The Union Cabinet has approved the Real Estate (Regulation & Development) Bill, for setting up a Regulatory Authority to ensure transparency in the real estate sector and ensure speedy resolution of disputes. The other aspects covered in the proposed legislation are: Projects to be registered with the Regulatory Authority mandating that private builders will sell houses in residential projects on the basis of carpet area or build-up area instead of vogue super area. Builders to commit and adhere to completion time-frame announced. Seventy percent of funds to be deposited in escrows accounts. Developers to launch project only after securing all clearances. License for property brokers and also refunds for buyers in-case of projects delays.
S.K.Khanna & Maria R had the opportunity of interacting with various stakeholders of real estate sector, soliciting their views on some of the provisions of the Bill. The overall response was of a mixed feelings, some cheer and a few tear. But the common concern of all the stakeholders was the effective implementation of various provisions of the Bill in sharp contrast to earlier practices.
"Real Estate Regulatory Bill is well intentioned, but may become breeding ground of corruption. Many provisions are against the industry and of consumer interest. Our fear is that those with expertise to handle political influencers will only survive, thus leaving the all important industry in the hands of corrupt people. There is a need for regulator covering all stakeholders like defaulting customers, the approving authorities and financial institutions that fund projects. CREDAI has worked hard to advise the ministry to come out with appropriate comprehensive Bill with teeth to direct all stakeholders including approving authorities which will protect consumers while enhancing quality environment for the business." - Lalit Kumar Jain,
"From an industry perspective it's important the Bill maintains equilibrium between developer community and end users. Certain provisions in the Bill are required to be amended or removed otherwise it will result in substantial increase in cost and in long run will shatter government's dream to provide housing for all." - C Shekar Reddy,
National President, CREDAI.
"The mandatory registration process for any new projects is in favour of customers and will bring confidence and transparency in buying or investing in any such project and will also improve on the sector's credibility." - Supertech's chairman and MD, RK Arora.
RICS South Asia
RICS commends the Cabinet decision to clear the long-pending real estate regulation Bill aimed at regulating the housing market and protecting home buyers' interest. Whilst the Bill is not flawless, it is certainly a step in the right direction and we hope that this legislation will be supplemented with necessary rules and regulations which will clarify any ambiguities or gaps that exist in the Bill. The bill could have been more balanced and clearer on issues relating to dispute resolution and project clearances. In some ways, the Bill should be termed as ‘housing regulation bill' rather than ‘real estate regulation Bill' because it does apply only to primary residential market, leaving out the secondary market and also leaving out the commercial property market." - Sachin Sandhir, Managing Director, RICS South Asia.
NAREDCO & Raheja Developers
"It is a welcome step. We had been waiting for the same for long as it would bring buyers at ease along with transparency and respect to the sector. The proposed law will protect the interest of all stakeholders and also help check unscrupulous players in the sector. This now would help to establish a regulatory authority for enforcing fair practice and accountability norms and fast track dispute resolution mechanism in real estate transactions." - Naveen Raheja, President NAREDCO & CMD Raheja Developers.
"The proposed setup of a regulator will not only protect consumer interests but will also ensure fair practices and accountability on the part of industry players. However, the Bill should be more balanced and should include clauses that protect developers as well. Government should ensure setting up of a Single Window Clearance mechanism to avoid unnecessary delays," - Brotin Banerjee, MD & CEO, Tata Housing.
"We welcome the move by the Govt to set up the Real Estate Regulator. It is an extremely proactive and a long awaited move to bring transparency and accountability to the home buying process. It will protect the interest of the home buyers and at the same time, keep a check on the unscrupulous elements. It will help the buyers to take informed decisions. As Groupco Developers, we already have a system in place to regular ourselves." - Shilpa Shetty Kundra, Chairman, Groupco Developers.
Cushman & Wakefield
"The Bill is a welcome move by the Centre to boost the morale of the sector. In the short to mid-term, there could be a noticeable slowdown in launches of new projects as getting all the necessary permissions in place may delay the process of launching a project. The Bill may create an upward pressure on prices as there will also be some cost implications as developers wait to launch their projects with due approvals in place," - Sanjay Dutt, Executive Managing, Director, South Asia, Cushman & Wakefield.
"This Bill although is welcomed by the Realty-Sector but for me, it is surely bound to incur a mixed-response. Real-Estate Bill influxes a requisite step by initiating a regulatory authority to ensure transparency in this sector. This body would listen to our grievances, which could speed the time-frame-announce. The requirement of a license from the property-brokers would also curb the fraudulent practices, against the people who pretend to be brokers. Real-Estate bill on some aspects appears to be tad-harsh for realtors. There are times when project delays due to unavoidable circumstances, which could lead to refund for buyers, resulting in loss incurred to the realtors. With the 70% amount to be kept in escrows hand, this is an unnecessary step to further delay the process in pipeline. Thus I feel the Bill could have been so framed that both, the buyers and sellers could be benefited equally." - Mr. Ram Kumar Tyagi's - Director, RMS Group
Griha Pravesh Buildteck Pvt Ltd
"This is a wonderful step to bring complete transparency in dealings. This step will force developers to put their effort more towards the layout so that they can derive maximum carpet area. The positive-buyers will get more enclosed area, negative- developers would now try to make less balcony and terraces. The price adjustment according to the carpet area would give a shock to buyers and this would take time to educate them the calculation before selling. This measure will adversely affect the sales of any project. 70% of funds to be deposited in escrows accounts is a welcome step and should have no complaints. This will add to the self-discipline among builders and the timely delivery would become more certain. Any siphoning of the funds to other projects or another piece of land will be stopped resulting in project centric development. Govt should bring all the clearances under one roof and in this case the regulator itself have such divisions for controlling it." - Abhay Kumar, CMD, Griha Pravesh Buildteck Pvt Ltd
"This move would suck up liquidity from the market. Developers would have to look at other sources for funds, which could push the prices further up. The property prices could hence, go up a bit due to these regulations. The Bill will make it mandatory for developers to disclose details, including minor ones, about their projects on the company website. The details will include specifications, such as the layout plan, carpet area of each dwelling unit, number of units in the project, the amenities being provided, and the approvals received for the project from various authorities. Such disclosures will make it difficult for developers to make ad hoc changes to their project plans at a later stage of development." - Niranjan Hiranandani, Managing Director, Hiranandani Group.
Akshaya Pvt Ltd
"Being an ethical and transparent business practitioner, we welcome the much awaited Regulatory bill 2013. The bill will help construct clean, clear, principled and balanced real estate system to reduce the burden from the customer as well as the developers. But it will succeed only if the intent of the bill is synchronized encompassing all 4 major stakeholders - the developer, the financial institution which is lending money to both developer as well as buyers, the government authorities administering statutory approvals and providing public infrastructure facilities and the end customer. And as a matter of the regulations this bill has been the forte of Akshaya since the time of its inception in 1995 and the national awards such as ‘India's Most Transparent Developer' at the NDTV Property Award in 2013, CNBC/CRISIL Award for Highest Transparency in Real Estate Industry In India for 2010 and CNBC/CRISIL Award for Best Legal Systems in India for four Consecutive years in a row 2007, 2008, 2009, and 2010, stand testimony to it." - T Chitty Babu, Chairman & CEO of Akshaya Pvt Ltd
Jones Lang La Salle
"The bill will pave the way for providing the much needed transparency by seeking to regulate the hitherto largely unregulated housing sector in India. Even though Banerjee of Tata Housing feels that the notion's construction industry (real estate) is not regulated is debatable." - Jones Lang La Salle India's country head, Anuj Puri.
The Bill very clearly defines "carpet area" as the basis that would govern the transaction in any real estate project. It also defines "common areas" as distinct from carpet area. "Standardisation of terminology used in realty transactions usually led to confusion. Introduction of standard definitions will certainly provide ease of understanding. The absence of terminologies such as ‘built-up and ‘super built-up' will discourage unfair trade practices. Much of the delivery on the goals envisaged in the bill, rests with the states as they would make the rules and administer them, and that would be the test of its efficacy. The success of this law will be directly proportional to how proactive the real estate authority is. One hopes that it is able to identify the pointers well in advance. Only then it will be successful in achieving the goal of a "transparent realty" in India." - Bhairav Dalal, associate director, PwC India.
"The cabinet nod for the proposed Real Estate Regulation and Development Bill, which was pending since 2007, is a welcome move. Confederation of Indian Industry (CII) has always favoured setting of an institutional mechanism to improve the image of this crucial Sector for Indian economy and setting up of a Regulator is a step in the right direction. Though we must also keep in mind that multiple Acts and Rules exist for protection of consumer interests for any deficient services in any sector and hence it needs to be ensured that the proposed Real Estate Regulatory Authority (RERA) does not end up merely replicating various functional roles." - Mr. Firdose Vandrevala, Chairman - CII National Committee
"In principle, this is a very welcome and progressive development initiated by the Government of India. However, to ensure an equitable implementation of the proposed policy, the government, on its part, must also streamline processes to ensure better co-ordination amongst the numerous agencies involved in the approval process at the local, state and central levels, strict accountability for timely clearances by government functionaries, measures to curb corruption and consistency in laid down policy to ensure speedy approvals. Lastly, it will benefit buyers, industry and the country most if the long standing demand to grant industry status is granted to real estate and infrastructure sector. It is our sincere hope that the steps suggested will result in a balanced approach that benefits all and penalises none." - Pankaj Bansal, M3M India Directors.
"The Bill will have a negative impact on the industry, especially the clause of keeping 70% investment cost in the escrow account. As the money does not come cheap and permissions take one to two years to come, the growth in the industry will be affected. If I am building five projects per year, now I will be able to do just two to three at the most. The smaller builders will bear the brunt of this. The supply-demand gap will be adversely impacted." - Pratik Patel, Director, Rajesh LifeSpaces
"Regulation is a good idea as it will bring in transparency. However, the idea of 70% of the collection to be kept in escrow account will push several developers into manipulating the cash flow to other projects as circulation of money is essential for large scale developers. In any case, there is an escalation of five to seven per cent every year. Increase in petrol and diesel adds further to the burden. All this leaves no option but to balance it out in overall price rise." - Nitesh Kumar, COO, TDI Infracorp Ltd
The journey of the bill began in 2006 following market crisis in the housing and real estate sector in the US and European countries. Moving swiftly to avert such a situation in India's housing and real estate sector, the government initiated various measures to have a suitable mechanism overseeing development in housing and real estate sector in the country. Extensive deliberations took place with all the stakeholders and 22 states agreeing to various provisions of the Bill and finally this legislation emerged, receiving Cabinet nod this month. The Bill is awaiting approval of the parliament.
Through this Bill, having paved the way for the protection of buyers and consumers interests against prevailing practices and inordinate delays, the Ministry of Housing and Urban Poverty Alleviation (HUPA) now proposes to focus attention on streamlining the process of seeking clearances for the real estate projects. The Bill once enacted would be supplemented with necessary modifications as called for to clarify ambiguities or gaps found, said the ministry.
Welcoming the Bill former HUPA Minister Ajay Makan stated, the next big thing that we will focus on is the single window clearances. The ministry has formed a committee that will soon present its report on the implementation of a single window clearance system for seeking approvals and necessary permissions for the promoters. There should be a platform for the builders or the promoters to apply for all the required clearances together. Such a platform can be easily created by the state governments or the urban local bodies, where the work of seeking clearances can be done simultaneously in a transparent manner. The committee set up for the purpose was on the verge of giving a final report. A single window system for clearance of real estate projects throughout the country is expected to bring down average approval time from 196 days to 45-60 days, he disclosed.
From the perspective of the buyers and consumers, the proposed Bill may bring about a sea-change in the large, but largely unorganized real estate sector. It is indeed a boost to the infrastructure development and is neither a dampner nor a damp squib as is being made out. But there are apprehensions in the minds of buyers that the Bill could cause prices of new construction in some real estate hot spots to climb up. Definition of carpet area needs elaboration feel the buyers. The Bill certainly addresses the concerns of the buyers and is an important move forward and may prove to be a game changer for the home buyers. But all depends on the effective implementation of the provisions of the Bill by various stakeholders - from builders, real estate agents to government agencies to home - buyers and sellers — to work in a coordinated manner to achieve objectives enshrined in the Bill in sharp contrast to earlier practices so as to lift the image of real estate sector.