There are some differences between the Central Bill and laws proposed or already present in various states with regard to housing. Maharashtra uses built up area in its Ready Reckoner, while the central Bill uses carpet area. In addition, states will have to foot the bill for setting up and running the regulatory authority and appellate tribunal under the proposed Act

The Real Estate (Regulation and Development) Bill (Realty Bill) recently passed by the Union cabinet fails to provide clarity on several issues that the state governments are expected to implement. The conflict is not limited to Central and state laws, but also reaches to the basic definition of area under sale.

For instance, the Ready Reckoner of the Maharashtra government uses built-up area for referring area under sale, while the Realty Bill talks about carpet area. Carpet area is the area enclosed within the walls, while built up area covers carpet area plus walls and the balcony. (As per the Bill, ‘carpet area’ means the net usable floor area of an immovable property, excluding the area covered by the walls.)

Pranay Vakil, founder chairman of Praron Consultancy and former chairman of Knight Frank India, while speaking at a Moneylife Foundation seminar said there would be some issues (for the Realty Bill) like jurisdiction, registration and control of developers with multi-state operations besides conflict between central and state laws. In his words, the Realty Bill, which is a huge step forward in terms of consumer protection, would need some ‘debugging’. 

There are areas of conflict between the central and state laws that also need to be debugged. Last year, both houses of the state legislature passed the Maharashtra Housing (Regulation and Development) Bill (MHRDB), which at present is awaiting the presidential nod.

According to media reports, Sachin Ahir, (minister of state for housing), Maharashtra, and few other states too have objected to the Realty Bill due to difference in conditions and development control regulations for different cities.

“We do not know in what form the Realty Bill will be imposed on states, whether it will be a nodal law or a law that will supersede what the state government has proposed. We will decide what next once we get information from the Centre, once we get the minutes of the Cabinet meeting,” Ahir had said.

While the MHRDB seeks to safeguard interests of home buyers and bring transparency in real estate deals by setting up a housing regulatory authority and a housing appellate tribunal, the central Bill also proposes the same.

A press note issued by the Union government states that “Establishment of one or more ‘Real Estate Regulatory Authority’ (RERA) 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”.

While speaking at the Moneylife Foundation seminar, Parimal Shroff, who has over 37 years’ experience in constitutional, corporate, civil and property law, pointed out that the Central Act is “too ambitious”. He said, the functions of RERA includes administrative, advisory, executive, judicial and regulatory and it needs to be rationalised as it can be overburden by solving smallest to largest issues across the country.

In addition, the state governments are expected to establish Real Estate Appellate Tribunal (REAT) to hear appeals from the orders or decisions or directions of the authority and the adjudicating officer. The REAT 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.

According to Ahir the central Realty Bill was largely based on the housing bill proposed by Maharashtra. He said, the only major difference was the MHRDB sought to equate the appellate tribunal with a civil court, while the central one did not. Instead, the Realty Bill provides same powers to RERA as vested in a civil court while trying a suit.

One of the issues that could put brakes on setting up RERA and the REAT is the cost factor. As per the Bill, the state government should set up RERA and tribunals. However, the states would be too reluctant to bear the financial burden on setting up these authorities, unless the Centre provides sufficient funding. 

The Realty Bill says, “The state government may, after due appropriation made by the state legislature by law in this behalf make to the authority, grants and loans of such sums of money as the state government may think fit for being utilized for the purposes of this Act.”

In addition, the appropriate governments are expected to constitute “Real Estate Fund” and shall credit all government grants received by the authority, the fees received under this Act and the interest accrued on these amounts.

Salaries and allowances payable to the chairperson, other members as well as officers and other employees of the RERA and REAT and administrative expenses would be paid from the Fund.

While there is no mention on any budgetary support for establishing the RERAs and REATs, the question is will there be sufficient funds for all the expenses, like employee cost, infrastructure like computer systems, offices, transportation and communication. Especially, in states like Maharashtra setting up RERA and REAT with meagre funding would not only prove a hurdle, but also sabotage entire purpose of the Realty Bill.

The Realty 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 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 another area that could pose challenges. 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. And this would not be possible without adequate funding.
 

Read more about the Real Estate Regulation Bill:
 

• A bulk allottee or buyer will also be considered as a promoter causing confusion

• Will the regulation really exclude commercial property?

• The humungous job of monitoring 30,000 crore sq ft of construction planned

• Registration of brokers: Huge challenges ahead

• Moneylife Foundation event on decoding the realty regulator

• Here is the Real Estate Bill, kept hidden from public