Rajya Sabha clears Real Estate Bill, homebuyers gets rights
Rajya Sabha approved the Real Estate (Regulation and Development) Bill, 2016 that seeks to protect the interests of the large number of aspiring house buyers while at the same time enhancing the credibility of construction industry by promoting transparency, accountability and efficiency in execution of projects. The Bill seeks to put in place an effective regulatory mechanism for orderly growth of the sector which is the second largest employer after agriculture.
Moving the Bill pending in Rajya Sabha since 2013 for further consideration and passing, Minister of Housing & Urban Poverty Alleviation M. Venkaiah Naidu stated that over the years the sector has acquired a degree of notoriety which needs to be addressed to enable enhanced flow of investments, for which the Government has announced several incentives in the Budget for 2016-17 and earlier.
Naidu further said that consumer has become the king in telecom sector further to introduction of a regulator. While there are only a few operators in telecom sector, a total of 76,044 companies are involved in real estate sector including 17,431 in Delhi, 17,010 in West Bengal, 11,160 in Maharashtra, 7,136 in Uttar Pradesh, 3,054 in Rajasthan, 3,004 in Tamil Nadu, 2,261 in Karnataka, 2,211 in Telangana, 2,121 in Haryana, 1,956 in Madhya Pradesh, 1,270 in Kerala, 1,202 in Punjab and 1,006 in Odisha.
Stating that real estate sector contributes about 9% GDP, the Minister informed the House that between 2011 and 2015, new projects in the range of 2,349 to 4,488 were launched every year amounting to a total of 17,526 projects with investment value of Rs.13.70 lakh cr in 27 cities including 15 state capitals. According to industry information, about 10 lakh buyers invest every year to own a house of their own.
Naidu asserted that with so many operators in the sector and such huge investments at stake, regulating the real estate sector has become necessary in the interest of consumers and developers. He said, “Consumer shall be the king as in telecom sector and the developer obviously the queen. And there shall be a happy marriage between the two for both to live happily ever after and the Bill seeks to forge such a happy alliance for the benefit of real estate sector.”
Let’s go through the industry reactions after passing of Real Estate Bill:
Vikas Oberoi Chairman & Managing Director, Oberoi Realty, said:
“We are very pleased that Real Estate Bill was finally passed by the Rajya Sabha.
When the Bill will become an Act, it will ensure more transparency in realty deals and help protect the rights of the buyers. This will boost buyer confidence and in turn will also help increase sales. This bill also looks at the developer’s interest by taking into consideration external factors in case of project delays.
This Real Estate Regulator will look at all stake holders – the buyers, developers and the authorities. We hope all the states will start adopting this act without any further delay so that the housing industry witnesses uniformity across the country to ensure that our Prime Minister’s goal of Housing For All by 2022 is achieved.”
Navin M Raheja CMD, Raheja Developers; Chairman advisory council Naredco, said:
“We welcome the move as the bill provides uniform regulatory environment to ensure speedy adjudication of disputes and orderly growth of the real estate sector in India. The bill will instill confidence amongst buyers and will boost domestic and foreign investment in real estate. The thrust of the bill is on transparency, greater accountability of developers towards customers, ensuring dedicated utilization of project related payments from buyers. This will certainly lead to growth of organised real estate sector in the country. I wish the sanctioning authorities were also included in the bill and most importantly single window online clearance mechanism for time bound clearance of projects should have been implemented.”
S K Sayal Managing Director & CEO, Bharti Realty Limited, said:
“It’s great news to see the Real Estate Regulatory Bill becoming a reality. From the macro outlook, the approval of this bill is a big positive for the Indian Economy. From the point of view of the sector, it is a much awaited development and will be a milestone to regularise the Indian Real-Estate landscape. It will bring the much needed transparency for the consumers and accountability on the developers end.
The bill addresses some real issues that will bolster the sector: the inclusion of escrow mechanism, timely completion of projects and build financial sensitivities. It will help the industry to grow in an organized manner and will check entry for the unorganised players. With this bill the long subdued sentiment in the Real-Estate sector is expected to get the much needed boost.”
Jason Kothari CEO, Housing.com, said:
“The much awaited ‘The Real Estate (Regulation and Development) Bill, 2015’ has finally been passed in the Rajya Sabha. Our hope is that it will help bring the fence sitting home buyers, back to the market and create a more positive business and investment environment in the sector. We applaud the balance it strikes between heeding the needs of the sector like creating a single window clearance for all approvals; and protecting consumer interests through measures like fines for project delays, faster redressal to consumer complaints, minimum of 70% collections from buyers to be deposited in separate escrow account to cover cost of construction and land. The success of this Bill will hinge on the timeline for these laws to come into force, and the implementation of the same, at the central and state level.”
R.K Arora Chairman, Supertech Limited, said:
“The Real Estate Regulator Bill passed by the Parliament is a significant step towards bringing transparency and financial discipline in real estate sector and it would secure the interests of home-buyers. The legislation would definitely provide clarity to the buyers on various aspects of housing projects at the time of investing in the project as it is mandatory for the developer to post in advance all information on issues such as project plan, layout, government approvals, land title status, contractors to the project, schedule for completion with the State Real Estate Regulatory Authority. It is also a welcome step that the Regulator will promote single window clearances which is vital for the timely implementation and delivery of projects. Further, the provision for giving infrastructure status to the industry would bring confidence to the real estate sector and the industry. We welcome the new legislation”
Dhruv Agarwala CEO & founder, PropTiger.com, said:
“As a sector that lacks clarity and is riddled with legal disputes between consumers and developers, passage of Real Estate Regulatory Bill comes across as a much needed wave of hope. Delayed possession of properties has been a major cause of trust deficit in the space and has kept potential consumers away for a long time in case of long term projects. However, State-level Real Estate Regulatory Authorities (RERAs) are now expected to ensure timely completion and handover. Homebuyers will be able to know the status of the land, site and layout plan, schedule for completion, and details on approvals from various government agencies which will lead to increase in trust which in turn could lead to a revival in the sector.
Further, clarity on carpet area would eliminate a major concern area. The current practice of selling on the basis of super built-up area, which is difficult for buyers to understand, will come to a stop as this law makes it illegal. Carpet area has been clearly defined in the law.
However, the bill has its share of shortcomings as well. It includes a provision for developers to maintain 70% of the money collected from buyers in an escrow account towards cost of construction. But what if the cost of land is more than 30% and cost of construction lower than 70%? In large Indian cities, land is very expensive, and this is often the case. When this happens, funds collected from homebuyers may not be utilized, and developers may be forced to raise funds from other sources. But apart from some minor points, which would need further discussion the bill would certainly be of great help in protecting the interest of buyers and bring more transparency to the sector by making developers as well as intermediaries more accountable.”
Rajesh Prajapati Managing Director, Prajapati Constructions, said:
“We welcome the passage of this bill. This will make the real estate industry more organized and mature. It will bring transparency to the sector and the passage of this bill will mean that the reputed long term players will be greatly benefited along with customers. Timelines will be more closely adhered to and also the quality of construction in projects will increase.
The only worry is about the inclusion of under construction projects as it will mean a lot of difficulty for the developers. Therefore, only new projects should come in the ambit of this bill.
Also, a definite time frame for approval of projects needs to be built in, maybe at a later stage if not now.
Most importantly the buyer will now have a peace of mind as he/she will know the project validity and also get complete authentic information about the same.”
David Walker Managing Director, SARE Homes, said:
“The passing of the Real Estate Development Bill today was a much awaited decision. We hope it will give home buyers the confidence to return to the market. The Bill will make real estate more transparent and organised and responsible builders will prosper. We encourage the government to also bring EDC charges paid to local authorities under the scope of the regulator to ensure timely delivery of infrastructure that has been paid for by home buyers. A more formal and regulated industry should in time also benefit from improved access to capital markets.”
Harshvardhan Neotia President, FICCI, said:
“The passing of Real Estate Bill, 2016 in Rajya Sabha is a landmark step towards enhancing the credibility of construction industry by bringing in transparency and accountability in execution of projects. I hope this bill will put in place an effective regulatory mechanism that would safeguard the interest of consumers as well as provide protection against fly by night operators. The passing of bill should enable timely approval and execution of projects which will raise the confidence of consumers and also give a huge boost to the growth of real estate sector.”
Sanjay Dutt Managing Director, India, Cushman & Wakefield, said:
“The clearance of the Real Estate Bill in the Rajya Sabha is a momentous decision for the real estate sector. This Bill is bound to bring about the much needed relief for the home buyers in India who are still struggling to put a roof above their heads. The Bill aims to bring in transparency in the real estate sector, thereby, encouraging investments from foreign and domestic financial institutions and protecting the interest of the home buyers.
The Real Estate Bill will place the Indian real estate market, which currently is fragmented and unorganized, at par with that of other developed countries with clear accountability of developers through the establishment of the Real Estate Regulatory Authority (RERA). Mandatory disclosure of projects, including details of the promoter, project, land status, clearances, approvals, etc. would increase the credibility of developers and would protect consumer rights as well.
Another significant ruling is in the form of definition of “carpet area”. Buyers will now be paying only for the carpet area and not the super built-up area which was fraught with confusion earlier. Also, the developers will now have to take consent of 66% of the home buyers in case they have to increase the number of floors or change the building plans. This will protect the buyers from any ad-hoc changes that are a norm presently.
Additionally, buyers and developers will now finally be on a level playing field with respect to penalties on delays. Both parties will now pay the same rate of interest in case the buyer delays payment or the developer delays giving possession. Earlier, the Buyer-Seller Agreements were heavily tilted towards the developers who used to pay very little penalty in case of delay in giving possession.
Furthermore, developers would need to deposit 70% of the project cost in a separate bank account to cover the construction cost of the project for timely completion of the project. This would go a long way in ensuring timely construction of projects and act as a safeguard in the event of any inordinate delays of the project as it would limit diversion of developers’ funds for other projects. Scenarios where buyers who are saddled with the burden of paying rent and also paying the EMI of a home loan which is delayed because of the builders should be a thing of the past. While this stipulation of having 70% of the funds in an escrow account will be a welcome relief for home buyers, it is likely to result in the builders losing fungibility of money, thereby, resulting in a hike in prices.”
Kishor Pate CMD, Amit Enterprises Housing Ltd, said:
“The real estate needed the Real Estate Regulatory bill more than any other single piece of legislation, even though GST, the Land Aquisition & Rehabilitation Bill, single window clearance and industry status are by now means of less importance. The industry has been in express need of an apex body via which all concerns of consumers can be addressed transparently and efficiently. We will now see a radical transformation of the entire residential sector. Strict enforcement of project delivery timelines, verifiable construction quality and assurance of legal clearances will finally become a reality, and the consumer confidence which had all but evaporated will return. It is a most welcome development.”
Anil Pharande Chairman, Pharande Spaces, said:
“The Indian real estate sector has historically been unregulated and very disorganized. Unfortunately, the unorganized segment has so far represented the largest share of the market, and it is in this segment that consumers have in innumerable cases been held hostage to by unscrupulous practices of ruthless developers. The real estate regulatory bill was drafted with a vision to give clarity and assurance to real estate buyers via various strictures. Now that it has become an enforceable law, it will have a profoundly positive effect on how both domestic and global investors view Indian real estate. More importantly, it will give homebuyers a strong measure of assurance.”
Gaurav Gupta General Secretary, CREDAI RNE, said:
“The real estate bill seeks to address some major concerns of the industry and protecting the interests of home-buyers. The bill would improve the customer sentiments as the bill includes measures to ensure buyers protection and standardization of business practices. The bill will be a watchdog for the malpractices and fraudulent activities of the sector. Overall the bill will be of great help to both the buyers and builders. However approval authorities should also be bring in the ambit of bill as many times they are responsible for project delays. The provisions like depositing 70% of the receivables in escrow account, bringing commercial segment under the bill, establishing state level regulatory authorities, interest on delayed possessions etc would help home buyers in a big way. The bill is a step forward to build up buyer’s confidence and keeping checks on the realty transactions and business. The bill will also be a promoter of such developers who are genuine and professional in their work.”
Manoj Gaur MD, Gaursons India Ltd., said:
“The need for real estate bill has been felt since long time in this unorganized sector. This is an important development towards the regulation of realty sector and to provide relief to the home-buyers. The amendments which were made to the bill last year aimed to promote transparency, greater accountability, protection of home-buyers & investors, and efficient working in the sector. The passage of bill will also result in authentic players remaining in the market and non-credible ones exiting due to stringent checks that would be brought by the bill. But it is also important that the bill needs to be a balanced one which is agreed upon by both buyers as well as builders. It is important to fix the accountability of approving authorities. This is important step towards avoiding delays. Bringing government agencies and authorities under its ambit would be beneficial to developers too. This would ensure that there will be a dedicated authority to deal with all the grievances. Overall, the bill once implemented will boost customer confidence and change the complete gamut of real estate workings.”
Prashant Tiwari Chairman, Prateek Group, said:
“The bill once made a law will not only protect property buyers but will also boost investments in the sector. As the government has already brought amendments in the bill like regulating both commercial & residential properties, maintaining an escrow account, establish fast track dispute resolution mechanisms for consumer grievances, preventing builders to make changes in layouts and plans etc. The builder community will also be benefitted as the bill would promote fair play in realty transactions. This would also help in distinguishing the work of sincere ones and the fraudsters. The law will be a brand builder for those developers who are genuine and work to deliver quality projects in specified timelines.”
Om Chaudhry Founder & CEO of FIRE Capital and Chairman & CEO of Astrum Value Homes, said:
“Real estate bill will help improve the sentiments of home buyers by boosting their confidence level and making them more comfortable while buying properties. The property buyers would rest assured as a result of the protection provided from any possible exploitation in the hands of builders. Measures like depositing part of the sale proceeds in an escrow account, interest on delays in project completion, time limits for resolving customer complaints etc. would bring much-needed relief to the home-buyers. The bill will bring more transparency in the working of the sector by promoting professionalism and standardization of industry practices. Along with improved customer outlook and enhanced growth, the sector will also witness a better working environment for builders too. Besides implementing the bill, government should also bring out some administrative reforms to speed up approval processes to avoid project completion delays.”
Deepak Kapoor President CREDAI Western U.P., said:
“Once implemented, the Real Estate Regulatory Bill will not only change the way real estate works but will also be beneficial to all the concerned stakeholders. The bill will act as a protector of home buyer’s interest and will help in building such brands in the market which will be known for quality and timely deliveries. There are key features of the bill like maintaining an escrow account by builders, barring developers from making changes in the construction plans etc which will are in the interest of customers. The regulator will also bring some consolidation between organized and un-organized players in the market, boosting the confidence level of customers. The bill is welcomed to become a law but it must be fair in nature as well to avoid hindrances and confusions.”
Sanjay Rastogi Director, Saviour Builders Pvt. Ltd., said:
“The Real Estate and Regulatory bill, as the name suggests would be a regulator of the entire real estate sector which at present is unorganized. Real estate bill will be a welcome move, as it will not only change the way how real estate sector functions but on the other hand it will also benefit all the parties involved in realty transactions. The bill will bring uniformity and transparency in the working of the sector. To protect home buyers interest, the bill has several clauses to bring the much-needed relief to the stressed customers. By bringing in some strict rulings, the bill will also make shady and treacherous builders to move out of the market.”
Kashi Nath Shukla Chairman Managing Director, Tashee Group, said:
“The new version of the Real Estate Regulatory Bill will bring more transparency to the sector that balances the currently skewed builder-buyer power equations. The Bill is indeed a powerful means to make the chronically opaque Indian real estate sector more transparent. Now people will feel more confident in investing into real estate, and this will result in the revival which everyone has been waiting for. Moreover it will also boost domestic and foreign investors to help promote private participation to achieve the target of Housing for all.”
Shishir Baijal Chairman & Managing Director, Knight Frank India, said:
“Finally the wait is over – an extremely important and timely step taken by the government that could prove to be a game changer for the industry. In December last year, the government introduced 20 amendments which was a positive move; however the industry and stakeholders were waiting for the Act to come into force. In its content and intent, the new Act could bring in a change in the landscape of real estate in the country, attracting new investors and customers, which the industry has been missing so long.
This Act will give long pending protection to the interests of the end-consumers and give a substantial fillip to the confidence of various stakeholders including fund providers like banks and other financial institutions, PE funds and the like. Greater institutional participation can be expected going forward.
The Act will help the sector transform into a more organised and transparent one. We have seen in the past that regulators have brought in more efficiency and transparency in telecom, insurance and financial sectors. The information pertaining to the real estate sector will be available in a systematic manner leading to easy accessibility and transparency.
Therefore, with the latest Union Budget announcing incentives for first time buyers, tax incentives for construction companies in affordable housing and RBI likely to bring down interest rates further, the enforcement of the RERA Act now will prove to be a boon to revive the much-ailing sector.”
Amit Modi Director, ABA Corp, said:
“A regulator to curb malpractices in the real estate sector is welcome hence we whole heartedly welcome this bill but we still feel a law without making all the stakeholders concerned accountable, will not be able to help the purpose at large. Projects are often delayed due to graft in the issuance of permits and clearances.
Government agencies issuing permits should be brought under the law and made accountable for undue delays. On an average it takes 2-3 years to start a project after land is acquired; by this time the cost of land rises by 24-30 per cent due to hefty interest payments as bank loans are not available for procuring important raw material in this sector. The added cost ultimately gets passed on to the customer. These costs can be curtailed and passed on to the consumer, if developers can start building faster and also deliver larger volumes quicker for the consumer.
In most states, real estate developers are required to get 40-70 approvals before starting a project. Currently, realtors have to seek approvals from National Highways Authority of India, the pollution department, ministry of environment, Airports Authority of India, labour ministry, Central Ground Water Board and Directorate General of Civil Aviation among many other sub-departments. Clearances from the water department, electricity board, coastal regulation zone tribunal, sewage department and fire department are also required before starting a new project. Local bodies’ inspection and frequent changes in local laws add up cup of woes.
Apart from approvals and time-delays, regulatory mandates like getting plinth certificates at the completion of each floors, hassles in getting occupancy certificates and obtaining ‘non-agricultural land clearance’ for land that is already under the city development plan are also creating a havoc on a real estate developer.
The whole process of approvals must be made online to reduce corruption and bribery, which is rampant in the business, and unless there is a single window clearance, low cost housing will never happen in this country and restrictive ad-hoc rules on usage must go.”