More power to the home buyer

Two years after the Union housing ministry came out with a draft bill to regulate the real estate sector, the final bill is ready to be introduced in Parliament during the upcoming Monsoon Session. The keenly-awaited bill, which promises a transparent regime that would uphold the interest of the home buyer, is being seen as a game-changer in a largely unregulated sector, even though some of its provisions have come for some flak from the real estate industry.

Several provisions of the draft bill have been reworked after consultations with states in the Real Estate (Regulation and Development) Bill, 2013, a copy of which was accessed by this newspaper. Analysts have welcomed the move as a necessary pre-condition to professionalising the sector. “Apart from protecting buyers’ interest and bringing in credibility to the developer community, we also see this working positively in terms of attracting investments in the Indian real estate sector,” says Sanjay Dutt, executive MD, South Asia, Cushman & Wakefield.

REGULATOR FOR EACH STATE:

The primary objective of the bill is to form a Real Estate Regulatory Authority in each state to be established by government of the state or union territory. An exception is Delhi, where the regulator would be set up by the union urban development ministry. In its draft version, the bill had envisaged two authorities: one at the state level and the other at the central level. That has been done away with in the final copy. The bill further provides for a common regulatory authority for two states or union territories and also more than one authority within a state. This would make the work load of the regulator more manageable in large states, even as that option rests with the state government.

CARPET AREA THE ONLY BASIS

The bill very clearly defines “carpet area” as the basis that would govern the transaction in any real estate project. It also defines “common areas” as distinct from carpet area. “Standardisation of terminology used in realty transactions usually led to confusion. Introduction of standard definitions will certainly provide ease of understanding. The absence of terminologies such as ‘built-up and ‘super built-up’ will discourage unfair trade practices,” says Bhairav Dalal, associate director, PwC India.

In addition to private sector players, the bill has also brought within its ambit government agencies that promote housing by defining them under the rubric of promoters. Interestingly, there are several cases where the Central Government Employees Welfare Housing Organisation (CGEWHO), an agency under the housing ministry, has been dragged to consumer forums for deficiency in service.

The definition of promoters has been expanded to include buyers/companies who purchase in bulk with an aim to resell later. In some markets, real estate developers rely on channel partners to generate sales, who usually operate under this model. The regulation would cover these entities too. The bill also mandates regulation for all real estate agents, primarily to check the black money trail and also with an intent to ensure professional services to the buyer.

“We welcome the clause proposed for real estate agents to register themselves with the regulator. Home buyers at times tend to get misguided by advertisements put up by developers. As real estate agents it is our responsibility to represent true facts and details for any kind of property transaction or information required by home buyers to make a decision,” says Honey Katiyal, CEO, Investors Clinic, a broker with a pan-India presence and operations in Dubai and Singapore.

REGISTRATION

The minimum plot area that would be governed by regulation has been fixed at 1,000 sq metres and the maximum number of apartments at 12. In its draft avatar, the area was 4,000 sq metres. This would be inclusive of all phases of a development, so developers cannot browbeat the system to escape regulation.

The bill, however, does not mention whether projects prior to enactment would fall within the regulatory regime, although it says that no registration would be required if the builder has got all approvals prior to the commencement of the Act. It also does not cover redevelopment or renovations in cases where the allottees are the same and the project is not marketed as a new one.

With these exceptions, the bill fulfils a long-standing need for transparency by making a developer mandatorily register a project. Once the registration is given, the developer would be given a login and a password on the website of the regulator where the mandatory disclosures have to be made. Some of them are: a commencement certificate to start construction, declaration of clear land title, all approvals, layout plans and development works (external and internal), the pro-forma agreement with the buyer, names of agents, time frame for completion.

The authority is mandated to complete the registration process within 15 days, and if the case may arise, give reasons why registration cannot be granted. If there is no word from the authority within this period, the registration would be deemed to be given. This stipulation would ensure the regulator cannot sit on any application indefinitely. The registration would be valid only for the duration of completion as stated by the builder. Earlier there was a window to extend it by up to two years, but the current bill has made that possible only subject to rules made by the authority. The regulator can also cancel registration subject to the rules.

AGREEMENT AND PAYMENTS

An important provision is for the developer to place 70 per cent of the sum collected from the buyer, or a proportion that the regulator may define, in an escrow account and to be used exclusively towards the construction cost for the project. In addition, the developer can accept a maximum of 10 per cent of the cost on booking from the buyer and only after entering into a sale agreement. Bookings can be cancelled only as per the terms of the agreement, and not unilaterally.

This provision would ensure that developers do not divert funds from one project into another. “The bill will require the developers to invest their own capital and launch only those projects that are well funded and have time-bound construction plans in place. This is a quantum shift which may take time to settle in as a process,” says Dutt.

Developers have reservations on the escrow provision being set at such a high percentage. Lalit Kumar Jain, chairman, Confederation of Real Estate Developers Association of India (Credai) says, “Construction costs vary in different markets. For instance, in prime areas, the cost may be around 30 per cent whereas in suburban areas it could be as high as 80 per cent of the entire cost element. The provision should be based on the ratio of the extent of the construction cost so as to ensure timely completion and prevent fund diversion.”

Buyers, who have usually to depend on assurances from the developer on project completion can now see the status of the project on the regulator’s website as developers would have to post quarterly updates on the construction progress and also the number of bookings done.

If the developer is unable to deliver the project as promised, the authority can compensate the buyers by refunding the money paid with interest. This is the verdict that most consumer forums have given in such a case.

Buyers too, have an obligation under this law to ensure timely payment of their share and cough up interest if they delay. “The Bill works both ways. While it aims to hold the developers accountable, it also looks to ensure that the allottees do not default in making payments. By providing penalties for both the promoters and the allottees, the Bill seeks to ensure that non-compliance is minimal,” says Anuj Puri, chairman and country head, Jones Lang LaSalle India.

GRIEVANCE REDRESSAL

The bill has provided for a robust grievance redressal mechanism with stiff penalties and in extreme cases, imprisonment of the developer. At the first level is the adjudicating officer of the real estate authority who would hear cases and fix penalties. At the second level is the appellate tribunal that would hear appeals on the adjudicating officer’s order. The officer and the tribunal have to decide a case within a specified period.

“Most aggrieved consumers abstain from the hassles of prolonged litigation for obvious reasons. They may now be encouraged to explore the window that will be available under the fast track dispute settlement mechanism,” says Dalal.

Much of the delivery on the goals envisaged in the bill, rests with the states as they would make the rules and administer them, and that would be the test of its efficacy. “The success of this law will be directly proportional to how proactive the real estate authority is. One hopes that it is able to identify the pointers well in advance. Only then will it be successful in achieving the goal of a “transparent realty” in India,” says Dalal.

Source: The Indian Express

Builders may have to register with Pune Municipal Corporation

PUNE: The Pune Municipal Corporation (PMC) is planning to start a mandatory registration process for builders so that they can be held accountable for constructions carried out within the PMC limits. No construction projects will be allowed without registration.

“The administration has taken the decision to avoid cases of building and wall collapse. If the builders are registered with the civic body then they can be held accountable for any mishaps. At present, there is no provision where the builders can be held responsible for accidents or poor quality work,” said Mahesh Pathak, municipal commissioner while speaking to TOI on Friday.

It’s only the structural auditors and architects who are registered with the civic administration so that they can be questioned and held responsible for any mishap. The same process will now be introduced to the builders.

“The officials at PMC’s building department are working on the legal process related to the registration, which will be completed soon. The actual registration process will start in one month’s time,” he said.

Pathak said the registration system will be set up along the lines of the Union government’s real estate bill. The bill has proposed that the each project should be registered with the local body.

However, the civic administration’s registration process will not be confined to registration for a particular project. There will be no separate registration for projects but the builder will have to register. It will be a one-time registration no matter how many projects he undertakes.

If the registered builder is found involved in wrong practices, he may be banned from working within the PMC limits, said Pathak. “After any complaints, the builders will be called for a hearing. If the complaints are found true and the builder is found to have made serious lapses in work, then his registration will be cancelled. The option to suspend the license during the inquiry period is also available,” he said.

The city has registered four major accidents of wall / toilet/ wada collapse in the last two months where seven people lost their lives. Last year, an illegal building in Taljai area had collapsed killing 11 people.

Currently, the city has around 7.5 lakh properties including commercial and residential. Each year PMC gets around 4,500 proposals seeking building permissions.

Source: The Times of India

BJP seeks CBI probe into plot allotment scam

The Bharatiya Janata Party (BJP) on Thursday demanded a CBI inquiry into alleged irregularities in allotment of plots under the defence services quota in Haryana.

After HT highlighted how several officers fraudulently occupied multiple plots in the state, the party’s media in-charge in Haryana, Umesh Agarwal, submitted a memorandum to Governor Jagannath Pahadia, seeking a suitable investigation in the alleged scam.

In his memorandum, submitted through Gurgaon deputy commissioner PC Meena, Agarwal has alleged that the anomalies could not have happened without the involvement of government officials. He also requested the governor to issue suitable directions to investigate any political patronage enjoyed by the beneficiaries.

On June 7, HT had reported that several ex-servicemen belonging to the Army, Navy and Air Force — even those who have held ranks of lieutenant-general, brigadier and colonel — allegedly forged affidavits to acquire as many as 12 residential plots each under the Haryana Urban Development Authority’s (Huda) plot allotment scheme for defence personnel.

About 24 of the 124 plots listed in Sharma’s complaint are in Gurgaon. To get more plots, many officers had applied both in their names and their spouses’ names in violation of norms. Some even changed their names and forged papers, reveal documents.

Vigilance sleuths attached with the Haryana Chief Minister’s flying squad are inquiring into the complaints.

Meanwhile, after HT reports, Huda on June 10 issued a notice to a serving colonel who owns multiple plots in Haryana, including one in Gurgaon.

Source: Hindustan Times

Corporator to rope in architect for slum infrastructure

To ensure better planning in slums, a corporator is now roping in an architect to design infrastructure in his ward specific to the local requirement.

BMC, which has provided for additional Rs 100 crore for slum projects, has asked ward offices to appoint consultants to plan such projects. Each corporator in wards dominated by slums has received Rs 15 lakh to Rs 1 crore for improvement of slum infrastructure.

Rais Shaikh, SP corporator from ward 132 in Chembur (east) is in the process of appointing an architect for basic civic infrastructure. “There are major lacunae in the existing infrastructure, especially in slums. For example, the civic administration has set up a drainage system, but there are missing links or broken drains that lead to water flowing back into the homes of slum dwellers,” said Shaikh.

Shaikh said the architect will study, analyse and design infrastructure and bridge the gaps. At present, setting up of infrastructure like drains, public toilets, construction and repair of roads is done by the local ward office. “The architect will also look at the need for green patches,” he said.

“BMC engineers work in isolation while setting up or repairing civic infrastructure. In most cases, it is not well-connected to reach the end-user,” said Shaikh.

Source: The Indian Express

Cabinet approves Real Estate Regulatory Bill: All you need to know

The Union Cabinet approved the bill to set up a regulator for the real estate sector with provisions for jail term for the developer for putting out misleading advertisements about projects.

Here are 10 things you need to know about the bill:

1.The Real Estate (Regulation and Development), Bill 2013, seeks to make it mandatory for developers to launch projects only after acquiring all the statutory clearances from relevant authorities.

2.It also has provisions under which all relevant clearances for real estate projects would have to be submitted to the regulator and also displayed on a website before starting the construction.

3.The proposed legislation has certain tough provisions to deter builders from putting out misleading advertisements related to the projects carrying photographs of actual site. Failure to do so for the first time would attract a penalty which may be up to 10 percent of the project cost and a repeat offence could land the developer in jail. Moreover, any false advertising implies that buyers will get full refund of the money deposited with interest.

4. The bill also seeks to make it mandatory for a developer to maintain a separate bank account for every project to ensure that the money raised for a particular project is not diverted elsewhere. According to a CNBC-TV18 report, developers have to keep aside 70 percent of the buyers’ funds in a separate bank account to ensure timely completion of projects. The buyers are entitled to full refund with interest in case of delay in projects.

5. The proposed legislation provides for clear definition of the ‘carpet area’ and would prohibit private developers from selling houses or flats on the basis of ambiguous ‘super area’.

6. Under the proposed new law, builders will be able to sell property only after getting all necessary clearances. Registrations of projects with the regulatory authority is a must. This means developers cannot offer any pre-launch sales without the regulatory approvals. Moreover the authority must approve or reject projects within 15 days.

7. Developers will also be barred from collecting any money from buyers before completing all necessary permits to start construction on the project.

8. Builders cannot take more than 10 percent of the advance from buyers without a written agreement.
9. The bill also seeks setting up of a real estate appellate tribunal for adjudicating disputes. The tribunal will be headed either by a sitting or a retired judge.

10. It also suggests setting up of a national advisory council to be headed by housing minister Ajay Maken to suggest ways to advise the regulator on crucial matters.

Source: Property News India