There is finally something to cheer for the home-buyers in India. The long-awaited amendments to the Real Estate (Regulation and Development) Bill were cleared by the Cabinet on April 7, 2015. This is another move of the Government of India geared towards achieving the objective of providing housing for all by 2022.
As per the amended Bill, which is now applicable to both residential and commercial projects, the registration of both new and ongoing projects is mandatory. The relevant authority will be granting registration within 15 days of the application being received and, if the authority fails to grant or reject these application (as the case may be) within the stipulated time, it will be considered a deemed approval for a particular project.
Further, once registered, promoters will be provided with a separate registration number, ID and password to log into the authority’s website, where they can create their own web page and provide all details relating to their specific projects.
Another development envisioned by the Bill is the establishment of Real Estate Regulatory Authorities (RERAs) which will work in each state/UTs. Such an authority will be set-up to resolve disputes in the real estate sector. Real Estates Appellate Tribunals (REATs) have also been proposed for hearing appeals against the orders of RERAs. It is proposed that a REAT will be headed by a sitting or a retired high court judge, with one judicial and one technical/administrative member.
In the amended Bill, it is proposed that the central government may, by notification in the Official Gazette, establish a Central Advisory Council to provide advice and make recommendations to the Centre on matters relating to the Bill, protection of consumers’ interest, development and growth of the real estate sector and such other matters which may be assigned by the Union government.
As a relief to promoters, the Bill now provides for a compulsory deposit of 50% of the total amount realised from the buyers of a particular project, to be deposited in a separate account in a scheduled bank, for meeting the construction cost—the original requirement was of 70%.
Further, once the project has been disclosed to the public and registered with the relevant authority, the specifications in a project cannot be altered at the free will of the promoters unless consent of at least two-thirds of the buyers of the project has been obtained. The new Bill also discourages the promoter from accepting advance payments or application fees of more than 10% of the cost of the apartment without entering into a written agreement with the buyer. From the realtors perspective, this could lead to situations of funding mismatch in the near future, resulting in the former looking for alternative funding routes, such as equity or debt, for their projects. However, these routes have not proved easy to take for the sector.
The Bill also looks at introducing some stringent penal provisions for the violation of the rules. Violations could lead to de-registration of the project and penalties could range between 5-10% of the project cost, depending on the nature of the violation.
Making for important protection for buyers, the amended Bill introduces the right to claim refund, with interest and compensation, in case a promoter fails to deliver within the mutually-agreed deadline. The Bill now prohibits the sale on the basis of super-area, making it compulsory for promoters to advertise carpet area while trying to sell a project.
There can certainly be no doubt that the Bill brings transparency and accountability in real estate transactions, with a major aim being to curb undeclared black money.
It can be reasonably concluded that, after much negotiation and debate, the government has finally taken an unprecedented yet forceful stand over the regulation of a sector which has witnessed a lull in enforcement measures. If this Bill becomes a law, there is no doubt that the real estate companies will gain credibility—something that is very essential at the moment, considering the state of the sector.
With contributions from Bharat Bhushan Sharma, counsel, J Sagar Associates
The author is partner, J Sagar Associates. Views are personal