The sheer scale of manpower, money and monitoring team needed to regulate and monitor the huge real estate sector would be stupendous. Has the government assessed the true scope of work
The Real Estate (Regulation and Development) Bill, 2013, approved by the Union Cabinet aims to protect the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects. While this looks good on paper, the real question is who is going to collect the humungous data required to bring to record 30 crore square feet of construction that is planned across India?
While speaking at a seminar organised by Moneylife Foundation on decoding the Bill, Pranay Vakil, noted property expert and former chairman of Knight Frank India, admitted that the registration of properties of about 30 crore sq ft across the country is really going to be a tough task.
The Bill demands greater disclosure from the developers and a higher level of project accountability to remove the information asymmetries from the property market. There is also mandatory registration of all real estate projects and real estate agents who intended to sell properties, with the Real Estate Regulatory Authority (RERA).
For each project, the developer must disclose details of the promoters, project, layout plan, plan of development works, land status, carpet area and number of the apartments booked, status of the statutory approvals and disclosure of pro-forma agreements, names and addresses of the real estate agents, contractors, architect and structural engineer.
This is where the real challenge emerges. Monitoring whether all the projects that fall under purview are actually submitting themselves for registration would be a huge task. Even creating and maintaining data would require trained employees. Who will foot the bill of employee cost, infrastructure like computer systems, offices, transportation and communication, especially since the regulators would have to be set up by each state?
That leads to another issue. The quality of information may not be the same across all the states. All the disclosures are supposed to be mandatorily submitted to the RERA. However, it is not the union government, who would set up the RERA but the states.
A press note issued by the government states that "Establishment of one or more ‘Real Estate Regulatory Authority’ in each State/UT, or one Authority for two or more States/ UT, by the Appropriate Government, with specified functions, powers, and responsibilities to exercise oversight of real estate transactions, to appoint adjudicating officers to settle disputes between parties, and to impose penalty and interest".
Similarly, the state governments are expected to establish Appellate Tribunal to hear appeals from the orders or decisions or directions of the Authority and the adjudicating officer. The Appellate Tribunal should be headed by a sitting or retired Judge of the High Court with one judicial and one administrative or technical member. This is also not practical, especially looking at the dearth of High Court judges today.
One of the issues that could put breaks on setting up RERA and the Appellate Tribunal is the cost factor. As per the Bill, the state government should set up RERA and Tribunals. But the states would be too reluctant to bear the financial burden on setting up these authorities, unless the Centre provides sufficient funding. (Remember, the Prize Chits and Money Circulation Schemes (Banning) Act or PCMCS Act, 1978. It is a Central Act, which is expected to be enforced by the states. And except for a few, not many states are interested in this. )
In short, cost, the extent of effectiveness and the implementation at the state-level would emerge as hindrances for the Bill going forward.
Read more about the Real Estate Regulation Bill:
About 150 Maoists opened fire on Dhanbad-Patna Intercity Express between Jamui and Mananpur stations in Bihar
About 150-armed Maoists on Thursday shot dead a jawan from the Railway Protection Force (RPF) and injured two others including the train guard after forcibly stopping a Patna-bound train in a forested area in Bihar.
According to reports, the Maoists stopped the Dhanbad-Patna Intercity Express near Kunder halt between Jamui and Mananpur stations at around 1.20pm and fired indiscriminately for about half-an-hour.
They shot dead an RPF jawan Sukanta Dev while injuring the train guard and a passenger. The Naxals also took away weapons from two RPF personnel and later let the train go on its onward journey.
Railway Board Chairman, Vinay Mittal, had said that all passengers were safe and the train resumed its onward journey after about 75 minutes.
The real estate bill, recently adopted by the cabinet, seeks to register brokers or agents. While this would bring in some accountability, its effectiveness may fail in implementation given our experience of other regulators
The Union cabinet on 5 June 2013, cleared the Real Estate (Regulation and Development) Bill 2013, which seeks to create a Real Estate Regulatory Authority (RERA) and an Appellate Tribunal (AT) that will act as a watchdog for the real estate sector, set up specifically to protect consumer interests and redress grievances. The bill also mandates the registration of real estate brokers. In India, real estate agents could be anyone who makes buyers and sellers meet. This means that from a paanwala to a tailor to a scrap metal dealer, anyone can be a real estate agent. Would all of them fall in line and register with RERA? This would be quite a challenge.
In a Moneylife Foundation seminar on the Real Estate Bill, Pranay Vakil, one of the most respected names in the real estate industry and former chairman of Knight Frank India, said, “Though this is a step in the right direction, what is not clear is whether this would be a generalised registration or whether it would be for a specific project. The reason being, the developer has to disclose to the authority the name of the real estate agent. Every time a developer changes a real estate agent he would have to contact the authority to get the name changed on the website. One would still have to wait for the bill to know as to what are the exact qualifications that are required to register as a broker.”
The Bill proposes to register real estate agents which have hitherto been un-regulated, with clear responsibilities and functions, thereby leading to money trail and curbing money laundering. This clause has been added on the recommendations of the Department of Revenue, Ministry of Finance. The registration of brokers would bring some accountability in to the system. Consumers would be more confident as there would bring in credibility of the broker as well. At present, any person can become a real estate agent with no professional certification or licensing for specific areas of operation.
Over the past few years, brokers have been dominating the transactions market. They lure customers with ‘special’ discounts, another reason why consumers too prefer going through a broker than direct to a builder. Builders too, are dependent upon them for sale. Usually, they form groups to achieve their targets. Once they form a contract with a developer to sell a particular number of flats within a project, they will focus only on that. At the end of the day, the broker would favour the developer.
The new law may try to make all agents register, but would it be able to crack down on those who continue to operate unregistered? Will the authority be able to identify these agents and punish them?
Even after registration, there would be issues of enforcing fair conduct. In the financial sector despite strict regulations by Securities and Exchange Board of India and the Insurance Regulatory and Development Authority there have been numerous cases of mis-selling. Therefore, it would also need to be seen whether the regulation of real estate agents would be a workable model. If the real estate regulator is lax, the registration of real estate brokers would be a much-needed by a wasted effort.
Read more about the Real Estate Regulation Bill: