1. With Real Estate Act, PM Narendra Modi must ensure good intensions are backed with implementation

With Real Estate Act, PM Narendra Modi must ensure good intensions are backed with implementation

With the passing of the Real Estate (Regulation and Development) Act, 2016, under the leadership of Prime Minister Narendra Modi, citizens of the country were happy that achhe din have, indeed, arrived for the real estate sector and this initiative will...

By: | New Delhi | Published: November 16, 2016 6:19 AM
When providing the time-limit of six months for each state to come out with rules, the government could have considered a “standard set of rules”. (Reuters) When providing the time-limit of six months for each state to come out with rules, the government could have considered a “standard set of rules”. (Reuters)

With the passing of the Real Estate (Regulation and Development) Act, 2016, under the leadership of Prime Minister Narendra Modi, citizens of the country were happy that achhe din have, indeed, arrived for the real estate sector and this initiative will help fulfil the government’s vision of Housing for All.

With the passage of this Act, all states and the urban development ministry have got time till November 27 to notify regulations for the real estate sector. Until now, rules have been notified by Uttar Pradesh and Gujarat, and housing ministry has notified norms for five Union Territories that have no legislatures.

We are not far from the deadline and the housing ministry had approached the Parliamentary Committee on Subordinate Legislation on October 27 to extend the deadline, since most states were unlikely to meet the target. Sources said the panel has sanctioned one month’s grace period. If states still fail to meet this time-line, the Centre can provide another extension.

A few months ago, Prime Minister Modi had raised concern over the delay in making of rules after laws are passed by Parliament. He had asked secretaries and ministers to ensure that rules are notified quickly so that people get the benefit of reforms.

Now, the question is, can we think out-of-the-box and come out with some innovative ideas to make sure the implementation of such people-friendly legislations happens on time and flawlessly?

There are some ideas that could have been considered.

The Centre to announce standard rules

When providing the time-limit of six months for each state to come out with rules, the government could have considered a “standard set of rules”. These rules could have become applicable in the interim from the expiry of six months and would remain in full force until the state comes out with their own rules. This would have at least made sure that in each state the implementation happens simultaneously.

And even if states delay passing rules in the interim, the standard rules would have become applicable.

Transparent mechanism to set rules by states

For long-term sustainability of public policy and regulatory measures, it is necessary that such rules are made through a transparent process of consultation with all the stakeholders. Gujarat and Uttar Pradesh, which have come out with rules, are already inviting criticism that the stakeholders have not been consulted and rules are biased and favour the builder/developer lobby. Such a criticism is avoidable in case the government had made it mandatory to set rules after following a due process of consultation, and the process that is to be followed could have been well-defined. Such processes exist in other regulatory regimes and telecom could be a good example.

In telecom, the policy framework starts with the floating of a consultation paper by the regulator, inviting comments from all the stakeholders. This is followed by open house discussions, where all the stakeholders are free to join and express their views. Once this exercise is done, the regulator, after considering the viewpoints, circulates draft rules for public opinion. Once public opinion is obtained and examined, the final rules are notified by the regulator. While making such rules, the authority has to keep in mind that final rules are in line with achieving the objectives of the Act. When such a transparent process is followed, the courts would hesitate in entertaining subsequent litigation on the ground that lawmakers have followed the principle of transparency, due process and have also kept in mind the public interest.

Agreement between buyer and builder

Another initiative is a “reference agreement”. The idea, again, comes from my experience in telecom sector, where the most challenging task is signing an interconnect agreement between operators. This exercise pertains to mutual agreement and terms and conditions of interconnect. This is the biggest showstopper and remains the same till date. Trai came out with a standard “reference interconnect offer” document which was necessary to be signed by the significant market power operator in case the mutual agreement was not reached within a given time. However, this initiative did not meet much success because of its limited applicability. Trai is now discussing an idea to define a standard interconnect agreement which will have to be necessarily signed between the two operators, in case they fail to agree mutually on an interconnect agreement within a given time.

The Centre could have suggested a “standard agreement” covering common issues such as reciprocal interest payment and its amount, consequences of termination of agreement, etc. This would avoid any discriminatory rules on the important aspects of agreement, varying from state to state.

For orderly and efficient implementation of this initiative and to ensure that this proposed regulatory initiative does not become slave to the political system, the selection of members of the regulatory authority should not be merely through political nomination, but based on merit, qualification, experience and integrity. These regulatory bodies should not become a place to park the retiring or retired bureaucrats and, hopefully, should follow the example as the government has recently followed in selection of chief for public sector banks by inviting applications from all who are interested, including people from the industry.

Further, these regulatory bodies should be made financially independent and must not be dependent on the political set-up for its funds requirements for day-to-day operations. This will ensure independence of regulators and avoid unnecessary interference.

The author is founder & CEO, Tathya Consulting. Views are personal

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