion, the buyer gets the property as per the specifications that he had been promised.
Real estate contributes the most to the economy. So it is very important for the industry to attract young talent. Our sector had a dire need for such a Bill to make it transparent. The other need of the real estate sector is to have more professional courses in colleges to attract young talent to the industry. With more professional and educated players in the field, real estate sector can flourish in India and contribute more to the Indian economy.
The Bill works both ways. While it aims to hold developers accountable, it also looks to ensure that allottees do not default in making payments. Thus, by providing penalties for both the promoters and allottees, the Bill seeks to ensure that noncompliance is minimal. On enactment, the Bill seeks to ensure that real estate transactions are carried out in a just and equitable manner.
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 Real Estate (Regulation & Development) Bill will improve buyer confidence and boost demand for residential real estate. The Bill will incorporate mandatory disclosure clauses, which would provide greater clarity on the project standards and time-lines for completion.
For developers, while this bill implies stricter regulatory control, it will also translate into better demand, as buyer confidence improves. In terms of supply, delays in handover of projects are likely to decline as clauses mentioned in the Bill mandate strong commitment from developers to complete projects as per schedule.
Mandatory registration of projects and real estate agents will promote fair and ethical practices within the sector. Mandatory disclosures of project details to public will ensure an environment of transparency for the consumers. The compulsory deposit of 70 per cent of the project collections in a separate bank account will infuse some financial discipline with the developers and also promote the timely execution of projects.
This Bill will bring clarity among the customers regarding their invested projects and benefit them in a larger way than anticipated. It is one great initiative by the Government to bring all developers under one roof of regulations. On an overall basis, this is a move in the right direction and at an opportune juncture, when the sector is facing the heat from all directions, this will definitely bring in fresh breath of air for all the stakeholders.
Developers often start multiple projects and redirect money for one project towards their other projects. This harms the project by reducing investment in that project, causing long delays in its completion leading to distress among the consumers. The Bill will make it mandatory for a developer to keep separate bank accounts for each project. This will ensure transparency as the developer cannot divert money of one project to another.The best feature of this Bill is that disputes with consumers will be handled through the establishment of fast-track resolution mechanisms, reducing the worries of consumers and helping them in getting justice at a faster pace.
However, the only hurdle in this road to development is that part of the Bill which makes it compulsory for developers to get clearance from the relevant authorities before launching any projects. If this part of the Bill is not implemented properly and the clearance is not given in a timely manner, it can lead to long delays on the part of the authorities, worsening the position of both the consumers as well as the developers.