Amidst deliberation and several amendments, the Rajya Sabha approved the Real Estate Regulation and Development Bill 2016 on 10 th March 2016. This Bill serves to substantially amend the original Real Estate Regulation and Development Bill 2013. The Bill seeks largely to protect the interest of allottees and purchasers through promotion of transparency, efficiency and accountability in the execution and construction of real estate projects by promoters. At a time when the real estate sector had little to no reputable standing in the eyes of the public, the Bill comes as a breath of fresh air for both developer and home buyer who look to conduct business legitimately in the eyes of the government. But what does this Bill entail for the various parties involved?
Breaking down the Bill
This Bill has allowed for the setup of a regulatory framework governing contracts between real estate buyers and sellers. It applies to both the commercial and residential sectors which will contain a range of punitive powers and wide reaching regulations. In the past developers have been found to delay delivery, miss key deadlines, charge additional costs and drag their heels when it came down to providing a final, good quality product. However, the regulatory bill has been passed to put a stop to such practices through the formation of Real Estate Regulatory Authorities across each state.
These Authorities are in charge of maintaining records of projects, promoters and agents and a database of violators. Guidelines restricting advertisements will be enforced and all recorded information will be made available to buyers.
The Regulatory Bill also takes into account commercial developments and real estate agents. Promoters concerned with lengthy approval processes causing delays are also being taken care of by the Parliamentary panel through the initiation of single window clearances by each state’s government.
How the rules are changing the game
The government refers to the Bill as a pioneering initiative that provides protection to the consumers’ interests while promoting fair play in real estate purchases as well as ensuring timely execution of projects.
The Real Estate Regulatory Bill should be perceived as good news thanks to key features such as:
- The Bill regulates commercial and residential real estate developments.
- The Regulatory Bill also takes into account commercial developments and real estate agents. Promoters concerned with lengthy approval processes causing delays are also being taken care of by the Parliamentary panel through the initiation of single window clearances by each state’s government.
- The Bill has made registration of real estate projects and real estate agents with the relevant authority compulsory.
- The Bill states promoters must deposit 70% of the amount realized from the allottees in a separate account to be maintained in a scheduled bank. This sum will cover the construction costs and the deposit will only be used for the concerned project.
- The Bill ensures promoters cannot change plans and design minus the buyers’ consent.
- The Bill will prevent civil courts from passing judgment on matters defined in it. Consumer courts, on the other hand, are permitted to hear real estate matters. Since the country contains almost 650 consumer courts there are more avenues being made available for grievance addressing, resulting in lower litigation costs for buyers.
- The Bill aspires to put into action fast track dispute resolution methods in order to settle disputes via the Appellate Tribunal and adjudicating officers.
Protection coming into place
The cornerstone of the Real Estate Bill is consumer protection. For example, the buyer has protection now when venturing into the real estate industry. One of the key implemented changes is in the inclusion of insurance for land, which serves to protect developers from frauds. The Bill requires builders to deposit 70% of the project cost into an independent account.
The Bill stands to pose no adverse change to developers who stick to the rules and regulations of which there exist plenty in the country. Harsh penalties for disregarders of the regulation are a key element of the Bill and include jail sentences and hefty fines.
The buyer is further protected by the Cabinet’s proposal to charge equal rate of interest for both buyers and promoters in case of delays. This provision earlier favored developers.
The Bottom Line
The industry has wholeheartedly welcomed the bill stating it brings in much needed transparency in the industry. This assists with helping increase the flow of funds into the developments. One must note the real estate industry struggles for funds for projects thanks to companies being overcome with debt. Both consumer and developer are recognizing the bill’s attempt to promote clean business. When compared to markets such as Australia and the UK, transparency in those markets means there is massive FDI in housing.
2016 is poised to be the year to resemble 2007, the previous peak year, with regards to investment activities. The Bill stands to increase the market’s appeal for the sector expecting to grow five-fold to US$676 billion by the year 2025. The predicted steep growth will offer plenty of great opportunities for global real estate developers, addressing the void of adequate financial and technical support in the country. This will result in a rise in demand for project management consultants, facilities management service providers, architects and contractors. The Bill stands poised to reaffirm India as a land of opportunity for major investments and business and experts point to the market maturing further into a smooth flowing industry. A mixed 2015 for the real estate sector will definitely see a refreshing 2016.