Real Estate Bill passed in Rajya Sabha

The Rajya Sabha on Thursday passed the Real Estate (Regulation & Development) Bill. The Bill aimed to regulate India’s real estate sector, will help in protecting home buyers’ rights by bringing in transparency.

The Government expedited the passage of the Bill in the Upper House after renewed interest shown by the Congress, after its Vice President Rahul Gandhi, who told concerned home buyers last week that his party will support the Bill. The Congress party also wrote to the PM, urging to prioritise the Bill in the ongoing Budget session of the Parliament.

Based on the feedback of a parliamentary committee, the Government included 20 amendments to the Bill, which was rejected by the Rajya Sabha last year.

The Real Estate (Regulation and Development) Bill makes it mandatory for residential and commercial projects to be registered with the real estate regulator which will monitor transactions and also settle disputes. The Bill becomes very significant in the wake of the increasing number of delayed projects in recent years.

The Bill proposes to cover a larger number of projects for registration – any project including eight flats or 500 square metre will come under the purview of the Bill.

Real estate developers will have to deposit at least 70 per cent of money collected from buyers in an escrow account to meet construction costs, compared with the earlier proposal for 50 per cent. This is to ensure that developers do not run out of cash during the construction of the projects. The Bill also stipulates builders to pay interest to home buyers for any default or delays at the same rate they charge the buyers on delayed payments.

For any structural defects instead of two years proposed initially, the developers will now be liable for five years.

Real estate sector’s reaction to RERA Bill

Kashi Nath Shukla Chairman MD Tashee Group, “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.  It will also boost domestic and foreign investors to help promote private participation to achieve the target of Housing for all.”

Aman Singh Gehlot, Director, Ambience Group said, “We do welcome the setting up of regulatory authority for the real estate sector. The buyer confidence, which was shaken, will now come back with this crucial step taken by the Govt of passing the Real Estate Bill today. The real estate market, which has been plagued by numerous problems like approval hurdles and delay in projects, will also improve.  The regulatory bill will play an integral role in not only in safeguarding interests of buyers/ investors but also of developers across the nation and ensure consistent growth for real estate industry.”

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 standardisation 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 per cent 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.”

Manoj Gaur, President credai NCR & MD, Gaursons India Ltd. said, “The need for real estate Bill has been felt since long time in this unorganised 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 Govt has already brought amendments in the Bill like regulating both commercial and 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 standardisation 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, Govt should also bring out some administrative reforms to speed up approval processes to avoid project completion delays”.

Deepak Kapoor, President credai Western UP 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 unorganised. 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”.

Arvind Jain, Managing Director – Pride Group, said, “The real estate regulatory Bill has been long in the pipeline, and has now cleared all roadblocks and become a law. Various decision makers involved in it had been ambiguous about their stance towards this vital regulator, and as a result it remained pending. Now, it has finally received the green signal and is all set to revolutionise the Indian realty market. It will empower consumers by giving them confidence while making their real estate investments. It imposes strict regulations on how developers conduct their business, and underwent various redrafts aimed at doing this. It is very encouraging that the bill is now a reality.”

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 Acquisition and 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 disorganised. Unfortunately, the unorganised 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.”

RK Arora, Chairman, Supertech Ltd., & Member credai, said, “The Real Estate Regulator Bill passed today 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. However, the Bill has its share of shortcomings as well. It includes a provision for developers to maintain 70 per cent 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 per cent and cost of construction lower than 70 per cent? In large Indian cities, land is very expensive, and this is often the case. When this happens, funds collected from homebuyers may not be utilised, 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.”

Prashant Solomon, Managing Director, Chintels, said, “I welcome the idea of a regulator as this will lead to better transparency in the industry. What I am not happy about is that the government authorities have not been included in this bill. We know that many delays in the projects happen because of the tedious nature of getting approvals. In the long run unless govt. authorities are not regulated this will not benefit the end users or developers.

Kushagr Ansal, Director, Ansal Housing said, “We are now just one step away from receiving probably the biggest news for the real estate sector with Lok Sabha to give a final word on it. Developers will now have to park 70 percent of the amount collected from the buyers of the project in a separate bank account. Also, marketing and selling of the projects will be based on carpet area basis and not super area basis, thus justifying the amount which the buyers pay for a property.”

Ashok Gupta, CMD, Ajnara India Ltd. said, “It is very imperative to understand that the demand and respect of real estate sector has been moving downward for several years now attributing to the negatives pertaining in this sector such as fraud committed by several builders, possession delays and absence of a monitoring body, and this will continue if proper action is not taken. With this bill in place, every state will have a regulator who will be continuously supervising and monitoring. Moreover, the projects will now be completed on time and developers will have to submit all the layouts, plans and documents with the regulator who will ensure transparency and hence, customers will feel more secure while transacting.”

Amit Modi, Director, ABA Corp and Vice President Credai Western UP 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.

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.”

Manoj Kumar Singh, Chairman, Mangalya Group said, “We welcome the successful passage of the Real Estate (Regulation and Development) Bill in Parliament. The legislation will go a long way in reducing frauds and malpractices indulged in by unscrupulous realty players. It will act as a major deterrent to fly-by-night operators who bring a bad name to the sector. By bringing in transparency and best practices in the real estate sector, the regulatory Bill will safeguard the interest of both the buyers as well as the developers. We hope now the property market will gain the much-desired momentum with renewed interest and trust of buyers in realty projects.”

Anita Arjundas, MD, Mahindra Lifespace said, ‘We welcome the passage of the Real Estate Bill, which seeks to restore buyer confidence with a strong thrust on transparency and accountability. Speedy action on single window approvals will enable more efficient use of capital and also support timely delivery.’

“We appeal to the government for the faster proceeding in the matter as the Bill has already been delayed by many years. Also, it seems, that the clause to deposit 70 per cent of the funds received from buyers would definitely pose financial challenge for builders,” opines Praveen Jain, President, NAREDCO.

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