A new law to give home buyers a better deal aims to ensure builders sell residential property on the basis of carpet area instead of ambiguous terms like “super area” while a regulator will ensure housing projects declare the status of important civic clearances.
The Real Estate (Regulation and Development) Bill, which the government plans to bring to Parliament in the budget session, has been framed under provisions dealing with property transactions in the concurrent list of the Constitution that applies to states, making the proposed legislation more than a model law.
In a bid to try and make sure developers stick to timelines, the proposed law states that realty players will have to park 70% of funds in a particular bank account so that resources are not diverted and buyers are not left in the lurch.
A real estate regulator in every state will make it mandatory for private developers to register all projects before sale of property and only after getting all necessary clearances, addressing a major concern of buyers about incomplete or fraudulent land acquisition.
According to the bill’s provisions, failure to declare status of clearances will invite up to a maximum three years imprisonment or fine that can amount to 10% of project cost.
Realty players will have to disclose project details and contractual obligations to ensure transparent, fair and ethical business practices. There can be a model agreement which is expected to reduce ambiguities in real estate transactions that not many buyers are familiar with.
Private builders are not comfortable with some of the bill’s provisions and voiced their objections at a meeting chaired by housing minister Ajay Maken and urban development minister Kamal Nath. Those who attended the deliberations included representatives of developers’ associations — CREDAI, NAREDCO and industry chambers CII and FICCI.
Builders maintain there is no need for a regulator as they are already subjected to clearances from multiple agencies. They felt the penal provisions hurt their interests, but the government might want to increase the odds in favour of consumers.
The meeting was called after the intervention of the Prime Minister’s Office which asked the ministries of housing and urban development to resolve differences and quickly finalize the long pending bill.
The government hopes that the move for a strong legislative protection for buyers, which will also rein in unscrupulous players, will help in gaining the appreciation of middle class voters who have drifted from Congress in the wake of a series of corruption scams.
Although realty developers have been asked to submit their views at the earliest, the government seems determined not to dilute consumer friendly provisions. “We are not going to compromise on any aspect of the bill that hurts the interest of common home buyers,” Maken said.
Real estate agents will also be asked to register with the regulator. “The agents, an important link between the promoter and buyer, have been unregulated. Once they are registered, it will be help in curbing money laundering,” an official said.