New Bill to Bring Greater Regulation to Real Estate Sector
Jun. 7 – India’s Union Cabinet passed the Real Estate (Regulation and Development) Bill 2013 this week after congress agreed on changes to garner wider approval for the Bill. The Bill will put into effect a uniform regulatory system for real estate developers and will impose sanctions on any agent that misrepresents the scope and characteristics of their developments and properties.
The real estate market has been a hot bed for corruption in India due to the lack of an oversight entity. In the past, it has not been uncommon for contractors to demand under-the-table payments to finish a construction project or for agents to manipulate the prices of the estates they represent.
“The absence of a regulator is the root cause of corruption, anxiety and malpractice,” said Deepak Parekh, chairman of India’s largest real estate finance company.
Hoping to put an end to corruption in the real estate sector, Housing Minister Ajay Maken introduced the bill earlier this year during Union Budget discussions, yet the bill wasn’t passed until this week after debate in parliament was resolved.
“The Bill will greatly reduce the prevailing rampant corruption in the real estate and housing sector. Not only will it protect the rights of home buyers, but it will also bring in greater transparency,” said Mr. Maken.
The new Bill will set in place a regulatory oversight body for the real estate market to monitor the sector and impose fines and even jail time for repeat offenders in violation of the Bill’s new regulations. For those who misrepresent their development projects, a fine will be imposed equal to 10 percent of the project’s cost, with repeat offenders possibly facing prison time of up to three years.
Under the Bill, developers must obtain all statutory approvals for their projects before construction can begin and they will be bound by stricter rules for reporting the floor area ratio for their developments. Furthermore, every development project will be subject to approval by the new regulatory oversight body with the development plans available to the public for comment before construction begins.
The bill is a positive development for many participants in the real estate market who will benefit from the greater transparency that will result from the new regulations.
“It is a welcome step. We had been waiting since long [for the bill] as it would bring buyers at ease along with transparency and respect to the sector,” said Naveen Raheja, President of the National Real Estate Development Council.
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