Gurgaon, 10 December, 2015 – The long awaited Real Estate Regulatory & Development Bill finally received cabinet approval yesterday. The numerous amendments to the bill will result in profound changes in the way the industry operates. The key themes of the modifications are; bringing greater accountability to the real estate industry; providing more rights for the consumer and putting onus on the state government to improve ‘ease of doing’ real estate business.
The bill proposes to bring about more transparency and accountability by ensuring 70% of the sale proceeds are ring fenced and used only for development of the project; making developers liable for any structural default for a period up to 5 years; bringing commercial projects also under the ambit of the bill; and including the much resisted provision of imprisonment of promoters and real estate agents. All these provisions will protect the interest of consumers and will acts as a confidence booster in the real estate sector. However, the compulsory deposit will block the free cash available for new development and may result in reduced inventories going forward. Of the international benchmarks countries like Hong Kong and US (only for large projects) mandate that revenue collected from consumers of a project be set aside for use in that project only.
There is much cheer for the buyers, who will now have 644 consumer courts available at district level to approach with their grievances; promoters will require approval from two thirds of the buyer in order to make any changes to the project plans, provision to have titles insured and equal penalties for developers and promoters. The mandatory requirement of registration and furnishing all the related information on the authority website is a step in the right direction to improve the transparency in information starved real estate industry. However, for at least 1 to 2 years there will be a dearth in new supply as developers need to take all the approvals beforehand for projects sale.
The bill puts the onus on state governments to promote single window clearances in real estate, ensure digitization of land records, set up additional Appellate Tribunals for speedy adjudication of consumer grievances. This move will directionally set the groundwork for the next round of transformation in the Indian Real estate sector.
“Some of the provisions of the proposed bill may appear harsh in the short term for real estate developers and agents, however in the long run these measures will add more credibility to our much maligned industry. The bill has the potential to be a game changer for the real estate sector, by making it easier to do real estate business, revitalize consumer and institutional investor confidence which should lead to more sales and a lower interest rate regime for the sector. The onus of implementation of this landmark bill likes with the state and local governments, as land is a state subject. It is for them to ensure that the provisions of the bill are judiciously implemented, keeping in mind interests of all the stakeholders.” Says Amit Oberoi, Head of Valuation & Advisory Services at Colliers India.
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