CRISIL favours latest real estate Bill, but developers cautious

The real estate regulatory Bill approved by the union cabinet earlier week has got the thumbs up from CRISIL Research, but the realty sector has given it a guarded welcome.

CRISIL said in an 'impact note' on the Real Estate (Regulation & Development) Bill that it will improve buyer confidence and boost demand for residential real estate.

The Bill will incorporate mandatory disclosure clauses, which would provide greater clarity on the project standards and timelines for completion, CRISIL said.

However according to a Business Standard report, while there is a consensus among developers across India on the need for a realty regulator, they have apprehensions about its implementation.

Talking to the newspaper, the chairman of the Confederation of Real Estate Developers' Associations of India (CREDAI), Lalit Kumar Jain, said a regulator for real estate was the need of the hour.

"We have regulators for telecom, banking and stock exchange. Likewise, a watchdog is a must for real estate. It should provide a level-playing field for all stakeholders. The provision for criminal prosecution could lead to the exit of professional and qualified developers.

"CREDAI has worked hard to advise the ministry to come out with an appropriate, comprehensive Bill with teeth to direct all stakeholders, including approving authorities, which will protect consumers while enhancing quality environment for the business," he said.

"Else it will be another establishment with huge costs, serving no purpose other than adding cost, thereby making tenements costlier."

The provision for mandatory deposit of 70 per cent of the cost in an escrow account is impractical, said Jain.

The construction cost varies in different markets. In micro markets, as in prime areas, the cost might be around 30 per cent whereas in the suburban areas it could be 80 per cent of the entire cost of elements. The provision should be based on the ratio of the extent of the construction cost so as to ensure timely completion of projects, and prevent fund diversion. Otherwise, the growth in the sector will get arrested as funding for land purchase is just not available from banks.

He further said the Bill's provision for a speedy and specialised adjudication mechanism to settle disputes by a joint secretary is not practical, since the judicial process is a specialised task and an expert can only redress the disputes. Or it should be left to a judicial officer and not bureaucrats, who may be influenced by higher-ups or be susceptible corruption.

Getamber Anand, chairman and managing director of the ATS Group, said, "We are not against a regulator in principle, but any such bill should not be anti-development and retrograde in nature. With unilateral provisions it may be misused by people in the power to unnecessarily further delay real estate projects.

''For example, registration with the regulator should be deemed done once applied for rather than give a 30 day lever to the sanctioning authority to delay the application on any flimsy ground as was provided in the earlier version of bill.

''Also cancellation of registration can be highly misused and jeopardise projects which are well underway, thereby harming even the consumers."

Deepak Sachdev, executive director and chief executive officer of Country Colonisers Pvt Ltd, a unit of Wave Estate, also said the bill was desirable. "There may be short-term jerks for the developers in unorganised sector but will help in safeguarding the interests of consumers. A satisfied consumer means business for everybody. The only concern is that it should be implemented correctly. Any initiative that is business friendly would fetch the good results."