The government is looking to set up a tough regulator for the realty sector with provisions of even jail term for developers for putting out misleading advertisements about projects.
Undeterred by stiff opposition from private developers and builders, the housing ministry is pushing hard to bring the real estate regulator bill, aiming to protect home buyers, in the current session of Parliament. Housing minister Ajay Maken on Sunday said the bill was expected to be brought up for consideration of the Cabinet soon before being introduced in Parliament.
Will regulator be set up by 2014?
However, it will be interesting to see if the legislation, which has been pending since 2009, becomes a reality before the 2014 general elections.
The consumer-friendly legislation was once returned from the Cabinet after objections were raised by some senior ministers.
The legislation will clearly define ‘carpet area’, and private developers will not be allowed to sell houses or flats on the basis of ambiguous’super area’.
A real estate regulator in every state will ensure that private developers get all projects registered before sale of property and after getting all necessary clearances — addressing a major concern of buyers about incomplete or fraudulent land acquisition and pending clearances.
No ad before plan approval
The bill has proposed that private developers and builders would not advertise or start a housing project before getting all necessary clearances and reporting before a real estate regulator. The developers cannot collect any money from buyers before completing all necessary permits to start construction on the project.
Maken said builders wouldn’t be allowed to use pictures of housing projects in foreign countries to lure buyers while advertising a project. They will have to use pictures reflecting the actual project which will be delivered to homebuyers.
The developers will have to maintain a separate bank account for a particular project and will not be allowed to divert the money for other projects.
“Many developers use funds collected from buyers for a particular project to buy land for another project. This result in delays and innocent buyers are forced to bear the additional cost,” Maken said. “Salaried people usually spend all their savings on buying an apartment but often suffer delays and cost escalation.”
Before launching a project, developers will have to submit all necessary clearances to the regulator which will be displayed on the regulator’s website. Failure to do so for the first time would attract a penalty which may be up to 10% of the project cost; a repeat offence could land the developer in jail, Maken said.
The Real Estate (Regulation and Development) Bill, which seeks to provide a uniform regulatory environment to the sector, was opposed by private developers in totality but the ministry has stuck to it, saying the basic tenet of the legislation is based on voluntary disclosure which will infuse transparency.
As per the legislation, realty players will have to voluntarily disclose project details, including carpet area and open space and contractual obligations on the regulator’s website to ensure transparent, fair and ethical business practices.
The regulator will act only if there is complaint of any deviation from the project details disclosed by a developer on the regulator’s website.
Under the bill, there will be a model builder-buyer agreement which is expected to reduce ambiguities in real estate transactions that not many buyers are familiar with.
Real estate agents will also be asked to register with the regulator. Agents, an important link between the promoter and buyer, have been an unregulated lot till now. Once they are registered, it will be help in curbing money laundering.
source: Times of India