The lack of credible information makes property transactions difficult, hazardous, and at times traumatic for the buyers. To remove the information asymmetry, protect consumer interests, and make real estate transactions easier, the government has proposed to make registration of all real estate projects (meant for sale) mandatory. It has published a draft legislation — Model Real Estate (Regulation of Development) Act — that provides for a Regulatory Authority for the purpose. The registration process will require disclosure of information of a project and this in turn will be made accessible through the Authority’s website. The developers may view the creation of one more authority and more procedures as time-consuming and cost-escalating. But when market fails to self-regulate and exploitative practices abound, the state has a responsibility to intervene and put in place a regulatory system. The urgent need for bringing about greater accountability in this area is highlighted by the fact that a recent survey of 82 real estate markets in the world placed India at as low a rank as 50 in respect of Tier 1 cities.
The draft law also represents a significant step forward in safeguarding the interests of buyers. Under the Consumer Protection Act, 1986, buyers can seek redress for defective delivery of apartments, deficiency of services and such other lapses. But this relief is available only towards the end of the life cycle of the property transaction. Nor does it significantly enhance transparency in the real estate sector as a whole. On the other hand, the proposed legislation not only provides for a system of compensation and penalty where buyers are victims of unscrupulous builders. It also stipulates that the buyers be given property information packets early enough so that they could take an informed decision before the costs are incurred. In this, it has taken the cue from the practices adopted in countries like the United Kingdom and the emirate of Dubai. For the attempt to regulate the real estate market to succeed, however, a whole lot of related systems — land records management, property registration processes, and so on – have to be rationalised and improved. Ideally, a system of the kind in vogue in the United Kingdom — where the National House-Building Council, an independent body comprising consumer and industry representatives, offers a 10-year warranty to buyers of apartments in projects registered with it — is what one should aim at. Till such a system is evolved, state-initiated regulations are necessary to protect consumer interests.