New real estate act: Safeguards for homebuyers not fully functional yet

  • Jeevan Prakash Sharma, New Delhi
  • Updated: May 17, 2016 09:49 IST
The new real estate law makes it mandatory for all real estate projects and brokers to be registered with the regulator who will oversee transactions and settle disputes. (HT file photo)

The Centre has been accused of withholding the “soul” of a new real estate law designed to protect millions of homebuyers who face needless harassment because of limited legal options at times of dispute.

The Union ministry of housing and poverty alleviation notified on April 27 certain sections of the Real Estate (Regulation and Development) Act, 2016, allowing state governments to form regulatory authorities within a year, beginning May 1.

The new rules make it mandatory for all real estate projects and brokers to be registered with the regulator who will oversee transactions and settle disputes.

But the ministry’s notification is pending for sections that are crucial to bring the entire act into operation.

Read: Mortgage our unsold flats to recover land dues: Noida builders

Read: Assocham: Delhi-NCR stuck with highest unsold housing inventory

Legal experts said such half-measures will not work. For instance, a state government can designate any regulatory authority or officer, preferably a secretary dealing with housing, to act as the real estate ombudsman.

But “what will he do when the relevant sections under which he can initiate action have not been notified?” asked Sidharth Luthra, a former additional solicitor general.

“Since the provision of Section 20(1) enables the government to notify the secretary as the regulatory authority pending the constitution of the regulator, there is no reason to delay the act being brought in force completely,” he said.

Ministry spokesperson AA Rao clarified that the government was working on a time frame to announce the remaining sections of the act. It will be done in such a manner that proactive states can ensure benefits to consumers as early as possible, without waiting for the outer timelines stipulated by the law.

The outer timeline is one year for establishing a regulatory authority and three months thereafter to bring out regulations for day-to-day functioning.

The experts warned that the delay in implementing the real estate law in its entirety will help property builders get time to fix their wrongdoings. Several projects have been delayed after developers diverted funds raised for one project to another, leaving them unable to complete construction and resulting in buyers still waiting for their homes.

Senior Supreme Court lawyer Nagendra Rai alleged that the government has withheld the soul of the act. “It’s an eyewash … will not serve the cause of the public,” he said.

The notified sections of the act deal with definitions of real estate terms such as carpet area and completion certificate; appointment of the chairperson and members of the regulatory authority and appellate tribunals; their salary and powers.

What aren’t notified yet are sections on registration of real estate projects and agents; functions and duties of a promoter; rights and duties of allottees and offences; penalties and adjudication.

Ministry spokesperson Rao clarified that chief secretaries of all states and Union territories have been asked to take necessary action to implement the rules and “put other mechanisms in place”.

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