Realty check

After being held hostage by various lobbies and vested interests for the last four years, the Real Estate (Regulation and Development) Bill has come one step closer to being made into law, with a standing committee of the Rajya Sabha approving fresh amendments to it last week and tabling it in the Upper House. This doesn’t guarantee its passage though, what with the Opposition already filing a dissent note and a few States protesting the Centre’s encroachment into their turf.

It is true that the redrafted Bill has watered down some of the more stringent consumer protection provisions contained in the original draft. For starters, it applies only to projects with a minimum size of 500 square metres with eight apartments or more, which may leave many smaller middle-class transactions out of the ambit of these regulations. To prevent developers from diverting the funds raised, the new Bill stipulates that developers deposit 50 per cent of investor money in a separate escrow account and use it for construction of the specific project. But this is a dilution from the 70 per cent stipulated earlier, and seems to be a concession to the builder lobby’s tenuous argument that construction costs seldom make up 70 per cent of the project cost. Developers also seem to have won wriggle-room on project delays and post-sale alterations, with the revised Bill incorporating a force majeure clause for the former and allowing “minor alterations” without the consent of buyers.

But in quibbling over such clauses, both the Centre and the Opposition should not lose sight of the enormous difference that the passage of this law, even in its diluted form, can make to real estate buyers in this country. A property purchase is often the biggest investment decision that an individual makes in his lifetime; yet the sector has so far operated in a regulatory vacuum. In most property dealings, the dice is loaded against the consumer, with a complete lack of disclosures, delays and one-sided contracts, all working in favour of the builder. By requiring developers to adhere to registration and disclosures on each and every project, imposing penalties for delays and default, and establishing state-level Real Estate Regulatory Authorities for aggrieved buyers to seek redress, this Bill would at least lay down some basic ground rules in a sector where there seem to be none currently. But to push through this law, the Centre will not just need to win over the Opposition, but also have the active cooperation of State governments. Quite apart from land being a state subject, key elements of the Bill, such as the setting up of local regulatory authorities, online registration and single-window approvals for projects, rely on the States for their effective implementation. Overall, the passage of the Real Estate Bill is bound to be stormy. But if Prime Minister Narendra Modi manages to push this one through, he would be giving middle-class home-buyers what they have lacked so far — the backing of the law.

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