The Real Estate Bill 2011 is the strongest attempt so far to regulate the massive real estate market. Since there seems to be rare consensus between political parties on the issue, there’s a good chance the Bill will be passed in Parliament. The Real Estate Bill will not only protect buyers from the unethical practices of unruly builders and developers but also promote transparency and accountability in the real estate sector.
It is often the case that developers do not divulge the nature of a housing project, size and cost accurately. Agreements between buyer and developer typically favor the builder, giving him tremendous leeway to change terms without any compensation to the consumer. Take the case of Springfield Apartments in Bangalore where seven wings were constructed illegally and sold by the builder without the necessary approvals. Almost 1,300 residents faced eviction when the fact came to light.
Housing projects also get delayed or cancelled if builders launch projects without acquiring necessary sanctions. The Real Estate Bill aims to right this skewed balance of power and restore confidence of buyers in the real estate sector.
Key provisions of the Real Estate Bill 2011
The Real Estate (Regulation & Development) Bill 2011 supports regulated and planned real estate development via standardized practices and efficient systems for the sale of immovable properties. Key provisions of the draft Bill include:
- Establishment of Real Estate Regulatory Authority (RERA) in each state to assure planned and orderly growth.
- Mandatory registration of developers and builders for accreditation.
- Mandatory public disclosure norms (allowed only after all approvals are in place) that include developer details, project, land status, statutory approvals, and contractual obligations.
- Promoters’ obligation to adhere to approved plans and project specifications, with clause to refund buyer satisfactorily in case of default.
- Allottee’s (Buyer) obligation to furnish payments at agreed interest rate without delay.
- Directive for developers to allocate 70% of funds collected to that project to avoid misappropriation of consumer’s money and delays.
- Establishment of Authority (one chairperson and at least two members with experience and knowledge of real estate) to advise government in planning and dispute resolution.
- Establishment of a Real Estate Appellate Tribunal (REAT) by Central Government for quick resolution of disputes submitted by Authority.
- Establishment of a Central Advisory Council to counsel government and make recommendations to protect consumers and foster growth of real estate sector.
- Penal provisions to ensure compliance.
- Jurisdiction of Civil Courts barred on matters before Authority or REAT.
What’s in it for buyers?
The Real Estate Bill will help to contain the circulation of black money that is rampant in the real estate sector. Public disclosure norms and registration of developers will reduce fraud and possession delays as developers will have to complete all approval processes before launching a project or advertising it.
Developers’ unfair practice of reducing common areas, making arbitrary changes, selling off cordoned open spaces, and modifying terms would be restrained as these actions will be penalized. Fair agreement terms will also help buyers.
What’s in it for developers and promoters?
The Real Estate Bill will create an opportunity for honest developers to differentiate their projects and services from the masses. Since state authorities will be given 30 days to reject or accept an application along with necessary paper work, development of projects will not be delayed over administrative red tape. As allottees are also legally accountable under the Bill, developers will be protected from defaulting buyers and bankruptcy.
If the Real Estate Bill is passed in Parliament, buyers will be the happiest lot. Too many unscrupulous builders have come up, looting people as well as the environment with corruptly gotten sanctions, false promises and unplanned development. However, a Bill is as effective as its implementation. Will the Real Estate Bill lead to the maturation of a quality real estate industry in India? I sure hope so.