A landmark law designed to protect millions of homebuyers who face needless harassment because of limited legal options at times of dispute is set to miss its November target of becoming entirely operational across India.
The delay can be blamed on the states, including the Union Territory of New Delhi, which didn’t frame rules within a six-month target that expires on October 31 for the real estate regulatory authority act to become operative.
“We are approaching the Parliament committee on subordinate legislation to seek more time for the states,” a Union housing and poverty alleviation ministry official said.
The law will become operative from November 1 only in the Union territories of Chandigarh, Lakshadweep, Andaman and Nicobar Islands, Dadra and Nagar Haveli, and Daman and Diu, where the Centre is empowered to frame rules.
In Delhi’s case, the Union urban development ministry has to frame the rules. “We have held discussions with the Delhi government officials. But it will take more time,” a ministry official said.
The law to regulate the real estate sector, which contributes about 9% of India’s gross domestic product, makes it mandatory for all projects and brokers to be registered with a real estate regulator who will oversee transactions and settle disputes. States are supposed to frame rules and appoint a regulator after Parliament passed the law this April. The law came into effect in May.
Developers could see a boon in the delay. They won’t have to register their projects, mandatory under the new law, if they complete it before the real estate regulator is established. The law covers only ongoing projects where completion or occupancy certificate has not been given.
That leaves an aggrieved buyer, who has bought a home in one of such project, without a chance to get the complaint redressed.
Once the states finalise the draft rules, they will have to put it in the public domain for people’s suggestions.
“Usually they have to give 30 days for this process after which the draft rules is sent to the law department for vetting. Only after the legal approval, states can notify the rules. The entire process will take three to four months,” an official said.
Consumer groups are unhappy with the delay.
“We are afraid developers are putting pressure on the government to defer the notification of rules,” said MS Shankar, who heads the Karnataka chapter of Fight for Real Estate Regulatory Authority.
The law gave states time till next May to establish the regulatory authority. In the interim period, states were empowered to designate any officer, preferably the secretary of the department dealing with housing, as the regulator to hear buyers’ complaints. Again, barring Haryana, none of the states have appointed an interim regulator.
Only a handful of states such as Karnataka, Maharashtra, Haryana and Odisha have started the process.
“We are drafting the rules. It will take three-four months to notify them,” said Manjit Singh, Rajasthan secretary, department of local-self government.
Maharashtra housing secretary Shrikant Singh said the draft rules have been prepared and submitted for approval.
The law was passed as the real estate sector is largely unregulated in India. If a consumer had a complaint against a developer he would had to make rounds of consumer or civil courts. Also, the lack of adequate consumer protection has constrained a healthy growth for the industry.
Several projects have been delayed after developers diverted funds raised for one project to another, leaving buyers still waiting for their homes.
The law makes it mandatory for builders developing a project where the land exceeds 500 square metre to register themselves with the regulatory authority before launching or advertising their project.
Failure will invite a penalty of up to 10% of the project cost. For subsequent violation, developers face three years in jail.