What's The Big Fuss About The Real Estate Regulatory Bill?
The Union Cabinet had approved the Real Estate (Regulation & Development) Bill in April 2015. The Bill is expected to make dealings in real estate in India transparent. But, the real estate regulatory Bill has attracted much criticism from the opposition parties so much so that it was deferred in the Rajya Sabha on April 29, 2015. Congress Vice-President Rahul Gandhi criticized the bill saying it is “pro-builder” because it favors builders over consumers. Rahul Gandhi also assured people that the Congress would exert pressure on the Centre to roll back the proposed amendments to the Bills the United Progressive Alliance (UPA) government had introduced when it was in power.
What does this mean for home buyers in India? Let us look into the key arguments against the Bill:
The earlier Bill had stipulated that builders must not alter a sanctioned plan once it is approved. But now the amended Bill allows builders to make minor alterations in the plan though this is not clearly defined. The Congress claims that this is 'anti-buyer' and 'pro-builder'. If builders have to rigidly follow the guidelines set by competent authorities on plans, structural designs and specifications, they do not have much incentives to improve upon these standards. Even when the plans sanctioned by “competent authorities” are surpassed by new technological discoveries, builders will be compelled to abide by the approved standards.The amended Bill allows builders to deposit 50 per cent of the money collected from prospective buyers in an escrow account. The Bill that UPA proposed has stipulated that they must deposit 70 per cent in an escrow account. Many argue that this would allow builders to spend the money for other projects or misuse the funds. This allows developers to divert funds received from a project toward other projects or to acquire more property in India even though the rate of 50% would be restrictive enough. These are normal market practices that allow greater activity in the real estate market.Rahul Gandhi argues that the UPA's Bill clearly defines the carpet area as the net usable area minus the walls, but the National Democratic Alliance (NDA) government's Bill has done away with that. The draft Bill says that houses can only be sold on the basis of actual carpet area, quoting costs per square foot of carpet area. This helps ordinary homebuyers because builders mention the super-build up area. While buying flats in India, home buyers tend to believe that they might get a more spacious house by paying less. The super-built up area includes the common area, lift, corridor and other areas.According to the amended Bill, builders can ask for an extension if the authorities fail to give statutory clearances, like completion certificate, on time. But, if the government compels builders to compensate buyers if they failed to hand over the apartments on time because they had not received statutory clearances like the completion certificate, it will harm both builders and home buyers in the long run. If builders are forced to compensate homebuyers when government authorities delay the process, only the developers with political connections will undertake realty projects in India. This would increase home prices because the supply of homes will decline. Also, the cost of getting such clearances would go up as builders could be encouraged to adopt corrupt means to get various clearances on time. Read more on why real estate regulatory bill is good news for homebuyers.