Currently pending in Rajya Sabha, the Real Estate Regulatory Bill will be moved in Parliament in the second half of the budget session. But will it really help the consumers? Or will it impact the real estate market positively? Here’s how realty experts decode it.
Reduction of 20 per cent (from 70 per cent to 50 per cent) to be maintained in the escrow account of a project. This amount collected from the buyers must be placed in an escrow account within 15 days. “This provision will effectively allow developers to continue their practice of diverting funds collected for a project towards land acquisition or other projects, and will work in their favour by also allowing them to grow their land and/or project portfolio. However, the 50 per cent mandate will still place enough restriction on developers to divert funds elsewhere and ensure better completion records,” Anuj Puri, Chairman & Country Head, JLL India.
“For the buyers, concerns regarding funds diversion will be higher now. The end result is that the bill will be slightly less protectionist towards buyers,” he adds.
Other than this, the bill not only covers residential real estate but also commercial projects. “This will provide protection to investors of commercial assets, as well,” says Puri.
Other revisions include the ongoing projects and those which do not have completion certificate will come under the purview of the Bill and will be required to be registered with the regulator within three months. “It now allows bigger umbrella coverage for buyers and investors,” says Puri.
However, Brigadier R R Singh, director general of National Real Estate Development Council (NAREDCO) says, “This certainly seems to be a positive step however, it is difficult to execute. There are many buildings which are old and does not have completion certificates, and have people residing in. Opening records and giving those a completion certificate will take a lot of time”.
Developers also have to take the e-consent of 2/3rd allottees for a change in plan or design. This may help investors and buyers to be aware of the construction activity of the project they have invested in. However, the flip side of it is that taking consent from allottees for all kinds of small structural changes during the construction phase of the building may delay the projects further.” says he.
The Bill has provisions where a builder has to rectify defects within 2 years in case of any structural defaults to the regulatory authority and the body has to clear the case within 60 days. Fine and jail for non- registration of projects, cancellation of registration, will bring in transparency in the system.” says experts.
Also, penalising and punishment of a developer in case of non-registration, non-compliance, for providing wrong information, are few other positive moves that will help in keeping a check on the construction of the project.
Apart from this, brokers and agents have now been included under its purview as well, and are effectively rendered punishable in case of non-compliance with the authority's and tribunal ruling. Expert says that this point will help in consumers who have to deal with the brokers often than developers.
The Bill also stated that states have to set up regulatory bodies within one year of the Bill’s enactment and at the same time set up a web-based online registration facility within a period of one year from setting up of the bodies.
The cabinet in the new version has cleared that customers can now seek recourse with consumer courts and forums as well other than regulatory body. “This was done to release the pressure on the regulatory body in terms of an increased log of cases,” says Puri.
Experts say that though, the new amended Bill reads positively and will bring in transparency and better governance in the Indian real estate sector which is otherwise lacking, the amendments announced will take some time to settle and be ready for execution in the literal terms.