The Bill becomes operation from today.
The provisions of the bill are as follows:
• The bill establishes state-level regulatory authorities called Real Estate Regulatory Authorities (RERAs) to regulate transactions between buyers and promoters of residential real estate projects.
• The bill makes it mandatory for all real estate projects (where the land is over 500 sq.m. or 8 apartments) to be registered with the RERA of the respective state. Agents who wish to sell plots and buildings should also register with the authorities.
• The promoter must upload details of the project like layout plans, land status, completion date, etc., on the website of RERA.
• 70% of the amount collected from buyers for a project has to be deposited in a separate escrow account and can only be used for construction of that project (the respective state may, however, regulate the amount to less than 70%).
• The bill clearly defines “carpet area” which will henceforth be the measure of area of the property. This will prevent malpractices and confusions, such as the buyer unknowingly paying for the common passage area, stairs, etc. that usually comprise about 20-30% more than the actual area.
• The promoter is responsible for fixing structural defects that may arise within 5 years of transferring the property to the buyer.
• The bill also establishes state level tribunals called Real Estate Appellate Tribunals for settlement of disputes within 60 days. Although civil courts will no longer be allowed to hear real estate disputes, consumer courts will still continue to hear them.
• Promoters cannot change plan or design of the project without the consent of at least two-thirds of the customers.
• The bill has a provision for slapping a penalty and/or imprisonment of up to three years for promoters in case they violate orders of the appellate tribunals.
• In case of delay of payments/transfers, buyers and developers have to pay the same interest rate as penalty (as opposed to the interest rates being higher for buyers previously).
The bill was introduced in the Rajya Sabha by the UPA government in 2013 and was eventually referred to the Standing Committee. After the NDA government came into power in 2014, the bill was referred to a Select Committee of the Rajya Sabha. In December 2015, the cabinet finally approved the bill based on the committee’s recommendations. Since its first introduction, the bill has undergone numerous amendments before being finally cleared in the upper house.
After its approval in March last year, states had to notify the realty rules and set up Real Estate Regulatory Authority (RERA) by 30 April 2017. Without notifying the rules, the law will not become operational.
However, just 13 of the 32 states and Union territories, including Gujarat, Uttar Pradesh, Madhya Pradesh, Maharashtra, Odisha, Delhi, and Andhra Pradesh have notified the rules.
Only one state – Madhya Pradesh – has set up RERA while 9 others including Kerala, Maharashtra, Punjab, Rajasthan, Haryana, and Delhi have set up interim regulators.
Real estate transactions in India have remained unregulated for a long time. The Real Estate Bill is expected to solve a lot of inconveniences that buyers face while making purchases, and to bring in transparency in transactions and reduce corruption in the sector.
Real estate contributes about 6-7% of the nation’s GDP, but accounts to nearly one-third of black money deals. The regulatory bill was, therefore, a crucial step in ensuring transparency in the sector.