Tough realtor regulatory bill likely in current session
25 Mar 2013
Amid stiff opposition from real estate developers and builders, the housing ministry is planning to bring the real estate regulation bill, aiming to protect home buyers, in the current session of Parliament.
Housing minister Ajay Maken on Sunday said the bill was expected to be brought up for consideration of the cabinet soon, and then will be introduced in Parliament.
Giving some relief to developers, the ministry of housing and urban poverty alleviation has decided to keep commercial offices and shops / malls out of the purview of the Real Estate (Regulation & Development) Bill.
The bill, in the making for about five years now, will only regulate the housing sector, Maken said.
The current draft bill mandates developers to keep aside about 70 per cent of the collected amount from buyers in a separate account. The ministry may lower the limit to 50 per cent or make it construction-linked.
The real estate industry has been opposing the introduction of the bill over concerns of strict penalties or punishment to be imposed on them if they fail to comply with certain provisions.
The draft bill proposes up to three years jail or / and a penalty up to one-10th of the estimated cost of the real estate project in question for promoters who wilfully fail to comply with provisions.
The consumer-friendly legislation has already been returned by the cabinet once after objections were raised by some senior ministers.
The legislation will clearly define 'carpet area', and private developers will not be allowed to sell houses or flats on the basis of ambiguous 'super area'.
A real estate regulator in every state will ensure that private developers get all projects registered before sale of property and after getting all necessary clearances - addressing a major concern of buyers about incomplete or fraudulent land acquisition and pending clearances.
The bill proposes that private developers and builders would not advertise or start a housing project before getting all necessary clearances and reporting before a real estate regulator.
The developers cannot collect any money from buyers before completing all necessary permits to start construction on the project.
Maken said builders wouldn't be allowed to use pictures of housing projects in foreign countries to lure buyers while advertising a project. They will have to use pictures reflecting the actual project which will be delivered to homebuyers.
The developers will have to maintain a separate bank account for a particular project and will not be allowed to divert the money for other projects.
"Many developers use funds collected from buyers for a particular project to buy land for another project. This result in delays and innocent buyers are forced to bear the additional cost," Maken said. "Salaried people usually spend all their savings on buying an apartment but often suffer delays and cost escalation."
Before launching a project, developers will have to submit all necessary clearances to the regulator which will be displayed on the regulator's website. Failure to do so for the first time would attract a penalty which may be up to 10 per cent of the project cost; a repeat offence could land the developer in jail, Maken said.
The regulator will act only if there is complaint of any deviation from the project details disclosed by a developer on the regulator's website.
Under the bill, there will be a model builder-buyer agreement which is expected to reduce ambiguities in real estate transactions that not many buyers are familiar with.
Real estate agents will also be asked to register with the regulator.
Agents, an important link between the promoter and buyer, have been an unregulated lot till now. Once they are registered, it will help in curbing money laundering, commentators say.
