Will the Model Real Estate (Regulation of Development) Act, now in draft form, come to the rescue of hapless property buyers, or will it create fresh bureaucratic hurdles under a new licence raj that will lead to delays and increase transaction costs?
The draft Model Real Estate (Regulation of Development) Act, released recently by the Ministry of Housing and Urban Poverty Alleviation, seems to have evoked a mixed response from the realty sector of Chennai.
Welcoming the proposals and describing them as “good intentions,” developers in Chennai underscored the need for the authorities to ensure against bureaucratic procedures.
“The intention seems to be good. But it should not be a stumbling block in growth,” said Prakash Challa, president (Tamil Nadu), Confederation of Real Estate Developers’ Associations of India.
The Real Estate Regulatory Authority to be set up in each State according to the provisions of the Model Act would control and promote construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties. Construction for sale can be undertaken by registering them with the Authority.
“There are fly by night operators in the industry. If the intention is to control them, strengthening the local bodies with more manpower and resources would be the best option,” he said.
The Model Act makes it mandatory for all promoters to give a bank guarantee equivalent to five per cent of the estimated cost of the development to the regulatory authority and submit the details of the approved plans of projects. This provision would be yet another contributing factor to increasing cost and time of the project, said Mr.Challa.
“The end consumer cannot afford to get his project delayed or price increased because of these regulations,” he added.
The draft model Act has exempted development of land up to 1,000 square metres from registration with the proposed regulatory authority. The draft reads: “No such registration shall be required, when the area of land proposed to be developed into a colony does not exceed 1,000 square metres or the number of apartments proposed to be constructed does not exceed four”.
The regulations, however, would affect the small and medium promoters, said M.K.Sundaram, Secretary of Construction Industry Development Council-Chennai.
But the process of knowing the credentials of developers through the website would give more awareness to buyers, he added.
The draft has made it mandatory for a promoter who develops a real estate project to make available for inspection all documents and information to any individual who is intending to buy a plot/building/apartment in the project.
Clarity in the role, responsibility and obligations of promoters who undertake land development may be a good move. But the obligations of buyers also have to be fulfilled while the authority acts as an ombudsman for promoter and buyers, said Mr.Sundaram.
T. Chitty Babu, Managing Director, Akshaya said the provisions of the Act were welcome as aspects on injecting transparency were already being implemented by them.
“It is the code of conduct we follow for years,” he added. “It will also lead to generation of proper data for the real estate industry. The data on housing stock in specific urban localities will be useful for buyers and developers in making a decision,” he said.
Mr.Babu said the model Act preventing the promoters from advertising the project before registering with the authority was a good move. According the draft, if the information contained in the advertisement or the prospectus is found untrue and causes loss or damage to the buyer, the promoter will be asked to compensate for the loss.
“If the company has taken a loan against property, the regulations would contribute towards making the buyer aware of it,” said V.A.Ramash, president of Sabari Foundations.
“Such regulation is good. But we are always worried about the bureaucracy,” said R.V.Shekar, Managing Director of Lancor Holdings Ltd.
It should not take us back to the licence raj from an era of liberalisation, globalisation and privatisation, said Mr. Challa.