Landmark reform in realty sector: Passage of Real Estate Regulation Bill

New Delhi: Touted as a major reform measure to regulate the vast real estate sector and bring order in it, the Real Estate (Regulation and Development) Bill, 2016 was passed by the Rajya Sabha on 10 March 2016 and by the Lok Sabha on 15 March 2016.

The Act came into force from 1 May 2016 with 69 of 92 sections notified.

The Bill seeks to protect the interests of the large number of aspiring house buyers while at the same time enhancing the credibility of construction industry by promoting transparency, accountability and efficiency in execution of projects.

The Bill was hailed by realty developers and consultants saying the law will bring credibility to property business and protect consumers interest but felt that some of the provisions like imprisonment are harsh.

However, the developers expressed dissatisfaction over inclusion of the ongoing projects in the Real Estate (Regulation and Development) Bill. They wanted government authorities, which sanctions the project, to be brought under this bill.

Key points of the Bill can be summarised as under:

The bill would prohibit unaccounted money from being pumped into the sector. The government has gone beyond the recommendation of the Select Committee and now requiring developers to deposit 70 percent of the collections form buyers in a separate accounts through cheques towards the cost of construction including that of land as against a minimum of 50 percent suggested by the Select Committee;

Norms for registration of projects has been brought down to plot area of 500 sq.mts or 8 apartments as against 4,000 sq.mt proposed in the draft Bill in 2013 and 1,000 sq.mts or 12 apartments suggested by the Standing Committee;

Commercial real estate also brought under the ambit of the Bill and projects under construction are also required to be registered with the Regulatory Authority. About 17,000 projects are reported to be at various stages of development;

Capret area has been clearly defined which forms the basis for purchase of houses, eliminating any scope for any malpractices in transactions

Ending the earlier asymmetry which was in favour of developers, both consumers and developers will now have to pay same interest rate for any delays on their part;

Liability of developers for structural defects have been increased from 2 to 5 years and they can’t change plans without the consent of two thirds of allottees;

The Bill provides for arranging Insurance of Land title, currently not available in the market which benefits both the consumers and developers if land titles are later found to be defective;

Specific and reduced time frames have been prescribed for disposal of complaints by the Appellate Tribunals and Regulatory Authorities; and

A provision is now made for imprisonment of up to 3 years for developers and up to one year in case of real estate agents and consumers for any violation of Tribunals and Regulatory Authorities.

The Bill requires project promoters to register their projects with the Regulatory Authorities disclosing project information including details of promoter, project including schedule of implementation, lay out plan, land status, status of approvals, agreements along with details of real estate agents, contractors, architects, structural engineers etc.

Following is the chronology of events leading to the passage of Real Estate Bill:

-Union Cabinet approved the Real Estate Bill, 2013 on June 4,2013;
-Bill was introduced in Rajya Sabha on August 14, 2013;
-Bill was referred to the Department Related Standing Committee on September 23, 2013;
-Report of the Standing Committee was tabled in Rajya Sabha on February 13 and in Lok Sabha on February 17,2014;
-Attorney General upheld validity of central legislation for real estate sector on February 9,2015;
-Union Cabinet approved Official Amendments based on the recommendations of the Standing Committee on April 7,2015;
-Bill of 2013 and Official Amendments referred to the Select Committee of Rajya Sabha on May 6, 2015;
-Select Committee tables its report along with the Bill of 2015 on July 30,2015;
-Real Estate Bill, 2015 was approved by the Union Cabinet on December 9, 2015;
-Real Estate Bill, 2015 was listed for consideration and passing in Rajya Sabha on 22 and 23 December, 2015 but could not be taken up;
-The Real Estate (Regulation & Development) Bill, 2016 passed by Rajya Sabha on March 10, 2016.
-The Real Estate (Regulation and Development) Bill, approved by Lok Sabha today, five days after its passage by Rajya Sabha.

The Bill seeks to protect the interests of the large number of aspiring house buyers while at the same time enhancing the credibility of construction industry by promoting transparency, accountability and efficiency in execution of projects.