Real Estate Bill: Big Push For Good Governance And Transparency

The passage of the Real Estate Regulatory Bill by both houses of Parliament brings for the first time ever, compliance and governance in a sector whose functioning has been considered opaque and where information asymmetry and potential money laundering fraud has had maximum scope.

The bill which provides for the establishment of a Real Estate Regulatory Authority (RERA) in each State/Union Territory will bring in in much-needed professionalism.

The bill will regulate both commercial and residential transactions, all of which will be overseen by the RERA. It also establishes a fast-track dispute resolution mechanism through adjudication and a Real Estate Appellate Tribunal.

While safeguarding the interests of the buyers and investors, developers will now have to comply with a host of new norms. Firstly, developers have to mandatorily register the projects with the RERA. There will be compulsory public disclosure norms for all registered projects that include details of promoters, project, layout plans, plan of development works, land status, status of statutory approvals etc. Promoters are barred from modifying plans, structural designs and specifications of the plot, apartment or building without the consent of two-third allottees after disclosure.

Under the new bill, developers whose projects are delayed will face a stiff fine. In a worst case scenario, the tribunals can recommend a three year imprisonment term for developers found guilty of fraud.

Developers will also be responsible for fixing structural defects for five years after transferring property to a buyer.

With mandatory disclosures and registrations now part of process, this will help reduce black money transactions in the sector. Developers will have to reorganize their internal processes and form compliance teams. They will also have to bring in greater professionalism in their project management skills to ensure timely execution and delivery.

A key provision of the bill mandates that builders will have to hold 70 per cent of payments collected from homebuyers in a dedicated escrow account until a project's completion. This will prevent diversion of funcds from one project to another and help eliminate unwarranted delays in project completion. While the Act l aims to regulate and revamp the sector, some issues have not been addressed. Single-window clearance, a key demand, remains unfulfilled. Typically, realty projects need over 50 approvals.

With the new law coming into force, developers who wish to maintain their reputation and do good business will have to adopt industry best practices. Greater compliance by disclosure of necessary information and commitment to timely delivery will boost customer confidence.

The real estate sector will benefit if foreign companies invest in it. With RERA coming into force, developers will have to ensure that they are in compliance with overseas laws such as the Foreign Corrupt Practices Act (FCPA) of USA and the UK Bribery Act. Realty companies in developed markets will not look warily at a sector that has lacked transparency and good governance.

Developers will now have to streamline internal procedures to comply with new norms. Forward-looking companies will appoint a compliance officer and kick off initiatives to create a culture of compliance within their organizations. From an HR standpoint, developers would do well to provide risk and compliance training to their staff.

The real estate in India is expected to witness an uptick in foreign direct investment given the improved eco-system of transparency and compliance that the bill is expected to usher in. However, transitions are never without pain. Documenting governance procedures, automating processes and ensuring data security will transform the Indian real estate and bring it on par with global standards.

Punjab National Bank Reports $802 Million Q4 Loss As Bad Loans Surge

Punjab National Bank reported a fourth-quarter net loss of 53.67 billion rupees ($802 million) as the nation's fourth-biggest state-run lender by assets set aside more funds to cover a jump in bad loans.

Provisions, including for loan losses, nearly tripled from a year earlier to 104.85 billion rupees in the March quarter, the New Delhi-based lender said in a regulatory filing.

Gross bad loans as a percentage of total loans rose to 12.9 percent in March from 8.47 percent in December, and 6.55 percent a year earlier.

Indian banks have seen a surge in bad loans after a clean up ordered by their regulator, the Reserve Bank of India. The central bank wanted banks to classify some troubled accounts as non-performing and make adequate provisions for those over the December and March quarters.