Real Estate Regulation and Development Bill 2013 draft has been recently approved by the Union Cabinet of India, which aims at increasing transparency within the Indian Real Estate Market. Once Bill gets adopted by each state, customer rights will get a fillip. It will also allow for the creation of a real estate regulator in each state (realty being a state subject). While the Bill applies to residential properties, commercial real estate has been kept out of its purview.
The Bill has closed the window for comments and may be presented in Parliament. However, it has some contentious issues, which, according to developers, will affect investors and buyers in Indian property market.
Let’s have a brief look –
Issue: The Regulation Bill mandates registration of any new project before starting.
Impact on Developers: Red-tapism and corruption can be led by the procedure of Renewing a license.
Impact on Consumers & Investors: As the real estate developers will have to submit project details before launch, it will reduce false claims. However it may cause unnecessary push up into property prices as real estate developers have to submit a bank guarantee of 5 per cent of the estimated cost.
Issue: Signing sales agreement will be mandatory to take any advances.
Impact on developers: Due to potentially lower returns, it may push Investors away.
Impact on Consumers & Investors: A discrepancies cropping up at a later date will be prevented. As the stamp duty cost will reduce returns by 5–14 per cent, it may discourage investor & buyers from fuelling price speculation.
Issue: This regulation bill not allows any advertisement or brochure inviting advances or deposits or pre booking.
Impact on Developers: Developers will be unable to pull eyeballs to their upcoming projects and thus could witness a decline in pre-launch sales.
Impact on Consumers & Investors: This regulation will help in reducing chances of fraud but it will leave real estate investors and customers uninformed about new projects.
Alok Kumar Upadhayay
Real Estate Professional