In what would be called a landmark move, the Lok Sabha passed the Real Estate Bill on March 15, four days after it was passed by the Rajya Sabha, the upper house of Parliament.
Once enacted, the Real Estate Bill has provisions that will protect home buyers from developers who fail to deliver projects on time. Some of the provisions of the Bill include mandatory registration of residential and commercial projects with a real estate regulator (to be set up by individual state governments). The onus of monitoring such projects will then fall upon the regulator. The proposed regulator will also settle all disputes arising in the real estate sector.
The bill will now be sent for the President's approval, after which it will become law.
The bill was first introduced in 2013, when the Congress-led UPA was in power. The version that the government submitted for discussion included as many as 20 amendments or changes, based on the feedback of a Parliamentary committee. The first version of the bill was rejected by the Rajya Sabha last year.
Last week, the former urban development minister Ajay Maken had written to the Prime Minister asking for the bill to be prioritized in the current session of Parliament.
As per the provisions of the bill, if the developer fails to hand-over the property to the buyer on time, then he would be liable to pay same amount as interest which he is charging from the buyer on delay in payment.
Another important provision in the bill is keeping 70 per cent proceeds from pre-sales of housing projects in a separate account in order to meet construction costs, compared with the earlier proposal for 50 per cent. This provision aims at ensuring that developers who run out of cash don't stall projects. Builders would have to pay interest to home buyers for any default or delays at the same rate they charge them.
Also, builders will now be liable for structural defects for five years, instead of two years as proposed earlier. Builders will now be required to take all prior consent before they can announce any new projects.
Commenting on the Bill, Sanjay Dutt, Managing Director, India, Cushman & Wakefield said: "Another significant ruling is in the form of definition of 'carpet area'. Buyers will now be paying only for the carpet area and not the super built-up area which was fraught with confusion earlier. Also, the developers will now have to take consent of 66% of the home buyers in case they have to increase the number of floors or change the building plans. This will protect the buyers from any ad-hoc changes that are a norm presently."
Gaurav Karnik, Partner & National Leader - Real Estate & Infrastructure, EY India, said the Real Estate Bill will bring greater transparency, timely completion of projects, reduction in fly by night operators in the sector through registration of brokers etc and ensure that customers are treated fairly by ensuring no arbitrary changes in project plans, full disclosure on apartment size and fairer penalty provisions.
"Establishment of a Regulator will give greater confidence to foreign investors in the sector. However, certain key asks of the sector such as introduction of single window clearances system, coverage of civic and other related authorities under its ambit, etc. are not covered under this Bill. Overall a welcome move for the sector”, Karnik said.
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
