Homebuyers get good news, Rajya Sabha passes Real Estate bill
The bill will now go to the Lok Sabha where it is expected to have a smooth sailing due to the commanding majority of the ruling NDA coalition.india Updated: Mar 10, 2016 22:52 IST
A legal shield for millions of Indian property buyers from unscrupulous realtors could soon become a reality with the Rajya Sabha clearing on Thursday the Real Estate (Regulation and Development) Bill that aims to regulate the sector.
The bill will now go to the Lok Sabha where it is expected to have a smooth sailing due to the commanding majority of the ruling NDA coalition.
Once the bill becomes an act after Presidential assent, it will become mandatory for developers to register all commercial and residential real estate projects-- where land is over 500 square metres or eight apartments--with the regulator before launch.
“It brings in only a regulation and not strangulation. This bill is not against anyone...real estate bill will renew investors’ confidence and ensure timely completion of projects and create more opportunities,” housing and urban poverty alleviation minister M Venkaiah Naidu said in the Rajya Sabha.
“In this way, it will help in achieving the target of Housing For All.”
The bill envisages the setting up of a real estate regulator, to whom the developer will have to disclose all project-related information, including detailed lay-out plan, land status, status of approvals, etc.
Failure to disclose all information or any deviation from the plan would invite a penalty of up to 10% of the project cost and a jail term of up to three years.
India’s real-estate sector is largely unregulated, causing delays of several years in hand-over of apartments and overshooting of project estimate costs.
If a consumer has a complaint against a developer, they have had to make the rounds of consumer or civil courts. The absence of standardisation and lack of adequate consumer protection constrains the healthy and orderly growth of the industry.
The bill will make it mandatory for developers to deposit 70% of the money collected from buyers in a separate escrow account to meet construction costs, ensuring speedy completion of projects.
In the earlier version of the bill, the ceiling was fixed at 50%.
Introducing the bill in Rajya Sabha, Naidu said, “Today, this august House is taking upon itself such a legislative responsibility to restore order in one of the critical areas of economic activity i.e. real estate sector is the second largest employer in the country, next only to agriculture. Besides, it accounts for about 9% of GDP. Construction sector supports 250 ancillary industries.”
Later he tweeted, “Historic day for housing sector. PM’s guidance & support of Parliamentarians today fulfilled long pending dream of home buyers.”
The bill has many new “pro-consumer” features which were not there in the earlier version. It mandates the rate of interest payable by the promoter or the allottee in case of default and delays will be the same.
Also, a developer’s liability to repair structural defects in sold property has been increased to five years from an earlier two years. Promoters have also been barred from changing plans and design without the consent of consumers.
Addressing members’ concern about widespread bias against minorities, non-vegetarians and even sexual minorities in urban apartments, Naidu assured the House that the new legislation will provide for non-discrimination in housing.
The minister did not agree to amend to bill to include a non-discriminatory clause, but said a rule to that effect would be inserted.
But the bill appears to succumb to builders’ lobbies who say the bill is stacked against them with a penal provision - a first -- for allottees who fail to comply with orders of the real estate regulatory agency.
Allottees will have to cough up to 5% of the apartment cost or spend a year in jail ,or both, for defaulting on payment or any other violation.
Also, the bill mandates developers must mention the actual carpet area of projects to the consumers, not super-built area that includes common passage area, stairs and other areas which make up to 30% of the actual area of the property.
“By mandating that the carpet area be explicitly mentioned, this bill ensures that even the most undiscerning consumers are thoroughly informed,” said Rajya Sabha member Rajeev Chandrasekhar who was a member of the Parliamentary Standing Committee on real state bill.
In the works since 2009, the bill was introduced in the Rajya Sabha by the previous UPA government on August 14, 2013 but has since then gone through several changes. It had been referred to the Parliamentary Standing Committee and the Select Committee.