The cabinet approval of the long pending Real Estate Regulatory Bill is a positive first step towards bringing in the much needed transparency to the sector and reducing the risks associated with buying a property. The Bill will bring about a common regulatory platform for all stakeholders in the industry thereby ushering in a higher degree of accountability amongst builders and sales intermediaries.
The Bill in its current form applies to both residential and commercial real estate, and is far more comprehensive and holistic in approach, addressing both the regulatory and development oriented aspects that the industry needs.
The notable features of the Bill include – creation of state wise regulatory authorities for the sector, mandatory registration of real estate projects and agents, mandatory public disclosure of all project details, punitive measures outlined for transgressions by builders, etc. Once the Bill becomes law, it will go a long way in ensuring easier scrutiny on compliance to approved plans, progress on statutory approvals, etc.
Functions and duties of a promoter are now clearly defined. This will bring in greater accountability on the part of builders and give room for a clear locus standi for buyers to pursue legal proceedings if required against errant builders.
Builders are required to deposit 50 per cent of the amount realised towards bookings on a project in a commercial bank account within 15 days of receipt, and deploy the funds for construction of the project. This will ensure better adherence to delivery timelines and will also minimise cost overruns due to delays on account of inadequate capital.
The responsibilities of the allottee are also defined, making the Bill a lot more enabling and development oriented.
Additionally, creation of a Central Advisory Council (CAC) to oversee the implementation of the Act is commendable. Execution and enforcement of the Act is crucial to bring about the changes that the Bill seeks to achieve. The role of the CAC will be an important element in the success of the regulation, particularly given that regulators will come under the state purview.
Agents are required to be registered and only registered projects can be marketed by agents. Functioning of real estate agents will be better monitored as they are required to register themselves with the regulator. But the Bill fails to address qualitative issues of training and competency enhancement that should be made mandatory for an agent to register and get licensed. Only then we will see professionalisation of services provided by agents helping them become realtors in the true sense of the term. Also agents are required to sell only registered projects. This will help control price rise to a great extent particularly in investor oriented markets like Delhi NCR.
The consumer is definitely to benefit in the long run. However, property prices are likely to rise further in the short term as the cost of compliance is likely to be passed on by the builders to the buyers. One open issue that the Bill is silent on is the treatment for projects that are currently in the market at various stages of construction.
The Bill in its current form is just a first step. Implementing the same in letter and spirit will go a long way to restore the confidence amongst home buyers and giving an industry which is the most important contributor to the country's GDP, the rightful recognition and respect it deserves.
(Ganesh Vasudevan is the CEO of IndiaProperty.com.)