Sunday, December 25, 2011

Tight laws in regulating Real estate: Aview of real estate regulation bill

The realty industry is up in arms over the draft real estate regulation bill ... they don't want it, at least in its present form. They fear it will be the thin end of the wedge, a tool for the government to harass the realty industry, and that it will hit the sector — already impacted by the economic downturn, higher interest rates and spike in construction costs — hard.

The government doesn't think so: it feels the industry needs regulation if consumer interests are to be protected. It says that while the real estate and housing industry has been growing at a CAGR of over 20-30 per cent in recent years, this growth has been largely unregulated. Unscrupulous practices by some developers have led to widespread complaints with consumers lacking an effective grievance redressal or adjudication machinery, the Ministry of Housing and Urban Poverty Alleviation says.

Consumer groups have welcomed the bill; they say the real estate industry is subject to little or no oversight.

What exactly is the bill? The government's draft real estate (regulation & development) bill, 2011 seeks to establish a regulatory oversight mechanism to enforce full disclosure, fair practices and accountability in the real estate sector and to provide for speedy dispute redressal.

Power of the Bill

The bill will establish a 'Real Estate Regulatory Authority' in each state to promote orderly and planned growth, make it mandatory for registration of developers / builders, with the Real Estate Regulatory Authority as a system of accreditation.

Also mandatory public disclosure norms, including details of developer, project, land status, statutory approvals and contractual obligations are included in the bill.

The authority will also establish mechanisms for settling disputes between promoters and allottees/ buyers.

The bill will ensure obligations of promoters to adhere to approved plans and project specifications, and to refund moneys in cases of default and obligation of allottee to make payments and other charges agreed to under the agreement and payment of interest in case of any delay.

The bill also envisages the setting up of a 'Real Estate Appellate Tribunal' by the Centre to hear appeals and to adjudicate disputes, to be headed by a sitting or retired judge of the Supreme Court or Chief Justice of a high court.

The bill also has penal provisions to ensure compliance with orders of the authority and tribunal; and will bar civil courts from hearing matters which the authority or the tribunal is empowered to determine.

The new bill will make it mandatory for builders to specify the area of an apartment in the sale agreement, with a clear breakdown of what the builder is charging for the apartment and a separate calculation for charges levied for common spaces like corridors, parking and lifts.

The bill will also ensure that homebuyers don't get a raw deal by way of arbitrary pricing, and as a first step, the bill has a provision to cap property rates by fixing location-wise circle rates.

The regulator will ensure compliance with these rates.

The government says the Bill will be a game changer, and begin the process of long term cleaning up of the real estate and land sectors.

Adverse impact

However, the industry body, CREDAI (Confederation of Real Estate Developers Associations of India), feels that it will have an adverse impact on the realty sector and the government should bring transparency in its own functioning.

Builders are also concerned over the penal provisions such as three years' jail and penalty of 10 per cent of the project cost. T. Chitty Babu, Secretary, CREDAI and President of Akshaya, Chennai says, “Project launches are delayed as approvals take up to 18 – 24 months and we need to get sanctions from 48 different agencies so unless the statutory authorities are bought under the bill the time delay and hike in cost will not be ended.”

CREDAI National President Lalit Kumar Jain says the bill in its current form is nothing but “a Developers Harassment Bill.”

He told the CREDAI Conclave-2011 at New Delhi that developers faced multiple problems.

The government should cut red tape and take action for a single window clearance system so projects can be speeded up.

Though CREDAI says it has its own mechanism to address grievances, consumer groups say most of the complaints are against builders and developers — such as delayed possession, and a failure to keep commitments.

N.L. Rajah, Trustee, Citizen Consumer and Civic Action Group, Chennai while questioning whether it makes sense to add a new regulatory authority, says the bill should pay special attention to recurring problems that it does not address sufficiently in its present form.

For more information:-
TEAM Daniel & Boaz
Chennai Law Firm
Helpline:- 9840802218

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