But What is the ground
realty, Adv. R. P. Rathod analysis
the said Bill and throws light on some of
its important aspects, advantages and disadvantages of the
proposed Bills.
The Ministry of Housing and Urban Poverty Alleviation
has released the final draft of
the New Real Estate (Regulation and Development) bill, designed to
stop malpractices and bring in
transparency into the real estate section. According to the bill, for which
feedback is currently being invited, violations will involve imprisonment of up
to three years, and penalty of 10 per cent
of the estimated cost of the project. The bill is expected to be passed during the winter session of Parliament.
While
the consumers seems to be happy as this is a Right Step in the Right direction
for consumers. Some developers & Adv. R. P. Rathod believe that several
modifications are required to make it more equitable.
But some eminent builders
say that, The Real Estate
regulatory bill is a step in the right direction, this is likely
to bring order and respect to the sector. It will ensure a total stoppage of
the fly-by-night operators in the real estate realm. It will also be
instrumental in ensuring that only the more organized players remain and operate
on a long-term basis.”
However, some experts like
points out that while the bill is geared towards protecting the interest of the end
user, it should also ensure that building residences is a
profitable business for private developers. For instance, there is no mention
of protection of developer interest in the case of ad hoc rise in construction
prices or rising of capital or other regulatory changes which can lead to
either shortfall of capital or delay in the construction process.
The New Real Estate bill
should also provide the basic penalties and redress in case of any dispute that arises which will
assure the end user of their rights.
The independence of the
Tribunal provided for, in the Real Estate
Regulatory Bill, does not provide for any other judicial (such
as High Court/ Supreme Court) authority to oversee the procedures or provide an
escalation process, thus a judgment from the Tribunal cannot be challenged
anywhere else.”
Some Developers,
meanwhile, have strongly objected to certain provisions of the bill, pointing
out that while it will lead to transparency, it is also one-sided. The real
estate industry has other components apart from developers, and the bill does
not address this fact. The real estate sector comprises four components, apart
from developers; it is also impacted by consumers, financial institutions and the
government. Thus there should be an overall regulation among all
four components. Further each state has different problems and the bill should
be tailored accordingly.
Though the regulation is
set to protect the consumer, but it is limited to larger issues only. Further anything
that is one-sided is bound to face criticism and will not last for
too long, and if the government's main objective is to reduce costs for end
consumers, then there should also be a simplification of processes. The bill
should be implemented only after it has been tested adequately.
Some Developers also point
out that projects are sometimes delayed for reasons beyond the builder's
control. Section 3 of the
Real Estate bill pertains to the time-frame of construction. If
not adhered to, the developers can land themselves in jail. When the building
or construction projects are delayed, it is not because the developer has
delayed the project. There are permissions and clearances that are needed which
do not come in time, hence the delay. Simplification of processes and
transparency is definitely needed and will come, but based on the Real Estate
bill, within a year or so, developers across the country would be blacklisted.”
Further according to the
proposed bill, “no promoter shall develop any immovable property or make any
construction thereon or alteration thereof or convert any existing undeveloped immovable property or
part of it without registering the real estate project and
obtaining a certificate of registration
from the Real Estate Regulatory
Authority established under this Act.”
No such registration is required
when the area of the land proposed to be developed “does not exceed 4,000 square meters,
or an area as notified by the Central
Government in consultation with the States and Union
Territories from time to time.”
Builders say that this is
unfair as most of the large developers would go in for huge projects and the
newcomers who would start off with smaller projects do not have to follow these
rules. They also feel that since large developers have an image in the industry
which they need to preserve, there would be fewer chances of malpractices among
them.
At present, the projects
that are applicable for registration are the large projects, exceeding 4,000
square meters, if all projects come under the bill; implementation of the same
will be a nightmare. The proposed 4,000 square meters,
which roughly amounts to an acre, is a huge parcel of land in context of metro
cities and hence this clause should be made an exception. However, it could
work as a stipulation for outside metro cities where these would form boutique
developments.
The proposed human element being involved in the
licensing process might also become a breeding
ground for corruption & the builders/ developers would pass on this to
the end users resulting in escalation of property prices.
Adv. R. P. Rathod points out that Fundamentally, the bill will offer
advantages to consumers, and help introduce transparency. Thus from the
Consumer point of view it is a welcome move. There will be more transparency in
dealings. Once the rules and regulations are formed, there will be a proper
framework set. The bill also provides for a real estate appellate tribunal for
adjudication of disputes related to the sector. For buyers as industry
stakeholders, the biggest advantage that the model real estate act offers is
that there will be an arbitratory body available
to attend to grievances and redressal.”
However Adv. R. P. Rathod further also adds some negative aspects from the point of view of the
Consumers.
He explains that some of the sections of the said
proposed Act are contrary to the interest of the Consumers like:
Under Section 2 (c)
of the new law, by a legal fiction, opens spaces are included under the
definition of “apartment”. Once the bill is passed, builders will be legally
entitled to sell the open spaces (like parking space, terrace and private
garden) for independent and private use. At present, as per the interpretation
of law by the Supreme Court, sale of open spaces by a builder is illegal, as
the land and other open spaces would belong to the society. The new law will
help builders overcome this well reasoned judgment and profiteer by selling the
open spaces.
Further Section 3
of the bill provides that a builder must compulsorily be registered with the
real estate regulatory authority for plots measuring 4000 sq. metres or more.
Most of
the buildings are constructed on smaller plots. Hence this provision will not
be applicable to most builders says Adv. R. P. Rathod
He further says that Section 18: of the bill provides for establishment of the real
estate regulatory authority comprising of one chairperson and two members.
There law does not mandate the appointment of any Judicial officer on the
authority. So, given the way our country functions, the appointments may be
made to favour persons with the “right
connections”. The composition of the authority and its strength of three
members will be inadequate to cope with the construction and development
projects being carried out throughout the country. Also, it would be difficult
for the common man to approach a remote centralized authority.
Similarly, he adds that the
real estate appellate tribunal comprising nine members, to be constituted under
Section 35, will be unable to set up
Benches throughout the country to deal with disputes. Accessibility to the
redressal mechanism will become more difficult and costly.
Section 46
provides that the order of the tribunal can be enforced like the decree of a
civil court. This proceeding is lengthy, cumbersome and costly. Unlike the
consumer fora, the authority or tribunal under the new bill does not have power
to adopt penal proceedings/criminal prosecution for non-compliance. Such proceedings
would have to be initiated by the authority or tribunal by filing a complaint
before a criminal court, and the flat purchaser would not have any idea about
what is happening in such proceedings.
Section 47
provides that the decision of the appellate authority would have to be
challenged before the Supreme Court. The quality of adjudication by the
authority with no judicial member would be questionable. The rates of appeal
would be high. The cost involved would also be high. The tribunal would not be
easily accessible to the common man. The three-tier redressal system under the
Consumer Protection Act would be much more effective and economical.
Adv. R. P. Rathod further points out that the most anti-consumer provision of the new law is Section 60, which states that no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. The new law, thus, takes away the alternative, efficacious remedy which was hitherto available to a flat purchaser under the Consumer Protection Act.
Even some developers have labeled certain sections of
the bill as impractical, but still the act if implemented can potentially
boost transparency in the Indian scenario by standardizing practices and
streamlining Government procedure systems.
The act can help bring about a greater level of trust between buyers and sellers, landowners and developers and
also developers and the financial institutions that fund them; it would also be
a big step in the direction of recognizing Indian Real Estate as an Industry,
but the all the negative aspects as
emphasized above have to be considered & addressed before passing the Bill
concludes Adv. R. P.
Rathod.
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