The Indian housing industry is rapidly surging ahead as demand for property is a never-ending constant truth of life. This has inadvertently resulted in upswing of real estate companies of all sorts, big, small and mid-sized companies that are vying for attention of the buyers. However, in this pandemonium, the consumer has been the biggest loser due to lack of regulatory authority to check the unreliable transactions entered into. Resultantly, there has been a surge in real estate disputes related to project completion dates, escalation costs, lack of clearance certificates and handing over of possession between the buyer and real estate developers.
Essentially, introduction of the Real Estate (Regulation and Development) Bill, 2013 has been to create a check upon such rampant irregularities and to create a Tribunal to address the grievances of the consumers in a timely fashion. It is significant to note that this Bill has been approved by the Union Cabinet on June 4, 2013 and in all probability will receive the assent of the President and be notified as a statute soon. The need for a uniform Real Estate regulatory environment in India has been felt for years due to the rampant corruption, red tapism and money laundering that has erupted throughout the country. Today, although the Bill promises to regulate only the residential housing industry and anything ancillary to housing but still it provides hope for a uniform set of rules that can be perceived by the consumer. Previously, being at the mercy of the developers and builders of real estate, the customers could never come to terms with the high-handedness of the deals and illogical dues charged from them in the name of development and had to bear with every demand made out of them. Today, the Bill promises to make things clearer and provides for mandatory registration of real estate projects that would keep the consumer informed about his choices.
Some of the major features of the Real Estate Bill and its effect of the consumer is enumerated below:
- Establishment of Authority: People with legal knowledge and management skills would be appointed in the Regulatory Authority who would regulate, control and promote real estate development in India and all projects would mandatorily get registered with the regulatory authority which will create transparency in the system that would build the trust of the consumers.
- Appellate Tribunal: Establishment of the Tribunal will allow disputes to be heard in a timely fashion and provide speedier justice.
- Mandatory Disclosures: Real estate agents and developers need to mandatorily disclose material information about the project such as layout plan, common area, carpet area, status of the land and development scheme of the building. Further, more than 10% of advance amount of the estimated cost of the project cannot be collected by the real estate agents from the buyers without prior agreement and such action would lead to penalties. Further, the Bill provides that money should be utilized for development of the disclosed project only and 70% of the amount collected from allottees should be put in an escrow bank account separately.
- Abolishment of Misleading Terms: Terms such as “Super Area” or “Super Built-Up Area” has been avoided in the Bill and only the Carpet Area that would actually be the net usable space of the floor of an apartment, excluding the walls have been included in the Bill to provide clarity to the consumer. Further, real estate agents must get themselves registered and no pre-launch bookings would be allowed.
- Penalty/Liability: The Bill provides punishment upto three years imprisonment or 10% of the total cost of the project, or both for promoters who fail to register their projects in accordance with the law. Promoters who flout the law will be penalized with 5% of the total cost of the project and promoters who continue to disobey any order may be charged with over one lakh rupees per day.
Overall, it can be reckoned that the Bill aims to provide consumer protection and is primarily a populist move that would regulate the residential real estate industry. However, the Bill does not regulate the quality of construction, which is the domain of local bodies and State government, since the Bill is a National Bill that would regulate the “transactional” part of real estate deals. It would be interesting to see the reaction of the developers and builders once this Bill is passed in parliament and reports suggest that residential real estate cost would see an upsurge once such law is formulated.