Real estate bill to revamp the real estate sector

The Union Cabinet has approved the bill to set up a regulator for the real estate sector with provisions for jail term for the developer for putting out any misleading/beguiling information or advertisement about projects.

The Real Estate (Regulation and Development) Bill, approved by the cabinet, seeks to provide a uniform regulatory environment to the real estate sector.

It also intends to make it necessary for developers to launch projects only after acquiring all necessary statutory clearances or approvals for all projects from relevant local authorities for that particular area.

Promoters will have to disclose details about the project (name, type, plans, partnership companies, names of persons involved with that particular construction and so on). Will have to specify what kind of area is for sale (based on standardized markers).

Builders will not be able to sell or advertise a project till it receives the requisite approvals from concern authorities. These range from land titles and amenities, to provisions for water, electricity and sanitation. This means pre-launch sales are out or not possible. Brokers will be restricted from trying to sell a particular unregistered project or land, or one that has not received the necessary approvals or clearance from germane authorities.

The Bill has provisions under which all germane clearances for real estate projects would have to be submitted to the regulator and also displayed on a website before starting the construction, sources said.

The regulatory authority will get around two weeks after receiving an application for registration from a promoter to either clear it, or reject it. Reasons for rejection will have to be put down in writing. If the regulator fails to do so either of these, it means the project will be considered as registered.

The proposed legislation has tough provisions to deter or to halt builders from putting out any misleading advertisements or information related to the projects carrying photographs of the actual site.

Builders have to open a separate bank account for every project and set aside 70 % (or less, as designated by the local authority for that particular area) of buyers’ money, to be channeled only into the construction of that property.

Failure to do so for the first time would lead to a penalty which may be up to around 10 per cent of the project cost and a repeat offence could strike the developer in jail.