The Real Estate (Regulation and
Development) Bill, 2013, approved by the Union Cabinet yesterday is a
pioneering initiative to protect the interest of consumers, to promote fair
play in real estate transactions and to ensure timely execution of projects.
This was stated by Sh. Ajay Maken, Union Minister of Housing & Urban
Poverty Alleviation (HUPA) while addressing the media persons here today. He
said that the Bill provides for a
uniform regulatory environment, to protect consumer interests, help speedy
adjudication of disputes and ensure orderly growth of the real estate sector.
Reiterating Government’s commitment to make real estate development
transparent and consumer friendly, Shri
Maken said that real estate and housing construction has been largely the
concern of state institutions till the 80’s with very few private promoters and
a nascent industry. With the liberalization of the economy, conscious
encouragement was given to the growth of the private sector in construction,
with a great deal of success, and the sector today is estimated to contribute
substantially to the Country’s GDP. But currently the real estate and housing sector is
largely unregulated and opaque, with consumers often unable to procure complete
information, or enforce accountability against builders and developers in the
absence of effective regulation.
Shri Maken expressed the hope that
the proposed legislation would ensure greater accountability towards consumers,
and to significantly reduce frauds and delays. The Bill aims at restoring
confidence of the general public in the real estate sector; by instituting
transparency and accountability in real estate and housing transactions which
in turn will enable the sector to access capital and financial markets
essential for its long term growth. The Bill is also expected to promote
regulated and orderly growth through efficiency, professionalism and
standardization. It seeks to ensure consumer protection, without adding another
stage in the procedure for sanctions, he added.
Giving the details of the Bill, the
Minister said that it contains elaborate provisions dealing with registration
of real estate projects and registration of real estate agents with the Real
Estate Regulatory Authority; functions and duties of promoters; functions and
duties of real estate agents; rights and duties of allottees; establishment of
Real Estate Regulatory Authority; establishment of Central Advisory Council;
establishment of Real Estate Appellate Tribunal; offences and penalties;
Finance, Accounts, Audits and Reports; etc.
Benefits and Advantages of
Real Estate Bill, 2013
The Bill proposes to regulate transactions in the real estate sector
and is in pursuance of the powers under Entries 6, 7 and 46 of the Concurrent
List of the Constitution, which deals with Transfer of Property, Registration
of Deeds and Documents, and Contracts. The draft Bill has been prepared after
detailed deliberations with the State Governments and concerned Central
Government Ministries, and after having suitably incorporated the suggestions
received from them.
·
The Bill will bring about standardization in the sector leading
to healthy and orderly growth of the industry through introduction of definitions such as ‘apartment’, ‘common areas’,
‘carpet area’, ‘advertisement’, ‘real estate project’, ‘prospectus’ etc.
Introduction of the concept of using only ‘carpet area’ for sale which has till
now been ambiguously sold as super area, super built up area etc., will curb
unfair trade practices.
·
The Bill like other sectors such as telecom, electricity, banking, securities,
insurance etc. provides for specialized regulation and enforcement which
includes both curative and preventive measures, with powers to enforce specific
performance, not available under the consumer laws. The Authority has powers to
give directions for specific performance powers to impose penalty for
non-registration of projects including imprisonment for continuous violation
upto 3 yrs and impose penalty in case of other contraventions.
·
The Bill proposes to register real estate agents which have hitherto been un-regulated,
with clear responsibilities and functions, thereby leading to money trail and curbing money laundering.
This clause has been added on the recommendations of the Department of Revenue,
Ministry of Finance.
·
The Bill aims to ensure consumer protection, by making it mandatory for promoters to
register all projects, prior to sale; and only after having received all
approvals from development/municipal authorities thereby protecting buyer
investments.
·
The Bill will promote transparency and fair and ethical business practices,
relating to transactions, through disclosure of project details and contractual
obligations vis-à-vis the project and the buyer, promoting informed choice for the buyers.
This will substantially reduce the power
asymmetry prevalent in real estate transactions.
·
The Bill seeks to establish a regulatory oversight mechanism, through Real Estate
Authority(s) and Appellate Tribunal in the States, to enforce accountability
norms for the promoter buyer and the real estate agents.
·
The Bill will infuse professionalism and promote planned development of the real
estate sector through the promotional
role of the Regulatory Authority.
·
The Bill makes it mandatory upon the
promoters to deposit 70% or such lesser per
cent as notified by the Appropriate Government to cover the construction cost
of the project of funds received by the Promoter in a separate bank account,
for purposes of ensuring timely completion of projects to be used only for that
project, which shall help in timely
completion of projects, and prevent fund diversion.
·
The Bill provides for a speedy and specialized adjudication mechanism to settle disputes
between the promoter, buyer and real estate agents, thereby de-clogging the
civil courts and consumer forums, from disputes in the real estate sector.
· The Bill will catalyze domestic and foreign investment
into the sector, thereby contributing to enhanced activity, and increase in
GDP growth.
The main features of the Draft Bill:-
o
Applicability of the Bill:
The proposed Bill is
limited in its applicability to residential real estate i.e. housing and any
other independent use ancillary to housing. The two important definitions in
this regard are:
“real estate project
means the development of a building or a building consisting of apartments, or
converting an existing building or a part thereof into apartments, or the
development of a colony into plots or apartments, as the case may be, for the
purpose of selling all or some of the said apartments or plots or buildings and
includes the development works thereof”
“apartment whether
called dwelling unit, flat, premises, suite, tenement, unit or by any other
name, means a separate and self-contained part of any immovable property
located on one or more floors or any part thereof, in a building or on a plot
of land, used or intended to be used for residential purposes, or for any other type of
independent use ancillary to the purpose specified and includes any covered
garage, whether or not adjacent to the building in which such apartment is
located which has been provided by the promoter for the use of the allottee for
parking any vehicle, or as the case may be, for the residence of any domestic
help employed in such apartment”
o
Establishment of Real Estate
Regulatory Authority:
Establishment of one or
more ‘Real Estate Regulatory Authority’ in each State/UT, or one Authority for
two or more States/UT, by the Appropriate Government, with specified functions,
powers, and responsibilities to exercise oversight of real estate transactions,
to appoint adjudicating officers to settle disputes between parties, and to
impose penalty and interest;
o
Registration of Real Estate Projects
and Registration of Real Estate Agents:
Mandatory registration
of real estate projects and real estate agents who intend to sell any immovable
property, with the Real Estate Regulatory Authority;
o
Mandatory Public Disclosure of all
project details:
Mandatory public
disclosure norms for all registered projects, including details of the
promoters, project, layout plan, plan of development works, land status, carpet
area and number of the apartments booked, status of the statutory approvals and
disclosure of proforma agreements, names and addresses of the real estate
agents, contractors, architect, structural engineer etc.;
o
Functions and Duties of Promoter:
Duty of promoters
towards disclosure of all relevant information and adherence to approved plans
and project specifications, obligations regarding veracity of the advertisement
for sale or prospectus, responsibility to rectify structural defects, and to
refund moneys in cases of default;
o
Compulsory deposit of seventy
percent or such lesser percent as notified by the Appropriate Government, to
cover the construction cost of the project, of funds received by the Promoter,
in a separate bank account:
Provision to compulsorily deposit
seventy percent or such lesser percent as notified by the Appropriate
Government, of the amounts realized for the real estate project from the
allottees, from time to time, shall be deposited in a separate account to be
maintained in a scheduled bank within a period of fifteen days of its
realization to cover the cost of construction and shall be used only for that
purpose.
o
Functions of Real Estate Agents:
Real estate agents not
to facilitate the sale of immovable property which are not registered with the
Authority required under the provisions of the Act, obligation to keep,
maintain and preserve books of accounts, records and documents, obligation to
not involve in any unfair trade practices, obligation to facilitate the
possession of documents to allottees as entitled at the time of booking, and to
comply with such other functions as specified by Rules made in that regard;
o
Rights and Duties of Allottees:
Right to obtain information
relating to the property booked, to know stage-wise time schedule of project
completion, claim possession of the apartment or plot or building as per
promoter declaration, refund with interest in case of default by the promoter,
and after possession entitled to necessary documents and plans. Duty of
allottees to make necessary payments and carry out other responsibilities as
per the agreement;
o
Functions of Real Estate Regulatory
Authority:
The Authority to act as
the nodal agency to co-ordinate efforts regarding development of the real
estate sector and render necessary advice to the appropriate Government to
ensure the growth and promotion of a transparent, efficient and competitive
real estate sector;
o
Fast Track Dispute Settlement
Mechanism:
Establishment of fast
track dispute resolution mechanisms for settlement of disputes, through
adjudicating officers (an officer not below the rank of Joint Secretary to the
State Government) to be appointed by the Authority, and establishment of an
Appellate Tribunal to hear appeals from the orders of the Authority and the
adjudicating officer;
o
Establishment of Central Advisory
Council:
Establishment of Central
Advisory Council to advise the Central Government on matters concerning
implementation of the Act, with a mandate to make recommendations on major
questions of policy, protection of consumer interest and to foster growth and
development of the real estate sector. The Council to have among others, five
representatives of State Governments, to be selected by rotation;
o
Establishment of Real Estate
Appellate Tribunal:
Establishment of Real
Estate Appellate Tribunal, by the appropriate government to hear appeals from
the orders or decisions or directions of the Authority and the adjudicating
officer. The Appellate Tribunal is to be
headed by a sitting or retired Judge of the High Court with one judicial and
one administrative/technical member;
o
Punitive Provisions:
Punitive provisions
including de-registration of the project and penalties in case of contravention
of the provisions of the Bill or the orders of the Authority or the Tribunal;
o
Power to make Rules and Regulations:
Appropriate Government
to have powers to make rules over subjects specified in the Bill, and the
Regulatory Authority to have powers to make regulations.
RM/RS