Real estate bill set to become law as Lok Sabha also clears it
16 March 2016
Lok Sabha on Tuesday approved the Real Estate (Regulation and Development) Bill, 2016, which seeks to create a set of rights and obligations for both the consumers and developers and encourage both of them to live up to the agreement entered into by both of them.
Minister of housing and urban poverty alleviation M Venkaiah Naidu moved the bill in the Lok Sabha as it was passed in Rajya Sabha on 6 March.
The new rules as provided in the bill requires construction companies setting aside 70 per cent of customer advances in an escrow account. They will have to obtain all necessary approvals prior to project launches.
As builders charge interest on delayed payments by customers, construction companies would also have to pay on advances received from customers for delay in completion of projects.
The promoter or promoters of a construction company should compulsorily maintain a separate bank account, and not an escrow account, for depositing the monies received from customers.
They should also deposit 70 per cent of the amount so received for meeting both construction cost and land cost. In case the land cost has already been incurred, the promoter can withdraw to that extent.
Requirement to be met for such withdrawals is provided in the bill. This provision has only been provided to ensure that project funds are not diverted and projects are completed on time.
Upon passage of the bill existing and ongoing projects would not come to a standstill, as is being made out by some respondents from the industry, Naidu pointed out.
The bill has no provision that requires existing projects to stop all operations until complied with the provisions of the bill.
The bill only provides that upon the formation of the regulatory authorities all promoters of existing projects, coming within the ambit of the bill, would need to register and provide and upload all project details on the website of the authority.
A window of three months from the date of commencement of the said clause/section has been given to the promoters for registration.
The developers need to specify the project details of such apartments so that prospective buyers will make informed choices, project status is known to all and to ensure that the projects are completed on time.
Regarding the provision of imprisonment for any violations of the orders of the regulatory authorities or the appellate tribunal, it is certainly not a first option but only the last option.
There are many regulatory laws in the country with imprisonment provisions under which 3 to 10 years of imprisonment is provided for. Under the Securities Act, Insurance Act and Pension Fund Act, 10 years of imprisonment is provided.
The Food security Act has 7 years provision while it is 5 years under Electricity Act and Reserve Bank of India Act.
There can't be a consumer without a developer and vice versa. Keeping in mind the importance of developers for mobilisation of land and resources for housing projects, the last option of imprisonment has been kept at 3 years.
The Act also provides under clause 32(b) for the Real Estate Regulatory Authority to take up with appropriate government of competent authority, the creation of a single window system for ensuring time bound project approvals and clearances for timely completion of projects.
Naidu said that with a target to ensure that all required approvals are given in about a month's time, he had held seven high-level meetings with the ministers of environment, forests and climate change, civil aviation, defence, consumer affairs, and culture for streamlining such approvals. All these ministries as a result have taken significant measures to ensure online and timely approvals.
Single window approval system is being developed to standardise and settle timelines for approvals and use of IT & GIS for automation of such systems, setting up nodal agency and empowered committees, Naidu added.