It’s unfortunate that so many reform bills are stuck in Parliament but in the case of the Real Estate Reforms Bill, this may actually be good news. The real estate bill is a long-awaited piece of legislation that is arguably of more practical importance to most people’s savings and investment than anything else.
The bill’s draft was released to the public by the government in November. However, there has been no real public debate. This is unfortunate because if the bill were to be passed in its present shape, then that would leave loopholes that could be exploited by unscrupulous developers.
In fact, if one were to compare the 2009 draft of this bill that was made public at the time with the current draft, then it seems possible that the room for these loopholes has been created because of lobbying by the real estate industry.
Here are the two big problem areas. The first is about diversion of flat buyers’ funds by the developer. Such diversion is a widespread malpractice and is a major reason for delayed and stalled projects. The 2009 draft of the bill stipulated that all payments taken from buyers for a particular project would be kept in an isolated account of and would be used only for that project. Strangely, the 2011 draft of the bill reduces this to 70% of the funds. Basically, the 2009 draft sought to prevent the diversion of the house-buyers’ funds but the new draft allows diversion of 30% of these funds.
The second problem area is the exemption of small projects from registration and most of the provisions of the bill. The 2009 draft exempted projects smaller than 1,000 sq metres. This has now been raised to 4,000 sq metres. Moreover, if a project is implemented in phases, then the limit will be applied to each phase separately. This means that a majority of projects could be structured to avoid the coming under the purview of this bill.
If the anti-customer practices of the real-estate industry are to curbed, then these loopholes in the bill will need to be addressed.