Bengaluru/New Delhi: The government on Thursday managed to get The Real Estate (Regulation and Development) Bill, 2013, approved by the Rajya Sabha with the help of opposition parties, including the Congress.
It has been a long wait for the bill, first introduced in the Rajya Sabha in 2013.
The legislation is designed to protect consumer interest, ensure efficiency in all property related transactions, improve accountability of developers, boost transparency and attract more investments to the sector.
The bill, passed with all the new recommendations that were cleared by the Union cabinet in December, will regulate both commercial and residential projects and set up state-level regulatory authorities to monitor real estate activity.
The move is significant because the National Democratic Alliance (NDA) is in a minority in the upper house with just 64 members of Parliament (MPs), while the Congress alone has 66 MPs out of a total strength of 245.
Urban development minister M. Venkaiah Naidu told the upper house that real estate is the second largest employer in the country, after agriculture, and contributes 9% to the gross domestic product (GDP). Yet, the sector has been marked by a lack of trust and confidence between consumers and developers, which has had an adverse impact on investments in the sector.
“There are about 17,526 projects launched in 27 cities in the last five years and delay in implementation of these housing projects due to lack of transparency and accountability has been the bane of the sector. Its credibility has come into question. Delays have resulted in huge time and cost overruns, resulting in increased costs of houses. That’s one of the reasons for bringing in this bill,” said Naidu.
The key features of the bill include:
l Mandatory registration with real estate regulatory authorities of projects of at least 500 sq m area, or those comprising eight flats, which would enable registration of more projects with the regulatory authority and will protect more consumers.
l Project developers will now be required to deposit at least 70% of their funds, including land cost, in a separate escrow account to meet the cost of construction. Their inability to do so has affected thousands of customers across the country, and also resulted in poor demand for new housing projects.
l A provision for imprisonment up to three years in case of promoters and up to one year in case of real estate agents and buyers for violation of orders of appellate tribunals or monetary penalties or both.
l A clear definition of carpet area and a system that would require the consent of two-thirds of the buyers in case there are changes in project plans.
l Appellate tribunals will be required to adjudicate cases within 60 days and regulatory authorities will have to dispose of complaints in 60 days.
l Regulatory authorities can also register projects to be developed beyond urban areas, promote a single-window system of clearances, and grade projects and promoters besides ensuring digitization of land records. They will also have to draft regulations within three months of formation.
The real estate bill is one of the two bills that the NDA government has been trying to get Parliament to pass in the past 21 months.
Even though political parties came together to pass the real estate bill, the constitutional amendment bill to bring the goods and services tax into force will have to wait for now.
The success in passing the real estate bill comes at a time when the government and the Congress have been at loggerheads on a series of issues and the latter making it clear at the start of the budget session that “no contentious bill” will be cleared in the first half of the session.
Shishir Baijal, chairman and managing director of property consultancy firm Knight Frank India, said that the bill is an extremely important and timely step taken by the government, which could prove to be a game-changer for the industry.
“The information pertaining to the real estate sector will be available in a systematic manner, leading to easy accessibility and transparency. In its content and intent, the new bill could bring in a change in the landscape of real estate in the country, attracting new investors and customers, which the industry has been missing so long,” he said.
While the bill will bring credibility to the industry and comfort to homebuyers, to bring ongoing projects under the legislation would mean stopping the work and ensuring the compliance of such projects with the new legislation, said Getamber Anand, president of industry body Confederation of Real Estate Developers’ Associations of India.
“If a project has already been sold to the extent of 50% and construction is underway, it is practically impossible to make 50% of the project compliant with the Act. We request that ongoing projects be kept outside the legislation,” Anand said.
Lack of transparency in India’s real estate sector has always been a grey area. According to the last global real estate transparency index compiled by property advisory JLL in 2014, India falls in the ‘semi-transparent’ category. India’s tier-I property markets ranked 40th in the list, while the tier-II cities are at 42nd position. The UK and the US topped the list in the ‘highly transparent’ categories.
“It is by far the most decisive step the sector has taken towards transparency and reaching towards the kind of standardized processes, procedures and accountability guidelines that the industry requires to progress,” said Anuj Puri, chairman and country head, JLL India. “It will create a much-needed consumer right protection umbrella for buyers of real estate, thereby increasing consumer confidence as well as creating lasting developer brands strong on quality and timely delivery of their projects.”
Clearing the real estate bill also seems to be in line with the NDA government’s urban makeover plan along with initiatives to boost affordable housing through Housing for All By 2022 and Smart Cities schemes.