Finally getting real
Real Estate Bill will permanently alter the way the real estate sector functions in the country.
The much-awaited Real Estate Bill has finally seen the light of the day, which should bring cheer to scores of disgruntled home buyers and many who have deferred the decision owing to anomalies. With the passage of the Bill, we will soon have a real estate regulator—the Bill will help establish state-level real estate regulatory authorities and appellate tribunals to regulate transactions relating to both residential and commercial projects and ensure their timely completion and handover.
However, the regulator will not have any price determining powers. The regulator will also not have any control over clearances and approvals needed by developers for commencing a project. This is a drawback, which developers feel could hamper some of them. The biggest advantage for buyers is the mandatory registration of developers with the authority, which will ensure there are no flyby-night operators. To that extent, no promoter is allowed to advertise, market, book, sell or offer for sale, or invite persons to purchase any plot, apartment or building in a project without registering with the authority.
To ensure that there is timely action for both developers and buyers, the Bill states that the regulator must have an online system for submitting applications for registration of projects. It adds that the authority must grant registration to a project within 30 days of receipt of an application provided it meets the rules. In an ongoing project, the promoter has to apply for registration within three months of commencement.
The biggest safeguard for buyers is the clause that prevents diversion of funds from a project – the proposed Act prescribes that 70 per cent of the amount a project developer receives from buyers who have been allotted be deposited in a separate bank account to cover the cost of construction and the land cost. To further ensure there is no diversion of funds, the promoter is allowed to withdraw the amount to cover the cost in proportion to the percentage of completion of the project. The account has to be audited every financial year by a chartered accountant. Any withdrawal from the account has to be certified by an engineer, an architect and a chartered accountant.
Where the regulator may vary from state to state is the manner in which they value land, which in turn will result in the implementation of the 70-30 provision. With a few rough edges, the Bill is definitely a first step towards bringing the notorious builders’ lobby to check and ensuring that home buyers are at peace when it comes to making perhaps the biggest financial investment of their lives.