Revision in Real Estate Bill provides relief to Builders
In a revision to the Real Estate Bill, the housing ministry has extended a major concession to the real estate sector due to which builders should count themselves lucky. According to this proposal, builders will be allowed the leverage of diverting funds to the tune of about half the amount that they have collected from each buyer for a particular residential project to other projects that they are simultaneously engaged in. Besides, the ministry has extended the purview of this proposal to cover commercial real estate as well. Prior to the revision, only residential real estate came under the purview of the Bill. Furthermore, the Bill proposed that developers who are developing a residential project where the land exceeds 1000 sq. m. and above are required to register the project with the regulatory authority before launching or advertising it.
Revision results in dilution of the Bill clause
The revision in the Bill will result in a dilution in the original clause of the Real Estate (Regulation & Development) Bill which was drafted by the UPA-II government. As per the original clause, it was mandatory that the developer put 70 per cent of the amount collected from an allottee towards a residential project in an escrow account. It was imperative that the funds in this account was used exclusively towards the construction of that project. Following the revision, this amount has been reduced to 50 per cent. Incidentally, the real estate lobby had been pushing for a dilution in the clause for some time.
Bill revision meant to safeguard buyer interests
The revision in the Bill proposed by the Housing and Urban Poverty Alleviation ministry is aimed at safeguarding the interests of property buyers from the land mafia by setting up of the Real Estate Regulatory Authority (RERA). The ministry has already send the draft Bill to the Prime Minister’s Office (PMO) for being discussed formally in the Cabinet. The 70 per cent clause was being misused by many developers as a result of which money received from buyers for a particular project was being siphoned away for other projects that the builder was engaged in. As a result, the progress of the project for which money was collected from buyers was jeopardized.
Specifics of the proposal
The ministry has also specified that the developers of all ongoing residential projects for which a completion certificate has not been obtained will have to register with the RERA. This move was also meant to protect buyer’s interests. Further, it was proposed that buyers who have any grievance against the developer should deter from filing any complaint with any other consumer forum. This was meant to prevent multiplicity in litigation. Incidentally, the Real Estate (Regulation & Development) Bill was introduced in the Rajya Sabha on August 14, 2013, following which it was referred to the Parliamentary Standing Committee on Urban Development. Many of the recommendation proposed by the Committee were incorporated by the Housing ministry.
