<div>You work day and night to scrape together enough for the down payment towards an apartment and then approach a bank or housing finance institution to borrow a large sum that you will pay back in equated monthly instalments. You then scout around for a developer and hope he gets your dream house ready before you turn grey repaying the hefty loan. You know your flat is likely to take longer to be completed than promised because practically no developer delivers on time. In the meantime, you live in a rented flat waiting for the day when your house will be ready. That day almost arrives... <br /><br />...and then you learn that your house or apartment is in violation of rules and norms by a court and will be demolished as per the order; that the builder cheated you; that the authority in charge of giving the necessary clearances was in collusion with the builder; that the bank you took the loan from was either unaware of this nexus or was itself in cahoots with the builder; that the fact that the bank had agreed to advance the loan did not mean all was well.<br /><br />Slowly, the implications begin to sink in. The wait for your home becomes indefinite even as you continue to fork out instalments on the loan. Your expenses pile up, but nobody seems to care. <br /><br />This, in a nutshell, is the agony that buyers of flats in Supertech’s twin towers in its Emerald Court project in Noida have been put through over the past few months, ever since the Allahabad High Court ordered the demolition of the twin towers in April. But the Supertech imbroglio is just one among numerous instances of home buyers in India suffering on account of unscrupulous builders and real estate developers. The realty sector is one that has managed to escape regulation and where indulging in unfair practices is more or less the norm. Even reputed builders are often on the wrong side of the law and are as likely to mislead customers as smaller, fly-by-night operators. <br /><br /><strong>Roadblocks To Regulation</strong><br />There is no dearth of ideas on how this sector can be regulated. The Real Estate (Regulation and Development) Bill 2013, spearheaded by the Ministry of Urban Development, has been pending enactment by Parliament. The question is will it ever be passed and, if that happens, will the states take the legislation seriously and enforce it?<br /><br /> </div><table width="600" align="center" cellspacing="1" cellpadding="1" border="3"><tbody><tr><td style="text-align: center;"><span style="color: rgb(51, 102, 255);"><strong><span style="color: rgb(128, 128, 128);"><img width="120" vspace="6" hspace="6" height="91" align="left" src="/image/image_gallery?uuid=e9552f83-39ba-454d-aaf6-8fcfc5a35efc&groupId=520986&t=1408442456840" alt="" /></span>WHAT THE BILL PROPOSES</strong></span><strong><br />The Real Estate (Regulation and Development) Bill 2013 seeks to bring the sector under a watchdog and protect the interests of consumers</strong></td></tr><tr><td><ul><li><span style="color: rgb(128, 128, 128);">Mandatory registration with the regulator for all real estate projects over 1,000 sq. m and more or where the number of apartments exceeds 12; as well as for all real estate agents</span></li><li><span style="color: rgb(128, 128, 128);">Promoters will be liable to pay compensation to customers in case they fail to discharge any of their obligations under the proposed legislation</span></li><li><span style="color: rgb(128, 128, 128);">Establishment of the Real Estate Regulatory Authority as a watchdog whose job will be to advise the government on issues relating to the sector, publish and maintain a website with records of all real estate projects registered with it and ensure compliance with its guidelines for promoters, customers and real estate agents</span></li><li><span style="color: rgb(128, 128, 128);">Setting up of an Advisory Council tasked with advising the government on implementation of the proposed legislation; on matters of policy; protection of consumer interest; growth and development of the sector</span></li><li><span style="color: rgb(128, 128, 128);">Establishment of the Real Estate Appellate Tribunal for hearing appeals against the orders of the regulator</span></li><li><span style="color: rgb(128, 128, 128);">Appointment of an adjudicating officer by the authority for adjudging compensation under Sections 12, 14 and 16 of the proposed Bill</span></li><li><span style="color: rgb(128, 128, 128);">Punishment and penalties for non-compliance with the provisions of the proposed legislation as well as orders of the regulator or the appellate tribunal</span></li><li><span style="color: rgb(128, 128, 128);">Gives veto powers to the government in special cases specified in the Bill</span></li></ul></td></tr></tbody></table><div><br />There are several hurdles to the passage of the Bill. Real estate remains a state subject and states have been quite tardy in setting up regulatory bodies or even in preparing legislation.<br /><br />Says Ashok Chawla, chairman, Competition Commission of India, which has been quite active in the area of looking into consumers’ complaints in this sector: “Some states have a modicum of regulation enforced through their town and country planning bodies, but many lack any serious regulation. Setting up a regulator in a state is the responsibility of that state itself; Parliament has no authority to set up a central regulator.”<br /><br /><strong>Protecting Their Turf</strong><br />Chawla’s point is that regulation of the real estate sector is a grey area, falling between the Centre and the states, with no one fully accountable. Officials say while the Bill is theoretically and conceptually sound, it may still not get passed because of stiff opposition to stricter regulation at all levels. <br /><br />Another reason why regulation is yet to happen is because of the local authorities’ reluctance to cede power. “At present, most decisions rest with the states and local town and planning authorities,” says Rajiv Singh, a Gurgaon-based broker who has been in the sector for 20 years. “It is a Haryana Urban Development Authority, Mumbai Metropolitan Region Development Authority or a Noida Authority that takes the final call or gives clearance. A parallel regulating authority may adversely affect those who run local bodies.”<br /> </div><table width="200" align="right" cellspacing="6" cellpadding="6" border="0"><tbody><tr><td><img width="200" vspace="2" hspace="2" height="299" align="middle" src="/image/image_gallery?uuid=4266f524-b506-4078-8dad-182443da818e&groupId=520986&t=1408442233757" alt="" /></td></tr><tr><td><span style="color: rgb(128, 128, 128);"><strong>BLAST FROM THE PAST: Residents of Mumbai’s Campa Cola society are paying the price for the lack of regulation </strong>(Photograph by Subhabrata Das)</span></td></tr></tbody></table><div>According to Singh, even if a state makes a concerted effort at regulation, chances are that a retired bureaucrat will head the new regulating body — as is quite common in India — and then things will practically be run the way they are at present.<br /><br />Obviously, developers and brokers are not keen on regulation either. Top officials of real estate firms, especially the big ones, describe the Bill as draconian and are against many of its provisions. A former employee of realty major DLF says opposition from builders is not entirely unreasonable. “They (the firms) fear that this will be just another licensing authority,” he says. “You can add one more to the endless list of clearances (50-60) and agencies we need to pay off.” <br /><br />Brokers and real estate advisors — both of whom are used to little regulation — also oppose the Bill, but don’t want to admit it. A large proportion of real estate transactions in India happens in “black” and it is one of the largest generators of quick, tax-free income. “Everyone is keen on making a quick buck, including speculative buyers of apartments and land,” says a former secretary in the urban development ministry. “We can’t blame individuals or groups; the system is such.”<br /><br />Once they register with an authority, brokers will come under the scanner of various authorities, including the income-tax department. “This is not something they welcome,” says Ajayya Gulati of Future Gold Properties, a Gurgaon-based real estate agent. Gulati’s firm is known for its above-board dealing — a rarity in the National Capital Region.<br /><br />Finally, it is the lack of political will that keeps regulation from becoming a reality. “When politicians, local agencies, bureaucrats, builders and brokers are all in it together, there is no way consumers, who lack cohesiveness, can take anyone to task,” says a senior bureaucrat. “Who has the bandwidth to deal with lawyers, companies, courts and so on?”<br /><br />While the UPA government did lay the ground for the regulatory framework, the Bill did not — either due to lack of political will or lethargy that paralysed its decision-making process — make much progress. The onus now lies with M. Venkaiah Naidu, the current minister for urban development, and, finally, Prime Minister Narendra Modi himself. <br /><br />anjulibhargava@gmail.com<br /><br />(This story was published in BW | Businessworld Issue Dated 08-09-2014)</div>
