India has been in need of
policy corrective measures in the real estate sector for a long time now. Stringent
market and economic conditions have pressed the real estate trends into
sluggish markets. Though the industry has recently observed an upward shift,
there are other factors like delay in residential project completions and
prolonged bank interest rates which have dampened the spirits of buyers.
In this gloomy scenario, the
introduction of the Revised Real Estate (Regulation and Development) Bill, 2013
will bring new hope. The amendments will make way for a more transparent and
accountable system for the benefit of the developers, investors and buyers. This
will also attract global investors bringing in structured capital to the
sector.
The Bill is on the verge of
enactment and once implemented, the government will have higher control over the
contracts between real estate developers and buyers and thereby, will be able to
standardise the business practices in the industry.
In the proposed Bill, the
minimum balance to be maintained in the escrow account is reduced from 70 to
50% of the sales proceeds. This provision will enable the developers to
diversify their funds to land acquisition and other projects but will increase
the concern of the buyers regarding funds. The remaining 50% will place
restrictions on the developers resulting in timely completion of projects.
Another amendment is to include
commercial real estate under the law. Apart from developers, brokers and agents
come under surveillance and are punishable by law if they are found to be
non-compliant with the legislation.
The Bill also proposes to
establish a regulatory authority in every state within a year of enactment to
screen projects and to resolve buyers’ grievances and disputes. All new
projects have to be registered with the regulator before commencement and
under-construction projects will get three months to register. If a project is
not registered, the developer will have to pay a penalty of 10% of the overall
project cost and an additional 10% for continued non-compliance. Registering
with incomplete and/or incorrect details will attract a 5% penalty. Also, the
developer cannot make changes to the original, approved plans without the prior
consent of two-third of the buyers.
A crucial step for the
overall success of the law is to ensure that it is implemented at the grass
root levels as well. While it is not possible to forecast constrains in the
implementation process, a few anticipatory measures will be of great help.
No comments:
Post a Comment