The Cabinet has approved 20 major amendments to the real estate regulatory Bill that seeks to protect home buyers as well as help boost investments in the real estate industry. These changes are based on the recommendations of a Rajya Sabha committee that examined the Bill pending in the upper house of Parliament.
Under the amendments, projects on at least 500 sq metres of area or with eight flats will have to be registered with the proposed regulatory authority, instead of the minimum size of 1,000 sq metres suggested earlier, bringing a larger number of projects under the regulator’s ambit. Builders will have to deposit at east 70% of the sale proceeds, including land cost, in an escrow account to meet construction cost, compared with the earlier proposal or 50% or less, and pay interest to home buyers for any default or deays at the same rate they charge hem. Builders will be liable for structural defects for five years, instead of two years earlier.
Carpet area has been clearly deined under the new proposals to include usable spaces like kitchen and toilets. Garage will be kept out of the purview of definition of apartment.
Formation of residents’ association is compulsory within three months of the allotment of a major ty of units in a project.
The Bill seeks to allow aggrieved buyers to approach consumer courts at the district level, instead of only the real estate regulatory authorities proposed to be set up under the Bill.
The regulatory bodies will mostly come up in state capitals. The government had made a few changes to the Bill earlier in December 2014. It had brought commercial real estate projects under the ambit of the Bill, made the provisions of the Bill applicable to all projects wherein sales are still in progress and put in place a system that would require consent of two thirds of the buyers in a project for changing project plans.
Getamber Anand, national president of the Confederation of Real Estate Developers’ Associations of India (CREDAI), said while builders welcome the changes, the Bill should not be retrospective in nature as it would lead to a lot of confusion and delays. Commercial real estate should be kept out of the ambit of the regulator, he said.
“Also, they still have not included sanctioning authorities in the Bill. So where do we go if there is a delay in getting approvals such as plinth certificates, occupancy certificate, electricity and water connections, even after the project has taken off. Without these permissions, even a completed project cannot be offered for possession to home buyers,“ Anand said.
These issues, he said, should be addressed so that they do not become a pain point for the industry.
Anuj Puri, chairman and country head at property consultancy JLL India, said the Bill will bring more transparency and accountability into the sector, which will in turn help reduce the cost of capital. This will be good for both developers and buyers, Puri said.
“However, it needs to be ensured that it (the proposed regulator does not become one more approval authority as we already have sever al of them,“ he said. “To begin with we could have started with large projects and then brought smaller ones under its ambit, as it will be too much of volume to handle at a time when we are starting with it.“
The revised Bill includes an enabling provision for arranging insurance of land title, which is currently not available. This will benefit buyers and sellers in situations where the title of the land is held invalid.