Recently the Union Cabinet cleared the Real Estate (Regulation and Development) Bill. Critically comment on the important features of this bill. Examine how these features will have bearing on the consumers. (200 Words)
Real Estate (Regulation and Development) Bill passed by Union cabinet recently has come as a big relief for the buyers as well as for overall picture of Indian real estate market.
Features:
- Independent Regulatory Authority: Real estate regulatory authorities (RERAs) will be established in every state and be paired with real estate appellate tribunals (REATs) to consider appeals against orders of RERAs. All commercial and residential projects now need to be compulsorily registered with RERA.
- Prevention of diversion of funds: The Bill now provides for a compulsory deposit of 50 per cent of the total amount realised from buyers into a monitor able account in a scheduled bank to be used only for the construction of the designated project. This will help in less diversion of funds but it is lesser than initially speculated 70% so some funds may still be diversified to chit funds.
- Mandating consumer protection measures:
- Specification of project cannot be altered without consent of two-thirds of buyers
- Prevention from accepting more than 10% advance fees without written agreement.
- Stringent penalties in case of violation and right to reclaim refund in case of promoter failure of delivery.
- Promoter needs to declare carpet area
- Mandatory Registrations with RERA: Only projects registered with RERA can be bought or sold.
Developers will have to mandatorily disclose all details on the regulator’s website.
Advantages to consumers:
- Consumer will have redressal mechanism
- They will have more idea about project and they cannot be betrayed
- Consumer money will be safe and will be refunded in case of issues.
Disadvantages:
- Existing projects might get delayed.
- Costs can go up.
Overall this bill will be beneficial for consumers and will definitely benefit India’s real estate market in longer run. It will also help in curbing black money in real estate
01/02/2016
How REA will impede competition in the sector causing harm to the consumers ??
- 70% money in escrow account : would force builders to rely upon further borrowings & cost of which may be borne out of the consumers itself.
- Cancellation of Registration : RERA is empowered to cancel any project because of default on part of developer or non-compliance to any rule which reduce incentives of developers to compete given inherent market risks in the sector.
- Multiple Dispute resolution forums : leading to jurisprudence conflict to which consumers would be ultimate losers.
- Multiple Legislations : REA does not repeal existing laws leading to clash of jurisdiction & ambiguity.
- Regulatory : Still there is not a provision of single window clearance system reducing competition as part of developers.
- Nexus : between politicians, officials & builders is still neglected by the REA which is main reason for sky-rocket prices, reducing competition as part of consumers