What is the Real Estate Regulatory Bill ?

The Real Estate Regulatory Bill is a proposed law which the Indian Government is planning to introduce and implement (this is as of April 2013). 

This is required in order to regulate the practices and transactions of the real estate construction bodies or the ‘Builders’, for transparency and the welfare of consumers or the ‘Buyers’ in general.

Why is this bill required?

Transparency: This bill is required in order to inculcate transparency of the dealings between the Builders and the Buyers, since the Real Estate sector – although one of the largest in India, also happens to be one of the worst regulated.

Monopoly: In the absence of this bill, the Indian Real Estate sector has emerged as having monopoly of the promoters and builders.

Compliance: The builders are generally accused of promising, but not complying with the consumers with a project start date, completion date, possession date and construction specifications, and not to mention the price.

Payment window: Even in the construction linked payments plans, where the consumers are required to pay the builders according to the construction completed, the payment window is very thin and the interest rates for the default payments is exorbitant.

Model Agreement: In the absence of a model Builder-Buyer Agreement the buyers are compelled to sign an agreement which is one sided in the sense that the consumer does not have any rights to raise the voice, should the Promoter change the specifications of the project later on. Builder exercises sole discretion in altering the project layouts, carpet area and apartment location etc.

Delays: Consumer generally incur losses due to project completion time lags – as a result of any external reason like recessionary trends or the legislative disputes.

Approvals: There are large number of approvals required for starting construction on a project like NOC’s from various authorities (like Greater Noida Authority in case of Noida Extension (Greater Noida west or GreNoWest projects)). Builders, even before getting the required approvals, start collecting the funds from the buyers though various promotion techniques like advertising and selling prospectus etc.

Funds: Builders collect the funds from buyers for a project in which they have invested, and use those funds for starting another project – thus causing delays in construction and possession of the project for which the buyers have done the payment.

It is for this reason that NEFOMA (Noida Extension Flat Owner Members Association) was formed to safeguard the rights of the buyers of Greater Noida west since there is no regulatory authority to safeguard their rights.

What is the scope of this bill?

This bill intends to cover the housing infrastructure like townships and apartments etc. However the commercial infrastructure like malls etc are currently not within the purview of this new bill.

How will this Bill safeguard the rights of Buyers?

This bill will safeguard the buyer’s rights by ensuring that:

Registration: The promoters of a housing project (Builders) have to mandatorily get themselves registered with the Real Estate Regulatory Authority before starting any specific project.

Prior Approvals:  The promoter has to mandatorily get ALL the required approvals before getting registered with the Regulatory Authority for that project. Thus the approval process will then become mandatory for the Promoters before starting any such project. Even the brochure of the project has to be approved first by the regulatory body.

Raising Funds: The promoter cannot start collecting funds from the buyers or the consumers before they are registered with the regulatory authority

Advertising: The promoter is barred from approaching public or sharing the brochure of proposed project for which the necessary approvals and registration are not in place. The promoters cannot use fancy apartment pictures for advertising the projects – they will be required to advertise the actual location of the project.

Carpet Area: The builders will be required to state the ‘Carpet Area’ in the brochure instead of the ‘Super Area’. This will ensure that the consumers understand clearly what actual area are they getting in return for the money they are paying for the unit.

Misappropriation of Funds: The promoters will be required to create a new bank account for each project out of which 70% of the amount should be used for the existing project for which it was created, thus avoiding the misappropriation of the funds.

Transparency: The builder has to display mandatory information on their websites or brochures related to the housing projects like specifications, pricing, carpet area etc. The builders cannot make changes to these specifications once these are decided for a housing project.

Delays: The regulatory body must either accept or reject the registration for a housing project within maximum one month of the registration request submitted by the Builder. This will ensure that unnecessary delays are avoided – which always impact the consumers adversely.

Agents: The agents or the brokers associated with the housing project will also be declared by the builder before hand – and they will also be required to comply to the laws of regulatory body – just like the Builders.

Model Agreement: The regulatory authority will provide a model Buyer-Builder agreement containing the necessary clauses so that the agreement is not only in the interest of Builder or the Buyers – but equal interest has to be entertained or divided amongst both of them.

Enforcement of Law: If a Builder breaches the agreement several times, this can attract a police action like Jail term along with the hefty fine.   

In a country like India where the corruption is rampant within all the spheres of the political system – it is difficult to ascertain if this bill gets sanctioned any time soon, especially when it has been waiting for almost 5 years on bench. But this is definitely a high time that the Government of India realizes the pain of Buyers and how they have to suffer in the hands of some Builders to whome they surrender their whole life savings, for realizing a dream of getting a home of their own – which is a dream as well as a basic necessity of each and every living being on this planet.