Months after the Noida Extension fiasco left 6,000 home buyers in the lurch, the government is ready with a bill to regulate the real estate sector and protect property buyers from unscrupulous developers.
The Centre has finalised the draft Real Estate (Regulation & Development) Bill, pending since 2009, and plans to introduce it in the winter session of Parliament after getting cabinet approval.
The bill makes it mandatory for developers to register themselves with a real estate regulatory authority to be set up in each state. Developers must also submit project details — approved layout plan, timeline, cost, sale agreement — to the regulator before launching projects. This information will be displayed on the regulator’s website. Only those developers who fulfil this clause will be permitted to advertise their projects.
The bill also ensures the booking amount isn’t diverted. The developer will have to create an escrow fund, where a percentage of the money collected from the buyer will be parked, to be used for the specified project.
The draft comes with stiff penal provisions for errant developers. Defaulting on contract or deviation from the layout plan will lead to the developer being penalised 10% of the project cost or jailed for a maximum of three years. In extreme cases, a developer could even lose his licence."From the buyers’ perspective, the proposed bill provides sufficient safeguards. Disclosure of detailed information about projects will create awareness and curtail pre-launch," said Sunil Tyagi, senior partner, ZEUS Law Associates.
The draft proposes a two-tier grievance redressal system — the state regulator and an appellate tribunal at the Centre. At present, the only option open to buyers is to move the civil courts — a time-consuming process.
“Had a regulator been in place, we would have had a platform to lodge our complaint instead of running pillar to post,” said Ravikant Pandey, member, Noida Extension Owners and Members. He is one of thousands of buyers caught in the land acquisition stir between developers, authorities and farmers.
Developers reacted cautiously. “The bill should protect buyers’ interests but at the same time have safeguards for developers. Otherwise, it would be counter-productive,” said Lalit Kumar Jain, president, Confederation of Real Estate Developers’ Association of India, which represents over 6,000 developers.
The bill does have some safeguards for developers. Buyers who default on payments will be fined.
“The draft bill is balanced and has clearly defined obligations for both the promoter and the buyer,” said a source.