Wednesday, 16 December 2015

Real Estate bill changes to boost market confidence

As Union Cabinet cleared Real Estate (Regulation and Development) Bill, 2015 with certain amendments and changes, real estate stakeholders have welcomed the changes. However, they are still apprehensive about the functioning of the regulator.

The changes in the Bill that will bring change:

1. Small projects to get included under the purview
Earlier: Minimum size of 1,000 sq mt will have to register with the authority.
Now: Projects on at least 500 sq mt of area or with eight flats will have to be registered with the proposed regulatory authority. This will bring a larger number of projects under the regulator's ambit.

2. More money in escrow account
Earlier: Builders have to deposit at least 50% in an escrow account to meet construction cost.
Now: Builders have to deposit 70% of the sale proceeds, including land cost, in an escrow account and pay interest to home buyers for any default or delays at the same rate they charge them.

3. Term of Imprisonment
The term of imprisonment of three years has been upheld for all contraventions and in cases where the builder does not abide by the decision of the regulatory body imprisonment has been recommended.

4. Carpet area and garage
Carpet area is now defined as the net usable area. Apart from this, garage will be not be included in the definition of apartment.

5. Formation of RWAs

It will be compulsory to form resident welfare association within three month of possession.

6. Buyer can appeal to Consumer Court
Now, even consumer court can hear real estate cases other than the appellate authority.

7. Builder answerable for structural defect
Builders will be liable for structural defects for five years, instead of two years as proposed earlier.

8. Insurance of land title
The Bill proposed enabling provision for arranging insurance of land title, which is currently not available. This will benefit buyers in situations where the title of the land is held invalid.

Too much to handle:
Although the approved proposal has brought even the smaller projects under its purview, the volume of projects would be too much to handle. “Given the quantum of projects that the state regulator will have to cover now - due to norms on size of projects having been relaxed further from 1,000 sq.m. to 500 sq.m. - the onus on the state regulator will be huge, particularly for realty-heavy states like Maharashtra, Karnataka, etc,” says Anuj Puri, Chairman and Country Head at JLL India.

Another point raised by the industry leaders is of single window clearance. According to them, without ease of business for developers, it would be very difficult for the authority to work in the fairest way.

“The ease of doing business needs to be implemented in the real estate sector by making it easier for doing development by time bound approval mechanism by the government/local/ urban bodies. Therefore the government bodies also need to be held accountable for ensuring reforms in archaic laws and timely project approvals,” Anshuman Magazine, Chairman & MD CBRE South Asia Pvt. Ltd.

Flow of FDI to rise?
As Real Estate Regulatory Bill, 2015 has got cabinet nod, the bill is expected to bring transparency, defined rules and regulations. Consequently it would work as a confidence booster for foreign direct investors.

“The bill will help increased domestic and foreign investment in real estate sector which will be in line with the government’s objective to provide ‘Housing to all by 2022’. Registration of both the residential and commercial projects will be made mandatory and any harassment of buyers will also be checked. Overall, with the passage of bill, there will be fair play in real estate transactions in addition to ease of doing business,” Says Om Chaudhry, Founder & CEO of FIRE Capital.

Whereas the developers are expecting more professionalism and ease of doing business for them. “As a developer, we are hoping that the amendment would promote speedy approvals and execution of projects, bring about professionalism and accountability in real estate transactions and give a push to the investment sentiment in the sector,” Vineet Relia, managing director, SARE Homes.

As the winter session is expected to see passage of Real Estate Regulatory Bill, it would be interesting to watch out whether too much of responsibilities will make the authority more powerful or burdened.

Source: PropertyatNeoDevelopers.Wordpress.Com

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