The Real Estate Bill

Spotlight - The Real Estate (Regulation And Development) Bill, 2013
The bill was introduced and approved by the Union Cabinet on June 4, 2013. While the bill is
still to be passed, it offers some hope to the hapless homebuyers who have suffered for long in
the hands of many a builder.
Some of the positive highlights of the bill are as below:
1. It is applicable only to residential properties. Commercial properties are not yet included.
The logic for excluding commercial units is not clear as they suffer from many similar
perils as that of a residential unit - but still for the homebuyer, it is still better than
nothing.
2. The bill proposes to appoint a regulatory authority for Real estate. The authority would be
appointed at the state level or UT level. Is likely to have powers to enforce governance on
real estate industry in the state.
3. The bill proposes penalties for misleading information provided by the developers on the
advertisements / prospectus. The penalty goes upto 10% of the cost of the project. It is
indeed the market experience that most builders give out advertisements that promise a lot
but deliver less.
4. The builder can take not more than 10% advance from the buyer before signing of the
agreement. This means, projects seeking huge down-payments get a thumbs down.
5. The bill in some form states that if there is a delay in completion of the project, the builder
would be liable to give a full refund.
6. All critical information of the project should be disclosed by the developer on the website of
the regulatory Authority. This is a big one. This disclosure would include information such as
Carpet Area (as against super built up area), status of all the approvals that are required to
be taken to commence the project, details of no. of apartments in the project (along with
their approvals), layout plans, details of promoters, contractors, brokers and all other
related parties. With the introduction of the Carpet Area mandatory disclosure, the
chances of builders swindling money through announcing unverifiable Super Built up area
gets ruled out.
7. The bill mandates that prior to any launch or advertisement regarding the project, the
builder must have obtained all approvals for the project.
8. The bill tries to prevent fund diversion from one project to the other. It proposes that the
builder must deposit UPTO 70% of the cost (or any lesser specified amount) of construction
of the project in a separate account. This is to help timely completion / prevent fund
diversion.
9. Mandatory registration of projects and brokers with the regulatory authority: If the project
is more than 1000 sq.mtrs / 12 apartments, the project needs to be registered with the
regulatory authority. And so must the real estate agents who market the project.
There are news reports that say that the government is trying to pass the bill. However, the
developers as expected have raised concerns. The government has responded through the
Minister of Housing and Urban Poverty Alleviation that it would address all the concerns of the
developers.
The bill was referred to the Standing Committee on Urban Development (Chaired by Sharad
Yadav) for its recommendations. The Standing Committee has come back with its
recommendations in February 2014. If anything, the Standing Committee has tightened some
of the items mentioned in the bill. Some of the recommendations of the committee are :
- Include Commercial properties as well.
- Reduced the minimum cut off area for coverage under the bill from 1000 sq.mtrs to 100
sq.mtrs. This will bring in all the smaller projects also under the purview of the bill.
- While the bill requires registration of brokers facilitating the sale of a particular project,
the committee recommends that all real estate agents must be registered with the Real
Estate Regulatory Authority.
- The committee recommends establishing a single window system of providing approvals
and proposals for the projects.
- There is a recommendation that the agreements should include Common Areas clearly
mentioned. It also advises placing a model agreement as a part of the bill.
- The bill specifies a time of 15 days within which the regulatory authority should either
approve or reject a project. If no answer, the project is deemed approved. The
committee recommends to increase this deadline to 30 days.
- Appeals against revocation of approvals of the projects to be decided within 45 days (as
against 90 days suggested in the bill).
- Structural defects in the building as brought to the notice of the builder, should be
rectified within 5 years (as against 2 yrs proposed in the bill).
The above are some of the key recommendations of the Standing Committee.
In the interest of the homebuyers, it is high-time that a bill such as this is passed. It would
be a good beginning in terms of regulation of the real estate if the bill is passed by the
parliament, even if it be in the present form.
Lets keep the fingers crossed.
Cheers.

The Real Estate Bill

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Spotlight - The Real Estate (Regulation And Development) Bill, 2013

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