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The Big Picture – Real Estate Bill: How will it protect home buyers?

The Big Picture – Real Estate Bill: How will it protect home buyers?

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Summary:

One of the most unregulated sectors, despite it being most in demand in the country, has been

the real estate sector. For years, home buyers have been the most exploited lot with flats and

houses never delivered on time and people’s hard earned money going down the drain many

times, cheated by the builders and many other problems. All that is now supposed to change.

The union cabinet has approved the Real Estate (Regulation and Development) Bill which was

originally brought in by the UPA government in 2013.

The present approved bill has some amendments to the original bill. The Bill seeks to create a

Real Estate Regulatory Authority apart from other measures. One of the major amendments to

the original law is that the new law will include not just residential properties for regulation but

also the commercial properties. The various measures suggested in the Bill which are aimed at

protecting the rights of home buyers and commercial building investors, is also expected to

boost both domestic and foreign investments in this sector. The bill is expected to be moved in

the forthcoming session of the parliament.

Developers are also expected to benefit as improved transparency and accountability will

improve institutional funds flow into the sector. The number of tussles between home buyers

and realty developers due to delay in project completion is likely to come down as the bill is

making it mandatory for the builder to maintain 50% of customer advances in an escrow

account within 15 days of receiving the money from buyers.

Another major modification in the bill is that promoters will not be allowed to change plans and

structural designs without the consent of 2/3rd of consumers of a project. Real estate agents

also have been made punishable for non-compliance of the orders of Regulatory Authority and

Appellate Tribunals to be set under the proposed law.

Some states have enacted laws to regulate real estate projects. The Bill differs from these state

laws on several grounds. It will override the provisions of these state laws in case of any

inconsistencies. The real estate sector has some other issues such as a lengthy process for

project approvals, lack of clear land titles, and prevalence of black money. Some of these fall

under the State List.

While some experts are of view that the minimum balance to be maintained by the developer

in an escrow account has been reduced to 50% from the earlier proposal of 70%, this is still

sufficient to complete the project after factoring in the land cost. The 50% mandate will still put

enough restriction on developers to divert funds elsewhere and ensure better completion

records. However, funds diversion is not the only reason for delay in project completion and

therefore the Bill needs to cover government bodies, including civic authorities too. The new

amended Bill reads very positively for inducing transparency and better governance, but the

continued non-inclusion of government agencies whose slow approval processes are major

contributors to project delays, remains an issue that needs to be addressed.