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The much awaited Real Estate (Regulation and Development) Bill has been cleared by Union Cabinet on June 4, 2013. It is weightily claimed that this Bill has been prefigured as a move in favour of buyers of properties. The Bill has been in the offing for more than six years and now is entailing serious concern of the Government in to making it a law.

There are factors of significant importance in this Bill such as the Real Estate Developers can launch new projects only once all the relevant permissions are procured and that all such permissions and sanctions are to be displayed on the website of the Developers and only then the construction can commence. The Bill further envisages that if the promised property is not delivered on time, the buyer shall be entitled to a full refund along with interest on the amount so paid.

The Developers shall have to maintain separate Bank Accounts for every project and have to ensure that the money taken from buyers is used only for that particular project and the said money is not diverted in any of their other projects. While advertising also, the Developers will have to publish photographs of the actual site of the proposed project and any violation of these provisions shall attract penalty.

The Bill also provides provision to establish a Central Appellate Tribunal and every State Government shall be responsible for establishing the State Level Regulators. Further, the Bill prohibits the Developers from accepting more than 10% advance from the property buyers without an agreement. It is stupidly “presumed” by policy making stalwarts of that this provision will help to hold back the amount of black money that is pumped into Real Estate Industry.

The Government is rather keen to ensure that all these rigorous provisions will help the buyers. However, it has to be a “Wait & Watch” stance for a common man as to how far these rules will help them in buying a “Dream House” as there are many a slips between the cup and the lip while dealing with the lobby of nefarious and cheat Developers.

The Bill shall be applicable only to new Real Estate Projects
as and when it becomes an Act. Hence, the projects already been launched, will not come under the regime of the Act. This means that the Real Estate Projects which have been delayed will continue to hang the buyers to face problems.

The recent past has seen Real Estate Developers launching more and more new projects like filling up their plates more than required to garner more and more profits and use the money thus raised to pay off their past loans. This has led to a situation where there is no money left to build the projects which have been launched.

In order to get the money required to build these projects, newer projects are launched. This modus operandi has led to a situation where projects are rarely delivered on time and are endlessly delayed keeping the buyers in lurch. There is no relief in the Bill for the buyers who are misfortune on account of delayed projects.

Developers will have to sell property based on the carpet area whereas, according to the Income Tax Act, a built-up area for any realty project includes thicknesses of walls of that building but, carpet area does not include wall’s thicknesses. Given this confusion on the definition of carpet area, measurements should have been given based on the built-up area than carpet area.

One of the key negative factors of this Bill like any other Bill is that it will have a cost push effect i.e. the realty prices will rise by another 30 to 40%. Also, if premises are sold on super built-up area or carpet area basis, even if the total value remains the same, on a square foot basis the cost for sure, will go up.

Introducing a regulator in every State is a long-term process since it calls for the recruitment of a lot of staff who are in the knowledge of integrated and specific real estate regulations. The question is whether are there enough such personnel available?

In India, any regulator introduced, takes time to become effective. Take the case of the Securities and Exchange Board of India (SEBI), the Stock Market Regulator, which was established in 1988 and given statutory powers in the 1992 after the Harshad Mehta scam.

It is established fact that even stringent regulators don’t stand much of a chance against large established business groups of realtors as real estate regulators cannot go against Real Estate Developers, who are known to be operators for politicians and underworld dons?

Then there is the question of whether the regulator will act in favour of buyers of premises like the insurance regulator which over the years has invariably acted more in favour of insurance companies than thought about people who buy insurance.

The implementation of the said bill will also be an upheaval task for all concerned. A major point in the Bill is that the Developers will have to open separate bank account for each project and ensure that the money from the buyers goes into that particular project and not diverted elsewhere, as is the case currently in the realty industry resulting in inordinate delay in completion of projects. Of course, on paper, this is probably the most important point in the Bill.

The Himalayan question is who will ensure and keep vigil that the money is pumped to the intended project and is not being used to by the Developer to meet other obligations or simply being siphoned off.

The State Level Real Estate Regulators must have to be vigilant at such a micro level. It is uncertain that they will have the required expertise as the implementation of laws which has never been executed strongly in India and with its Indians.

It is pertinent to mention here that the above provision in the Bill has been considerably diluted over a passage of time i.e. as compared to the initial version, the anti-fund-diversion provisions of the Bill has been weakened.

In the 2009 draft, all the funds collected from the buyers were to be kept in a separate bank account and from which 100% money could be drawn only for the use of that project only. This has been diluted and the current version of the Bill which shall now allow the Developers to push only 70% of the money collected for the relevant project and rest of 30% of the money shall be siphoned elsewhere. The logic behind this relaxation can very well be spelt that the Government wants avenues to be kept opened to favour the Developers for the discernible reasons.

Prevent black money transactions in realty is a fairy tale. It is stressed that the Bill does not allow Developers to accept more than 10% advance from the buyers without a written agreement to help in controlling black money. This is a joke of the top lunatic of our country. Has any agreement prevented Indians from transacting in black money? Scores of Developers across this country continue charging money in black separately for car parking, loading over the sale area, pocket terrace etc despite there being a Supreme Court order against the same.

The Bill also says that buyers will be entitled to a full refund along with interest if the Developer does not deliver the project on time. This may not be of much help because even with the compensation in form of interest which joyfully the Developer shall offer, the buyer may not be able to buy a home. There are dishonest and nasty Developers who deliberately delay the projects and then offer meagre interest on refund of money to buyers and grab their flats to sell at a higher price since the home prices may have raised in the meanwhile manifold. Also, after a project is delayed, you cannot expect the buyer to put money in a fresh project, which again promises the project to deliver a few years later with delay, like the former Developer did.

Buying a fully ready home may turn out to be expensive and beyond the budget of the buyer even with the paltry compensation. Instead, the Bill should impose a penal clause that in case of ordinate delay, the Developer must provide a similar sized flat to the buyer in the same vicinity without any additional cost from the buyer or, the buyer should be compensated either the price of buying a similar home in the open market as promised by the Developer, or refund his money along with interest equivalent to the cost of flat, whichever is higher.

Also, it is one thing to make a law which calls for the developer to pay up in case a project is delayed and it is altogether another thing to expect him to pay up. Take the case of DLF. The company was fined Rs 630 crore for abusing its dominant market position by the Competition Commission of India (CCI) and held DLF guilty for grossly abusing its dominant market position in the relevant market and imposing unfair conditions in the sale of apartments to home buyers in contravention of the provisions of the Competition Act, 2002.

The height of wickedness and lack of honesty on the part of DLF that ever since the order came out, DLF has not paid a single rupee to CCI. Not only that. They have launched four different projects since then, despite continued objections of CCI. One can imagine that if DLF can get away without paying a regulator like CCI, where is the question of evilest Developers paying the “Aam Aadmi” for delayed projects? It is generosity and kindness of politicians towards the Developers who have fine-tuned the provisions of the Bill and garner more and more profit by robbing the gullible and helpless buyers who cannot approach the law which evidently again, is most corrupt in our country.

In the 2009 version of the said Bill, only those projects were exempt from the provisions of the Bill which were less than a 1,000 square metres and had less than four dwelling units. With the stretch of time over four years, the current version of the Bill is now made applicable only to projects over 4,000 square metres in size with no limit on the number of dwelling units.

Also there is a twist in the tale. Even more alarmingly…when a project is executed in phases, then each phase will be considered separately. This means that even very large projects could just be broken up into sub-4000 meters phases and escape much of the regulatory oversight of the Bill and the regulator and the evelopers for sure, might exploit this getaway route for the provisions of the Bill.

People who head the regulatory bodies are living under the comfy shelter of politicians who are eager to pump their “Hard Earned” money in realty business using the Developers as their instruments ensuring that the Developers do what they are instructed to do. Long live Politician-Developers nexus and the Bill does very little to address this menace. To be fair, one cannot expect any law to end this nexus at any time whether now or later.

Many countries have beaten India in diverse fields. However, India has out-beaten all the countries in one field and that is widespread corruption for which every Indian is proud about his country being on the pinnacle since ages. One of the areas of this majestic achievement by established interests of the corporate field is realty business.

 Mumbai has become the capital of corruption, especially in the construction business, perhaps, because of the highest property rates in India. Cheating property buyers, flouting the rules, getting the requisite papers and plans approved sometimes in advance, selling refuge and other free of FSI areas and construction and sale of illegal floors are common these days in the financial capital of India.

The benevolent Officials at MCGM are always in readiness to approve any and every plan where they smell greens offered under the table. MMRDA, MHADA, Banks, Politicians and Senior Bureaucrats, Police, Local Goons and all concerned are the core harvesters in most lucrative money spinning business involving multi crores of rupees in the name of developing our mother land.

Though the intent of the Bill may be moral, the two main issues i.e. one is rising real estate prices beyond the affordable limit and the other is prevention of corrupt and dishonest practices which will certainly continue to hamper the realty sector targeting the buyers dreaming a small house to shelter his family despite of the fact that unsold real estate projects are at a record high....