Bringing order to real estate deals

The Kerala Real Estate (Development and Regulation) Ordinance is expected to provide a uniform regulatory environmentand ensure orderly growth of the sector, writes M.L. Mahesh

May 03, 2015 12:00 am | Updated 05:51 am IST

on recordThe new law envisages registration of all large construction projects with the Real Estate Regulatory Authority

on recordThe new law envisages registration of all large construction projects with the Real Estate Regulatory Authority

Having pioneered in bringing out various novel and popular legislations for the civil society, Kerala has once again proved its versatility in law- making, this time through Kerala Real Estate (Development and Regulation) Ordinance.

As the Governor inks the Ordinance, the State will stand second among the Indian States — after Maharashtra — to bring out such a law to curb all unhealthy practices prevailing in the real estate and construction industry and to ensure timely execution of projects through establishing a Real Estate Regulatory Authority and Real Estate Appellate Tribunal.

The Ordinance covers all activities related to transactions of land and buildings of both commercial and domestic nature and exempts contract construction in smaller plots below 25 cents or buildings with less than a dozen flats.

Though the move for a legislation to check unhealthy practices in real estate had spread wings more than two years ago, it could not gain the required momentum, says Minister for Urban Affairs Manjalamkuzhy Ali who spearheaded the law-making process.

The Minister is quite optimistic that genuine builders will not be affected by the new law and only fly-by-night and fraudulent operators will face the music. Enough damage has already been done in the State as the law makes its entry.

Till now, any three or four persons would group together, make a colourful brochure with attractive commercial terms and woo the public with alluring offers. The customers are often taken for a ride, which is glaringly evident from the dilapidated structures at various stages of construction seen across the State, blocking an estimated amount of Rs.2,000 crore.

The new law envisages registration of all large construction projects with the authority and all permits to be secured before it is marketed. Brushing aside the industry’s apprehensions that an exclusive authority will delay projects further, the Minister says that all proper applications are cleared in 30 days. The builder should foresee all probable delays in material-manpower logistics and getting clearances while framing the agreement.

The law only stipulates the builder to meet the time period which he agrees solely on his own will. Though only new projects fall in the ambit of the law, complaints on on-going projects shall also be addressed by the authority.

Quality is a major concern after handing over a project. Even brand-new buildings wither away in a couple of years with leakages and cracks rapidly appearing on the walls. Hence, a two-year warranty has been provisioned in the ordinance.

It also strictly monitors proper handing over of the project to the end customers; forming of buyers’ association; and providing annual maintenance.

When asked whether it will make the price tag further heavy, he says it will not drain the buyer’s wallet much as it is market driven.

S.N. Raghuchandran Nair, National vice-president, CREDAI (Confederation of Real Estate Developers' Associations of India), welcomes the Ordinance but says that it must cover every stakeholder in the industry and not the builder alone. He illustrates a number of issues.

The enthusiasm to issue a stop-memo even on frivolous complaints is not seen to grant permits and clearances even on normal grounds. Cartelisation of suppliers of raw materials has never been addressed by the government, and it has to be specially provisioned in the Ordinance, he demands. Migrant labourers, the only workforce, have considerably low workmanship and are now supplied by registered trade unions, making wages soar. Tipper lorries are permitted to ply only in the night but people complain of noise, losing productive working hours.

Caution warranted

He fears that the Ordinance will just be another window of corruption. Working time restriction during summer and lightning hartals delay the projects. No builder intentionally delays projects as the cost escalates. The stipulated 70 per cent of money to be deposited with the bank — which the Ordinance mandates — is 20 per cent higher than what is stipulated in the Central Act. . Compensation for cancellation can be made only after a re-sale.

But CREDAI welcomes the Ordinance in its spirit, he says, as it is expected to boost the confidence of both the buyers and bankers which also leaves the government with clearer statistics of the industry. Warranty for more than one year may get reflected in the price along with all uncertainties under the project’s fold which will eventually make the end customer bear the brunt.

T.S. Ashok of Artech Builders welcomes the Ordinance saying that it will be more realistic since it encompasses regional conditions and gives legal backing to every real estate transaction. But he does not conceal his apprehensions whether this will further delay the projects. Biju Sadasivan of Silver Castle Builders too expresses his optimism on the new Ordinance.

It is generally expected that the Ordinance will provide a uniform regulatory environment, protect consumer interests, help speedy adjudication of disputes, and ensure orderly growth of the sector. It aims at restoring confidence of the general public in the sector by instituting transparency and accountability in transactions. This, in turn, will enable the sector to access capital and financial markets essential for its long-term growth. It will promote orderly growth through consequent efficient project execution, professionalism, and standardisation.

Genuine builders will not be affected by the new law and only fly-by-night and fraudulent operators will face the music

Manjalamkuzhy Ali

Minister for Urban Affairs

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