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A Real Estate Regulator In The Offing

The Union Cabinet has approved a bill to set up a real estate regulator in India. Don’t rejoice yet; to become a law, the bill needs to be passed in parliament and the in-thing nowadays is to disrupt parliament because some minister or the other is not resigning.

The bill requires each state to setup a regulator individually, with a common framework.

Developers will have to register their projects with the state regulator and include site plans, drawings, schedules, obtained registrations etc. They can’t even launch a project if they have not received all clearances.

All brokers need to register. Don’t worry, this doesn’t make them any better. Bankers, Insurance salesmen and mutual funds need to register too – does that make them saints? No, they just have to pay a fee for registration, which they will eventually recover from: you.

Further a “representative” picture of a project in an advertisement will become punishable. This will benefit paper companies, as nearly all brochures of all real estate projects contain stuff that is, well, not real. Repeat offences can lead a developer to jail.

A standard definition of carpet area has been recommended that will be used all over the country and prices will be linked to that definition. Thankfully, this is not the “super built up” area that is currently used, which includes area under your feet, under the walls, the common area, the park, the basements, neighbourhood tea stalls, and parts of other districts. But since this was used to make people pay more for tiny pieces of liveable real estate, you can imagine that carpet area prices will now look much higher.

70% of the Funds collected for a project will need to be escrowed and used only for that project. This gives rise to the question – why 70%? Why not 100%? But this has again been diluted and left to the states, saying that 70% is the maximum, and states can decide the minimum.

Currently the rules only apply for residential projects. There is no stomach to build a regulator for commercial real-estate, it seems.

CREDAI, one real estate builders association, is miffed, says Mint. Another, NAREDCO, is happy, says Zee News. It’s left to after implementation to find out if buyers will be happy.

  • Sambaran says:

    This regulation was unnecessary. I am a victim of painful real-estate transaction (blogged about it). Still I believe this ‘problem of real-estate-developers’ should NOT be fixed by regulation and regulators. Free-market-choice is the right way to go about it.

  • Uma says:

    Who will bell the cat? We all know the politician-builder nexus and how it seems immune to all existing laws.

  • Kaushik says:

    Despite all grudges, I like the scene when bigger sharks are freed in a tankful smaller sharks. Lets the play begin.

  • fubar says:

    Why now? Just before the elections? Trying to soothe the middle class anger over RE mess?

  • Manoj Nagpal says:

    The below sentence in your post is incorrect:
    “70% of the Funds collected for a project will need to be escrowed and used only for that project”
    The actual statement in the regulation is “70% or lesser as maybe decided by state for the project so that the cost of construction is covered”

  • Adheer says:

    A real-estate (housing) regulatory authority is welcome, I wonder how much powers it will have to penalize developers.
    Undoubtedly it also going to lead to more corruption. For example, in Mumbai a developer has to “take care” of BMC, MHADA, Fire Department, political parties and rogue RTI activists. Now add this new agency to that list, and the cost of doing business goes up.
    I hope that create a concept of “Property ID”, that uniquely identifies each apartment, shop or sale-able unit. Each apartment unit, or commercial unit must be allotted a unique ID by this authority. This will reduce fraud to a great extent and speed up the process of registration, bank loan processes etc.

  • XYZ says:

    After returning to India, I have noticed that people crowd into industry that are poorly regulated in our country. The two businesses that I have noticed are the restaurant business and real estate business. The restaurant business was brought under regulation recently in the name of health safety and now the real estate is going to have the same experience soon.
    We are seeing a return of the licence raj. While I wouldn’t trust a single businessman/woman in India, I don’t trust the Indian government either. Ultimately, I believe that full deregulation is best for our country and the evidence is the way people are desperately trying to create self-employment by crowding into industries that are unregulated.
    What we need is a better judiciary that dispenses justice fast in a consistent manner.