Decoding: Is the Real Estate Bill Builder-friendly?
In spite of the number of controversies surrounding the draft Real Estate Bill and its various versions, it does bring in the much required accountability to the sector. As a wise man puts it, the biggest advantage of law is that it exists.
Reduced bank deposit amounts
There have been dilutions in the Real Estate Bill like reducing the extent of money from allottees to be deposited in the banks, cutting it to 50 per cent from 70 per cent. These changes give genuine builders to allot more for properties in India, which have higher land costs. In spite of the reduced percentage, the Bill will ensure that builders maintain a cleaner slate. If a certain amount is earmarked for construction of a project, it can bring in more discipline into the sector of construction allowing fewer projects being stalled due to bankruptcy.
Threat of penalties
What is not builder-friendly in the Bill are the penalties imposed by the government for builders, who willfully delay the projects. They will be slapped with penalties and interest and forced to compensate consumers in cases of delays from the builder's end, except when municipal authorities stall them for clearances. This move will also ensure that consumers will have more assurance while investing in a project. Delay in possession of apartments has become more of an industry norm rather than an exception of late with property market slowing down.
With the Bill, the builders will now think twice before promising embroidered possession dates for upcoming apartments in India, eliminating false promises to some extent. Rogue builders are also liable to jail term if they willfully disregard the authorities.
Registration of properties
The Bill mandates all the properties and developers are to be registered with the authorities. This consumer-friendly move will impact all the frauds done in the name of real estate transactions. The consumer-friendly move will however add more paperwork for builders, who will now have to ensure that they are registered and adhere to all the rules of the Bill. If they fail to keep up with the new laws, registration will be cancelled.
More responsibility
The Bill also addresses the complaint of the consumers that the builders are not forced to be accountable for a project, and that they themselves have no control over their homes after they pay for it.
Under the Bill, the real estate developers will also be forced to disclose all the relevant information of a project, adhere to approved plans and project specifications. The promoters of real estate companies will be obligated to responsibly draft advertisements and prospectus of an upcoming project. And the defaulters will have to refund the money as well be responsible for any defects in the structure of a building that is discovered later.
The Bill sticks to its objective of providing transparency. “Currently, the real estate and housing sector is largely unregulated and opaque, with consumers often being unable to procure complete information, or to enforce accountability against builders and developers in the absence of effective regulation,” says a release by the Press Information Bureau on the amendment to the Bill.
While the Bill and its intentions are in the right place, the outcome of justice to consumers lies in the enforcement of these laws and how strongly the regulator operates. Only time will decide how much it can do what it intends to.
(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)