Here’s how the Real Estate Bill will benefit buyers

  • Moushumi Das Gupta, Hindustan Times, New Delhi
  • Updated: Mar 10, 2016 20:47 IST
The real estate bill slated for passage in the Upper House on Thursday after the Congress indicated its support for the legislation, seeks to set up a Real Estate Regulatory Authority in states and federal territories to oversee real estate transactions. (Parveen Kumar/Hindustan Times)

The real estate bill seeks to set up a Real Estate Regulatory Authority in states and federal territories to oversee real estate transactions. It will help regulate sector and bring in clarity in terms of who governs/monitors realty projects.The bill is touted as a key reform measure in the vast real estate sector.

Here is how the new real estate bill will benefit consumers

1) As of now the real estate sector was 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 absence of standardization and lack of adequate consumer protection has constrained the healthy and orderly growth of the industry. Not anymore. Once the bill becomes an Act, in case of any grievance, the consumer can go to the real estate regulator for redressal.

Read more: Congress on board after tweaks, Real Estate Bill may pass in Parl today

2) The bill will make it mandatory for all commercial and residential real estate projects where the land is over 500 sq. mt. or eight apartments will have to register with the regulator before launching a project. By making registration of the project compulsory with the regulatory authority, the bill aims to provide greater transparency in project marketing and execution. Failure to do so will attract a penalty which may be up to 10% of the project cost and a repeat offence could land the developer in jail.

3) Developer will have to put 70% of the money collected from a buyer in a separate account to meet the construction cost of the project. States can increase the ceiling but not lower it. This will put a check to the general practice by majority of the developers to divert buyer’s money to start new project instead of finishing the one for which money was collected. This will ensure that construction is completed on time.

4) It is likely to stabilize housing prices. The bill will lead to enhanced activity in the sector, leading to more housing units supplied to the market. In the government’s opinion, the bill will bring in the much-needed confidence to infuse more investment and, in turn, stabilise house prices.

5) The bill also seeks to impose strict regulations on the promoter and ensure that construction is completed on time. Its purpose is to ensure that the buyer gets the property as per the specifications that he had been promised

6) Carpet area has been clearly defined in the bill to include usable spaces like kitchen and toilets imparting clarity which was not the case earlier.

7) A developer’s liability to repair structural defects has been increased to 5 years from the earlier 2 years.

8) Real estate appellate tribunals now required to adjudicate cases in 60 days as against 90 days in the earlier proposal.

9) Regulatory Authorities to dispose of complaints in 60 days while no such time limit was indicated earlier.

How it benefits builders:

The builders will also benefit from the proposed legislation, as it proposes to impose penalty on allottee for not paying dues on time. Also the builder will have the opportunity to approach the regulator in case there is any issue with the buyer.

But, builders believe that the bill was heavily stacked against them. The bill provides for penalty, upto 10 per cent of the total project cost or even imprisonment, if builders do not honour their commitment or fail to register themselves with the regulator

How it works in other countries

United States

Real estate in the US is regulated at numerous levels. Therefore, there is no single regulatory body, but rather a series of bodies that regulate different ownership and usage aspects. To safeguard the interest of the end-users, the US. Department of Housing and Urban Development (HUD) has rules under the Real Estate Settlement Procedures Act to protect consumer interests pertaining to residential properties.

Issues related to end users are not a matter of federal regulation. These are dealt with in a legal contract. If a purchaser enters a contract with the developer, and the developer does not deliver on the terms agreed upon in the contract, the developer can be taken to court for breach of contract. In the US, there are state real estate licensing laws and a code of ethics in place.

United Kingdom

There is an absence of a regulator to monitor development.The Financial Services Authority (FSA), which is now part of the Bank of England, regulates almost all investments in real estate. The Property Misdescriptions Act 1991 prohibits the making of false or misleading statements on property matters in the course of estate agency business and the property development business.


In principle, no regulatory authority exists. According to the German Civil Code, the seller is generally liable to the buyer for damage compensation, if the delivered property deviates from the description in a guaranty or in a brochure. The seller is generally also liable for damage compensation in case of delayed deliverables.


Land ownership and planning is primarily controlled by the public sector. Hence, based on the demarcated use, the respective regulatory authority such as Housing Development Board for residential and Jurong Town Corporation (JTC) for industrial will regulate and guide development. Details such as the possession, allotment date and specifications are usually set out clearly in contracts; end users are able to undertake legal means to claim compensations.


The UAE Government is considering the establishment of a federal real estate regulatory authority. Currently, the government does not have a body to supervise the sector, although emirates like Dubai and Ajman have their own real estate regulatory authorities — Real Estate Regulatory Authority (RERA) in Dubai and Ajman Real Estate Regulatory Authority (ARRA) in Ajman. The Land Department of Dubai is proposing the Real Estate Investor Protection Law.


The Central Government introduced a regulation for real estate in 2010, which is more stringent and specific than it has historically been to control the market. The State Department of Real Estate “New State 10”, is a regulation which enforces an accountability system for the local government to stabilize local real estate prices. This is aimed at promoting the construction of affordable housing to promote social development and enforce stability and accountability. On this basis, local governments have introduced their own control rules in Beijing, Shanghai, Guangzhou and Shenzhen.

The sales agreement contract specifies the area of the property being sold. In case of the sale of residential property, a minor differential (generally in the range of 2-3%) in the area is permissible. In case this is not followed, the buyer can legally get a refund from the developer. The mortgage contract is a legal document and provides legal protection to the bank (lender) and the buyer (borrower).

The sales agreement specifies the terms and conditions for sale and determines the legal rights of both the buyer and the seller. Apart from conditions in the sales agreement, there are no other provisions to safeguard end-users.

Source: Realty decoded: Investing across borders by Ernst & Young and Ficci

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