Paving the way for regulation of realty business, the Union Cabinet today approved amendments to the long-pending real estate bill to bring under its ambit commercial and all ongoing projects as also brokers, while safeguarding consumers.
While Bill already provides for strict penalties including jail for errant builders, the amendments seek to make it mandatory for all developers, including of housing projects, to keep minimum 50 percent of funds collected from buyers in a escrow account to meet construction cost.
Through the amendments to the Bill of 2013, the Cabinet has extended the applicability of the Bill to commercial real estate also. Ongoing projects that have not received Completion Certificates have also been brought under the purview of the Bill and such projects will need to be registered with a proposed regulator within 3 months.
Another major modification is that promoters will not be allowed to change plans and structural designs without the consent of 2/3rd of consumers of a project, according to an official statement.
Real estate agents also have been made punishable for non-compliance of orders of regulatory authority. Appellate Tribunals will also be set up under the proposed law.
Under the other new stipulations approved by the Cabinet, states have to make rules in this regard within one year.
Adjudicating officers will have rank equivalent to that of District Judges. Besides, an online system for submitting applications for registration of projects will be introduced within one year of the establishment of regulatory authorities. Regulator will have to decide cases within 60 days.
Under the Bill, piloted by the Housing and Poverty Alleviation Ministry and introduced in Rajya Sabha in August 2013, real estate project developers both in residential and commercial sectors will be required to register their projects with the proposed regulatory authorities.
Promoters will be mandatorily required to disclose all information regarding promoters, project, layout plan, schedule of development works, land status, status of statutory approvals, proforma agreements, names and addresses of real estate agents, contractors, architect and structural engineer.
Developers welcomed the proposal for having a regulator under the the Real Estate (Regulation and Development) Bill, 2013, but expressed concerns over retrospective application with regard to registration of all ongoing projects._PAGEBREAK_
Ghulam Zia, executive director, Knight Frank believes the passing of this Bill is a huge positive for the sector that has been mired with lack of credibility. The Bill demands developers park 50 percent funds collected for projects with scheduled banks and this Zia believes can revive confidence and thereby sales.Below is the verbatim transcript of the interview.Q: Let me take you through the details that we now have – housing and commercial real estate buyers will of course get protection, real estate developers will have to register projects and disclose all the information and comply with the same. 50 percent of funds collected from buyers will have to be deposited in a separate bank account to meet construction costs. Also another major modification being that promoters will not be allowed to change plans and structural designs without the consent of two thirds of the consumers of a particular project. How would you respond to what I read out to you as being the highlights of this real estate regulatory bill?
A: The industry was passing through lack of credibility for a long time form all quarters. On one side the consumers – the buyers of housing stock etc have been facing this huge problem for a long time. On the other side even international investors who are keen to invest in real estate of India have been facing huge challenges purely because of lack of credibility. So, this government move to bring in a real estate regulator is positively and definitely going to have a very long term impact on putting place some more credibility in the real estate industry. Consumer for sure will be much better, a much happier lot because of whatever you are reading about. Lot many other changes also are being brought about to ensure that the consumers are not really taken for a ride the way the scene has been so far. So, it is definitely a positive step in that direction.
Q: What will the implications be on the developers and especially given the liquidity crisis that most developers face, what will the implications be of the fact that now mandatorily 50 percent of the amounts collected from consumers will have to be kept in a separate account which a scheduled bank?
A: Currently the way the market is poised buyers are hardly there. Practically the market has come to a grinding halt for all practical purposes. There are few buyers who are desperate only trying to take a position in the market. So, in any case the fund crunch is absolutely felt by all the developers. However the major reason for this entire state of affairs is that the whole industry has lost credibility. Consumers are not keen to put in money on something which has long time to complete. So, this step that we are talking about can build in huge confidence within the consumers that if all this is done the consumers can come back in the market and start buying activity all over again.
So, the way at least I look at it is, it is definitely a positive step to bring in some confidence in the consumers so that the sales start and the developers also get some money.
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