In a major concession to the real estate sector, the housing ministry has proposed to allow builders to divert up to half the amount collected from a buyer for a specific project to other projects.
It is a dilution of the original clause in the Real Estate (Regulation & Development) Bill, drafted by the previous UPA government, that mandated the developer to put 70% of the amount collected for a project from the allottee to an escrow account to be used only for construction of that project. This has now been reduced to 50%.
The housing and urban poverty alleviation ministry, which is piloting the bill aimed at safeguarding property buyers interest from land sharks by setting up a Real Estate Regulatory Authority (RERA), has recently sent the draft bill to the Prime Minister’s Office before taking it up formally in the Cabinet.
The 70% clause was aimed at putting 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. The real estate lobby was pushing hard for dilution of this clause.
The ministry has also expanded the purview of the proposed regulator to cover commercial real estate. Earlier, the bill covered only the residential real estate segment.
To protect buyer’s interest, the ministry has also decided that developers of all ongoing projects for which he has not got a completion certificate as yet will also have to register with the RERA. To do away with the multiplicity of litigation, the new bill also explicitly bars buyers who have a grievance, to knock the doors of any other consumer forums.
The Real Estate (Regulation & Development) Bill was introduced in the Rajya Sabha on August 14, 2013 and referred to the Parliamentary Standing Committee on Urban Development.
The committee gave its recommendation, many of which, the housing ministry has incorporated. The bill proposes that all builders who are developing a project where the land exceeds 1,000 square metre or above will have to register themselves with the regulatory authority before launching or even advertising their project.