Cabinet Nod For Regulation Of Real Estate Sector

For those who are miffed with the ‘who cares’ attitude of builders and are fighting for their right to a fair housing deal, here comes a shot in the arm. In a historic move that brings respite to millions of people in the country who wish to own a house, the Union Cabinet has approved a mechanism to control errant builders and operators. In a crucial meeting on Tuesday, June 5, the cabinet cleared the Real Estate (Regulation and Development) Bill 2013, which calls for setting up real estate regulators for residential buildings. This bill, which comes under the purview of the Ministry of Housing & Urban Poverty Alleviation, will be tabled in the Parliament during the upcoming monsoon session.

Under this bill, regulators are being set up in each state, and it is mandatory that all real estate builders and developers get themselves registered with the regulator. In fact, developers need to register themselves before launching or even advertising projects. Experts feel that this will certainly help in curbing manipulations and mis-selling that happens during project launches and in advertisements.

What is interesting is that in addition to the financial penalty of 10% of the project cost, there is a provision of imprisonment of upto 3 years if a developer does not adhere to this registration clause. All developers with a project area exceeding 1000 square meters would come under the purview of this bill. At present, only residential developers come under this bill and commercial developments fall outside it, which can be a dampener for commercial property buyers.

To curb project delay, which is a practice in the sector, the bill proposes that developers must deposit 70 per cent of the funds received for a particular project into a separate bank account so that they do not channelise these to other projects. There are also strict penalties provided for any deviation from the layout plan and defaults on contractual agreement, which is certainly the need of the hour. In the bill there is a clear-cut provision of a model builder-buyer agreement that all contracts in the residential space would have to follow. This will certainly help in bringing in more clarity to this space and safeguarding buyers’ interests.

The bill also envisions setting up a two-stage redressal system, in which a regulator is set up in each state and there is an appellate tribunal to give the final decision.

All in all, this bill seems to be a foolproof armour safeguarding the interests of customers. First and foremost is that it calls for elaborate disclosures by developers in terms of project details, land status, promoters, layout plan, carpet area, statutory approvals and units booked in the apartment. Also, defining ‘carpet area’ has provided an effective safeguard to house buyers’ interest as builders across the country have been following the misleading jargon of ‘super area’. The bill provides that now onwards all real estate units will be sold as per carpet area only. It also calls for registration of real estate agents, which is long awaited as it is this lot which creates the most ambiguity in the real estate sector.