Salient Features & Key Issues in the Real Estate
Salient Features & Key Issues in the Real Estate. The Real Estate (Regulation and Development) Bill, 2013 was introduced in the Indian Parliament on August 2013 by the Ministry of Housing and Urban Development. Since then, there has been inordinate deferment in its enactment because of the concerns of the various stakeholders and the ambiguities over the proposed amendments by the Standing Committee.
The Bill in its rudimentary sense aims to regulate the transactions between the buyer, promoters/developers and agents of residential real estate projects.
Authorities and Tribunal
- State-level RERAs (Real Estate Regulatory Authorities) – RERAs shall be established by the State Government to ensure consumer protection and standardization of business practices. Wherein, two or more states can have a joint RERA and one state can have more than one RERA.
RERA has to publish an annual report detailing its activities.
- A Central Advisory Council is also to be constituted to advise Central Government on matters concerning the implementation of the Act.
- A Real Estate Appellate Tribunal has the power of the civil court to settle disputes related to the order of RERA, shall be established. HRA
Developers have to register their Real Estate Projects with Real Estate Regulatory Authority if the carpet area of their project is more than 1000 square metres. or construction projects have more than 12 apartments.
In order to register the developer, following requisite details are to be submitted:
- Copy of the commencement certificate;
- The layout of the project;
- Number of Carpet area of apartments for sale;
- Real Estate Agents must also get registered with RERA.
Developers have to:-
- Update any change in the construction of building to the buyer; this will bring an end to developer’s freedom to make hasty changes in their original plans. Moreover, Any Structural changes can only be done with the signed approval of at least two-thirds of the investors.
- Compensate allottee for damages incurred as a result of false advertising.
- Not to accept more than 10% of the total cost of the building without entering into a written agreement with the allottee/buyer.
- Is liable to return the entire amount given by allottee, if he is not able to give possession of the building.
- The developer must also upload quarterly updates about the project on the Regulatory authority website.
- Developer’s duty is also to obtain a completion certificate from the local authority and make it available to the buyers.
On the other hand, buyers have to make timely payment or else they would have to pay interest for deferred payment.
Offences – Penalties and Adjudication
- The developer has to pay upto10% of the estimated cost of the Real-estate project if he fails to register the project within 3 months of the Bill becoming a Law. In case of further delays, they can even be served with imprisonment.
- Whereas, if the allottees fail to make timely payments they can be subjected to pay interest.
- Agents will have to pay a fine of Rs. 10,000 per day for violating any provisions.
- Duty of adjudicating officer is to decide possession/ compensation to allottees.
A Real Estate Fund is also to be established which will receive funds from Centre and State Governments.
Comptroller and Auditor General will audit the account.
The Bill also establishes an Escrow Account which requires the developer to maintain separate account.70% of the total amount collected from buyers is to be kept here. Amount in this account can only be used for construction purpose. However, the States have the flexibility to reduce this amount to less than 70%.
Amendments in the Bill
In the light of the reports of the committee of streamlining approval procedures for real estate projects and the 2014 Standing Committee on Urban Development, some of the proposed amendments are listed below:
- The term for a promoter to rectify any structural defect which is brought to his notice within two years of allotment should be increased to five years.
- To also include commercial and industrial projects as well in its ambit.
- The limit should be lowered to 100 square meters and three apartments.
- A new provision should be inserted to allow RERAs to give directions to state governments to establish a single-window system for providing clearances for projects.
- Reducing the requirement of 70 % amount for an Escrow account to 50%.
- Jurisdiction of Parliament is under a discussion as Land (Schedule7, List-II Entry 18) is a State Subject. Though Parliament’s empowerment has been validated by Contract (Schedule7, List-III Entry 7) and Transfer of property (Schedule7, List-II Entry 6) under the Concurrent List.
- Some states have real estate project related Acts, the act will overrule them for example- Maharashtra Housing Regulation and Development Act, 2012; Draft Haryana Real Estate (Regulation and Development) Bill, 2013; West Bengal Building (Regulation of Promotion of Construction and Transfer by Promoters) Act, 1993.
- 70% of the amount in the Escrow account is to be used only for construction work, which may lead to unutilized funds where the cost of construction might be less than 30% for land, what if the land cost is more – will give rise to financing from other sources.
- A more detailed definition of Carpet area should be introduced as the Bill defines carpet area as ‘net usable floor area’ of an apartment, excluding the area covered by its walls. The term ‘net usable floor area’ should also be defined in the Bill. Key Issues in the Real Estate
Since nearly 31% of the Indian Population reside in urban areas and accounts for around 63% of the GDP, the availability of residential space in urban areas is a rising concern. With the recent ordinance amending Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, is also among the factors that are expected to give a boost to real estate property development activities in the country during the year. With the Government’s Housing for All aspiration by 2022, the Act is expected to fulfil the requirement and at the same time usher transparency and curb money laundering.