The Real Estate (Regulation and Development) Bill, 2013

[Note: Author and Contributor of this blog post is Risabh A. Gupta, 3rd Year Student, B.B.A. LL.B. (Hons.), National Law University, Odisha. He can be contacted at rishabh.a.09@gmail.com] 

The Real Estate Regulation and Development Bill, 2013 has been approved by the Union Cabinet on June 4, 2013 after much delay and deliberation. The bill has yet to be approved by the Parliament i.e, Lok Sabha and the Rajya Sabha. After this, the bill would become statute once it receives the presidential assent. Separate Real Estate Bills have been formulated by Maharashtra and Haryana State Governments. Therefore, when enacted, the Central Act would prevail over any State legislation and any provisions repugnant to the Central Act would be void. 

The Bill is aimed at regulating the largely unregulated real estate housing sector. It envisages the creation of a Real Estate Regulatory Authority [hereinafter “Authority”] and an Appellate Tribunal which would act as a watchdog for the housing sector, predominantly towards safeguarding and protecting consumer interests. Also, creation of the tribunals would act as an effective redress mechanism for any disputes. 

The Real Estate Bill envisages providing effective and efficient regulatory framework and environment in the real estate sector which is laced with illegal and black money, corruption, land mafias and red tapism. 

Applicability of the bill 

The proposed Bill has confined and limited its applicability & jurisdiction only to residential real estate i.e. housing and any other independent use ancillary to housing. Further, the bill is only applicable to private residential projects of more than 4,000 square meters. There is no prescribed limit on the number of dwelling units. The Bill only seeks to cover large residential projects; commercial projects are not covered. 

Salient features of the bill   

1. Prior approval before launch and advertisement- A developer has to mandatorily get all the approvals before the launch of the project. Many a times, developer starts the project without getting the requisite approvals. The bill aims to curb this practice.  

2. Mandatory disclosures –The Bill proposes to lay down stringent disclosures norms to be followed by the builder. Developers are required to upload information and documents on the Authority’s website relating to land title, encumbrances over land, layout plan, proposed facilities, excepted completion date etc. Presently, there is no effective regulator to ensure that developers comply with minimum mandatory disclosure norms. Thus, the basic aim of these provisions is to ensure that the customers are well acquainted with the relevant information concerning their flat. Further, these provisions would substantially reduce disputes and would bring in more transparency. 

3. Agreements – The Bill mandates the developers to provide to the ‘Authority’ proposed advertisements relating to the project. It further requires the developer to furnish the formats of the agreements to be executed with the buyers and list of bookings in the project on the basis of the agreements with the proposed buyers. Thus, these provisions further endeavors to safeguard the interest of the buyers and to avoid cumbersome and hardship due to one-sided agreements.  

4. No pre-launch bookings The new Bill prohibits any pre-launch bookings by the developers. Usually developers commence sale of units much before obtaining mandatory approvals. Further, it is only after registration that an issuance of advertisement or booking of units would be permissible.  

5. Carpet area – [The concept of ‘super carpet or super built-up area’ has been done away with in the new bill. The bill mandates the developers to clearly specify the carpet area for each unit. As per current practices, developers usually deceive the buyers by mentioning ‘super carpet or super built up area’ which is very misleading as super built up area is 20-30 % more than carpet area.  

6. Use of funds – The new bill mandates a developer to mandatorily deposit 70 % or lower percentage (as prescribed by the ‘Authority’) of the funds received to be deposited in a separate bank account. The funds are to be used only for the concerned project and not otherwise. Thus, this provision would aid in ensuring that funds collected are not diverted for other purposes. Further, the bill allows for an acceptance of advance/deposit for a proposed sale by a developer to a buyer only pursuant to execution of written agreement with the buyer and not before.  

7. Punishment –A term of up to three years or a penalty of up to 10% of the estimated cost the real estate project, or both is stipulated in case of contravention and non-compliance with the provisions of the bill.  

Conclusion 

One of the predicaments in proper implementation of the bill would include setting up of regulatory authorities at national and state levels. This would take a substantial amount of time. Further, as the applicability of the bill is only confined to real estate housing project more which is more than 4000 square meters, the developers may structure their project so that each phase is less than 4,000 square meters which would be considered as a stand-alone project, thus escaping the reach of the bill.  

The Bill has only been approved by the Union Cabinet. It still has to be approved by the Standing Committee, passed in both the houses of the Parliament and then would be required presidential assent to become an act. Therefore, it is likely that many amendments and changes would be done pursuant to the discussions in the parliament and the suggestions and recommendations of the Standing Committee.