Thursday, June 13, 2013

The Real Estate (Regulation and Development) Bill, 2013 – Details

Feeling of having own home and living there is indeed special. However, purchasing an apartment/ independent home from a builder, getting all clearances and mandatory documents may often turn out to be a Herculean task.

Questions like; will builder complete the construction and handover the key in time? Whether plan is approved my municipality/ corporation/ other concerned statutory agencies? Whether the builder got approval for all the floors of the building? etc will give long sleepless nights for any would be buyer.

It is in this situation, where newly introduced, 'The Real Estate (Regulation and Development) Bill, 2013' (already approved by cabinet) bill will come in to picture.

Let’s go through some of its salient features.
[Courtesy to press release from 'Ministry of Housing and Urban Poverty Alleviation', GOI]

...regulate transactions in the real estate sector and is in pursuance of the powers under Entries 6, 7 and 46 of the Concurrent List of the Constitution, which deals with Transfer of Property, Registration of Deeds and Documents, and Contracts...

...standardization in the sector... through introduction of definitions such as ‘apartment’, ‘common areas’, ‘carpet area’, ‘advertisement’, ‘real estate project’, ‘prospectus’ etc... using only ‘carpet area’ for sale which has till now been ambiguously sold as super area, super built up area etc., will curb unfair trade practices.

...provides for specialized regulation and enforcement which includes both curative and preventive measures, with powers to enforce specific performance, not available under the consumer laws... powers to impose penalty for non-registration of projects including imprisonment for continuous violation upto 3 yrs and impose penalty in case of other contraventions.

... proposes to register real estate agents... with clear responsibilities and functions, thereby leading to money trail and curbing money laundering...

... aims to ensure consumer protection, by making it mandatory for promoters to register all projects, prior to sale; and only after having received all approvals from development/municipal authorities...

... disclosure of project details and contractual obligations vis-à-vis the project and the buyer.

... Real Estate Authority(s) and Appellate Tribunal in the States, to enforce accountability norms for the promoter buyer and the real estate agents.

... mandatory upon the promoters to deposit 70% or such lesser per cent as notified by the Appropriate Government to cover the construction cost of the project of funds received by the Promoter in a separate bank account, for purposes of ensuring timely completion of projects to be used only for that project, which shall help in timely completion of projects, and prevent fund diversion.

... speedy and specialized adjudication mechanism to settle disputes between the promoter, buyer and real estate agents.

The main features of the Draft Bill:-

Applicability of the Bill:
... limited in its applicability to residential real estate i.e. housing and any other independent use ancillary to housing. The two important definitions in this regard are:

“real estate project means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of a colony into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or buildings and includes the development works thereof”

“apartment whether called dwelling unit, flat, premises, suite, tenement, unit or by any other name, means a separate and self-contained part of any immovable property located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for residential  purposes, or for any other type of independent use ancillary to the purpose specified and includes any covered garage, whether or not adjacent to the building in which such apartment is located which has been provided by the promoter for the use of the allottee for parking any vehicle, or as the case may be, for the residence of any domestic help employed in such apartment”

Establishment of Real Estate Regulatory Authority:

... specified functions, powers, and responsibilities to exercise oversight of real estate transactions, to appoint adjudicating officers to settle disputes between parties, and to impose penalty and interest;

·         Registration of Real Estate Projects and Registration of Real Estate Agents: 
Mandatory registration of real estate projects and real estate agents who intend to sell any immovable property, with the Real Estate Regulatory Authority;

·         Mandatory Public Disclosure of all project details: 
... including details of the promoters, project, layout plan, plan of development works, land status, carpet area and number of the apartments booked, status of the statutory approvals and disclosure of proforma agreements, names and addresses of the real estate agents, contractors, architect, structural engineer etc.;

·         Functions and Duties of Promoter: 
Duty of promoters towards disclosure of all relevant information and adherence to approved plans and project specifications, obligations regarding veracity of the advertisement for sale or prospectus, responsibility to rectify structural defects, and to refund moneys in cases of default;

Compulsory deposit of seventy percent or such lesser... in a separate bank account... within a period of fifteen days of its realization.

·         Functions of Real Estate Agents: 
Real estate agents not to facilitate the sale of immovable property which are not registered with the Authority... obligation to keep, maintain and preserve books of accounts, records and documents, obligation to not involve in any unfair trade practices, obligation to facilitate the possession of documents to allottees as entitled at the time of booking, and to comply with such other functions as specified by Rules made in that regard;

·         Rights and Duties of Allottees: 
Right to obtain information relating to the property booked, to know stage-wise time schedule of project completion, claim possession of the apartment or plot or building as per promoter declaration, refund with interest in case of default by the promoter, and after possession entitled to necessary documents and plans. Duty of allottees to make necessary payments and carry out other responsibilities as per the agreement;

·         Functions of Real Estate Regulatory Authority: 
... to co-ordinate efforts regarding development of the real estate sector and render necessary advice to the appropriate Government...

·         Fast Track Dispute Settlement Mechanism: 
... through adjudicating officers (an officer not below the rank of Joint Secretary to the State Government) to be appointed by the Authority, and establishment of an Appellate Tribunal to hear appeals from the orders of the Authority and the adjudicating officer;

·         Establishment of Central Advisory Council: 
... to advise the Central Government... to make recommendations on major questions of policy, protection of consumer interest and to foster growth and development of the real estate sector. The Council to have among others, five representatives of State Governments, to be selected by rotation.

·         Establishment of Real Estate Appellate Tribunal: 
... to hear appeals from the orders or decisions or directions of the Authority and the adjudicating officer... headed by a sitting or retired Judge of the High Court with one judicial and one administrative/technical member.

·         Punitive Provisions:
... including de-registration of the project and penalties in case of contravention of the provisions of the Bill or the orders of the Authority or the Tribunal;

·         Power to make Rules and Regulations:
Appropriate Government to have powers to make rules over subjects specified in the Bill, and the Regulatory Authority to have powers to make regulations.

Sajeev.

Reference

1. Press release from 'Ministry of Housing and Urban Poverty Alleviation', GOI

3 comments:

  1. jalandhar chiranjiJune 14, 2013 at 10:34 AM

    At last, we can have some form of regulatory structure in real estate. So far the people in realty are fleecing the buyers, commanding the price and making huge wealth at the cost of others. More over the sector accommodates huge amount of black money and funds illegal activities. Let's hope all these maladies will be contained at least to some extent.

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  2. We must control the situation to ensure that we will succeed. Hope for the better when it comes to our business by knowing different new information for our Real Estate Investing Australia. We should always control the flow of our business by keeping ourselves more accountable in the way it works.

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