The Big Picture – Real Estate Bill: What are the points of conflict?
The opposition parties in the Lok Sabha have demanded that the Real Estate Bill be referred to a select committee. The opposition parties have alleged that the diluted provisions of the Bill have made the legislation pro builder from being probuyers. Real Estate Sector has been one of the most unregulated sectors, despite being most in demand in the country. This bill 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 aims at regulating contracts and transfer of property, both of which are under concurrent list. The bill will override the provisions of state real estate laws if found inconsistent.
Important features of the bill:
- The Bill regulates transactions between buyers and promoters of residential real estate projects. It establishes state level regulatory authorities called Real Estate Regulatory Authorities (RERAs).
- Residential real estate projects, with some exceptions, need to be registered with RERAs. Promoters cannot book or offer these projects for sale without registering them. Real estate agents dealing in these projects also need to register with RERAs.
- 50% of the amount collected from buyers for a project must be maintained in a separate bank account and must only be used for construction of that project. In the original Bill, 70% of the amount had to be kept for this construction.
- The Bill establishes state level tribunals called Real Estate Appellate Tribunals. Decisions of RERAs can be appealed in these tribunals.
- The Bill provides for mandatory registration of all projects and real estate agents who intend to sell any plot, apartment or building with the Real Estate Regulatory Authority.
- It makes mandatory the disclosure of all information for registered projects like details of promoters, layout plan, land status, schedule of execution and status of various approvals.
- The Bill also includes a condition that prohibits a developer from changing the plan in a project unless 2/3rd of the allottees have agreed for such a change.
However, the Bill is not free from criticisms. While the Bill aims to penalise developers for failing to deliver on time, there is no clarity on what happens if the delay is due to the failure of government agencies to give timely approvals. The Bill also does not provide for any relief to developers on this count. Many builders have demanded that the authorities should also be made accountable for granting approvals within a certain time frame. Builders also claim that the provision asking them to deposit 50% of the amount realised from sale of their project in a separate bank account will affect their liquidity and may add to costs.
Since Real Estate is a state subject, it will be up to state governments to put the relevant structures in place and implement the Bill’s provisions. Some states like Maharashtra already have state laws that cover some aspects of the Bill. 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. Opposition parties are also arguing that while in the earlier bill, the builders were not allowed to change the sanctioned plan once approved and the project is launched, now the builders can undertake minor alterations just by intimating the buyer and the extent or type of minor alteration is not defined. There is also an allegation that Unlike the present bill, the previous bill had a clear definition of ‘carpet area’
Oppositon parties points out that the provisions which will allow builders to keep only half the money they receive in advance from buyers, against the earlier proposal for setting aside 70% of the funds in a special account, will go against the interests of consumers. The Opposition argues that such a provision will give developers more freedom to divert funds, hampering the completion of projects. The opposition parties also allege that the new Bill removes the provision of the 2013 Bill that provided the Appellate Tribunal the power to punish officers of real estate companies. They, however, seem to have accepted the clause which provides that if a builder wants to alter the design or the structure of the project he will need to take the consent of at least two-thirds of the buyers.