Realty bill changes augur well for all

The changes approved by the Union Cabinet in the real estate bill are seen as making the provisions stronger to protect the interests of property buyers while also easing some norms for the developers, experts say.

Some of the changes brought to the original Real Estate (Regulation and Development) Bill, 2013, include the inclusion of commercial real estate within the ambit, as opposed to just residential projects and the lowering of the minimum amount against advances to be held in a neutral account.

Another addition is the inclusion of brokers and agents under the proposed legislation's purview, effectively rendering them punishable in case of non-compliance with the rulings of the watchdog and the dispute settlement tribunal.

"The reduction of minimum balance to be maintained in the escrow account of a project has been reduced from 70 per cent to 50 per cent. This amount from money collected from buyers must be held in an escrow account within 15 days," said Anuj Puri, chairman of realty consultancy JLL India. “This provision will effectively allow developers to continue their practice of diverting funds collected for a project towards land acquisition or other projects, and will work in their favour by also allowing them to grow their land and project portfolio," he said. "However, the 50 per cent mandate will still place enough restriction on the developers to divert funds elsewhere and ensure better completion records." The markets also gave a thumbs-up to the proposed changes. Realty was the best performer among the 12 sector-specific index of the sensex.

According to Anshuman Magazine, chairman and managing director of CBRE South Asia, the changes would facilitate further investment into the real estate sector. The changes also dilute the authority vested by the legislation in that the regulator and agencies to be set up under the proposed new legislation will not be the sole recourse to address the grievances of customers, and would allow petitions before consumer forums.

The changes also place responsibilities on the stakeholders on projects that are yet to receive their completion certificates, allowing them to be covered under the proposed new law. This new provision will allow a bigger umbrella of coverage for buyers and investors, experts said.

They were also concerned about the proposed new legislation continuing to exempt the government and its agencies that have slow clearing processes, contributing much to overall delays. This was an issue that needed to be tackled, they said. This apart, some definitions also caused concern. "There are few areas of concerns which the government should look at. One, willful default must be defined in the bill in order to remove discretion," said Rohit Raj Modi, president, Confederation of Real Estate Developers' Associations of India.

The Bill will facilitate more investments, notably from overseas. India's construction development sector received FDI inflows of $24 billion between April 2000 and December 2014. The realty industry, which is the second largest employer after agriculture, is forecast to log a growth of over 30 per cent over the next five years to top $180 billion in revenues by 2020.