New Delhi: Paving the way for regulation of realty business, the Union Cabinet on Tuesday approved amendments to the long-pending real estate bill to bring under its ambit commercial and all ongoing projects as also brokers, while safeguarding consumers.
While Bill already provides for strict penalties including jail for errant builders, the amendments seek to make it mandatory for all developers, including of housing projects, to keep minimum 50 per cent of funds collected from buyers in a escrow account to meet construction cost.
Through the amendments to the Bill of 2013, the Cabinet has extended the applicability of the Bill to commercial real estate also. Ongoing projects that have not received Completion Certificates have also been brought under the purview of the Bill and such projects will need to be registered with a proposed regulator within 3 months.
Another major modification is that promoters will not be allowed to change plans and structural designs without the consent of 2/3rd of consumers of a project, according to an official statement.
Real estate agents also have been made punishable for non-compliance of orders of regulatory authority. Appellate Tribunals will also be set up under the proposed law.
Under the other new stipulations approved by the Cabinet, states have to make rules in this regard within one year.
Adjudicating officers will have rank equivalent to that of District Judges. Besides, an online system for submitting applications for registration of projects will be introduced within one year of the establishment of regulatory authorities. Regulator will have to decide cases within 60 days.
Under the Bill, piloted by the Housing and Poverty Alleviation Ministry and introduced in Rajya Sabha in August 2013, real estate project developers both in residential and commercial sectors will be required to
register their projects with the proposed regulatory authorities.
Promoters will be mandatorily required to disclose all information regarding promoters, project, layout plan, schedule of development works, land status, status of statutory approvals, proforma agreements, names and addresses of real estate agents, contractors, architect and structural engineer.
Developers welcomed the proposal for having a regulator under the the Real Estate (Regulation and Development) Bill, 2013, but expressed concerns over retrospective application with regard to registration of all ongoing projects.
Under the real estate regulatory bill, promoters will be required to compulsorily deposit 50 per cent of the amounts collected from consumers in a separate account in a scheduled bank with in a period of fifteen days to cover the cost of construction.
"This provision of 50 per cent has been made after taking into account the cost of land needed to be acquired before announcing a project," the statement said.
In the original bill, the provision was to keep 70 per cent of amounts collected from customers in escrow account.
"Penal provisions under the proposed law include payment of 10 per cent of project cost for non-registration and payment of another 10 per cent of project cost or 3 year imprisonment or both if still not complied with," it added.
For wrong disclosure of information or for not complying with the disclosures and requirements, payment of 5 per cent of project cost will be imposed.
The regulatory authorities would also have the power of cancellation of registration in case of persistent violations and decide on the further course of action regarding completion of such projects.
Under the proposed Law, one or more Regulatory Authorities will be set up in each State/UT or one Authority for two or more States/UT by the concerned governments for oversight of real estate transactions.
These regulators will co-ordinate efforts regarding development of the real estate sector and necessary advice to the appropriate government to ensure the growth and promotion of a transparent, efficient and competitive realty sector.
For fast track dispute settlement, one or more adjudicating officers will be appointed to settle disputes and impose compensation and interest.
Appeals against adjudicating officer and regulatory authority will lie with the Appellate Tribunals to be set up and final appeals will lie only with High Courts.
The proposed law is expected to give a boost to the 'Housing for All by 2022' mission by enabling increased flow of investments through enhanced transparency, accountability and standardization.
When contacted, realtors' apex body CREDAI President Getamber Anand said: "As an industry body we have always welcomed the real estate regulators."
He also hailed the government's move to include the commercial segment in the bill.
However, Anand expressed concern over the decision to bring all the ongoing projects under the ambit of this proposed law and said the provisions should be prospective and not retrospective.
"We have not seen the fine print of the amendments in the bill. We hope that all the issues we had raised have been addressed," Anand said.
CREDAI had demanded that all the sanctioning authorities of the real estate projects should be answerable to the regulator. It had also sought clarity on the clauses related to penalty for wilful default by developers, among others.
"If the bill in its final form addresses these issues, then this will help real estate sector grow," Anand said.
