Why the Real Estate Bill is still half a bridge of hope
While the bill tries to protect consumers, slow approvals are a major reason behind delays and increasing cost of property. The Bill does not address this
 
The Union Cabinet has finally cleared the Real Estate (Regulation and Development) Bill, which is being planned to be tabled in the winter session of the Parliament. In a note on the bill, Liases Foras Real Estate Rating & Research Pvt Ltd, said, "While the bill protects consumer interest, faster approvals are also crucial for developers to prevent delays. Against this backdrop, regulatory authorities aim to promote single window system of clearances for real estate projects, wherein the projects and promoters both can be graded along with digitisation of land records. However, the bill has a long way to go as far as faster sanctioning process is concerned. Thus, the problem is only half-solved." Also, after it becomes an Act, it’s the State’s responsibility to bring it to effect by appropriate measures, Liases Foras added.
 
According to Liases Foras, "...project delays are the Achilles’ heel of Indian real estate and one of the key reasons for sky high prices. As far as responsibility for delay is concerned, it lies with both the developer and the government authorities. Thus, if we look at the larger picture, the delays in execution also have a negative bearing on India’s gross domestic product (GDP)," Liases Foras says.
 
In June 2013, while speaking at a Moneylife Foundation event on the Bill, Parimal Shroff, with over 39 years’ experience in constitutional, corporate, civil and property law, had called the Central Act as “too ambitious”. He had said, "It (the Bill) proposes that all permissions, information, online declarations and registration are to be validated before the project starts. The penalties for failing to comply are too severe. Then, it requires that the plans and designs to be put up online—this gives rise to problems related to protection of intellectual property and security”.
 
The real estate sector in India faces some fundamental issues, which are not fully addressed in the new amended Bill. This includes, issues relating to land acquisition, registration, transfers, taxation and a plethora of permissions and clearances that would remain with state governments and municipal authorities. There is rampant corruption in each of these processes and Central legislation is unlikely to address many of these issues. But first the positives of the Bill.
 
The Positives
 
The Bill is based on three major foundation stones, transparency, accountability and efficiency. Compulsory disclosures and registration ensures transparency, while taking responsibility in case of any unwarranted deviations in the process ensures accountability. Together, these elements generate efficiency by discarding any kind of deception in prices. 
 
"Firstly, it may usher sales on carpet area, which is a practice followed in the developed countries including Singapore and UK. Secondly, the escrow account will help in curbing diversion and misuse of funds, ruling out speculative practices," Liases Foras said.
 
Another important aspect of the Bill is the redressal mechanism, addressed through adjudicating officers and Appellate Tribunal. Discontented buyers can now approach 644 consumer courts at the district level instead of only the Regulatory Authorities proposed to be established mostly in capital cities. This makes it convenient for buyers and reduces the costs of litigation. In addition, the Bill marks a provision for imprisonment of builders and real estate agents in case of violation of rules.
 
 
Delays 
 
However, the Bill does little to address the major cause of high real estate prices: delays in obtaining approvals.
 
A study conducted by Associated Chambers of Commerce and Industry of India (Assocham) show that over 75% of the total 3,540 projects, worth Rs14 lakh crore, have remained non-starters. "On an average, real estate projects in India are facing a delay of 33 months in completion," DS Rawat, secretary general of Assocham, had said while releasing the study report.
 
According to the study, over 2,300 projects in the realty sector remained non-starter, while over 1,000 on-going projects have registered significant delays in completion.
 
In its analysis of total supply across 25 cities, Liases Foras found that there is a delay of more than 12 months for about 34% of the supply. This estimated delay of residential projects amounts to 1.32% of the estimated GDP (2014-15) at current prices, it said.
 
In addition, there is the issue of unsold stock. Liases Foras says, even in the current depressed state of market, primary supply worth about Rs18.47 lakh crore or over 99% would come under the purview of the Real Estate Regulatory Bill. "There also exists a secondary market, which we estimate is of an equal size. So, the quantum under the Bill’s ambit is huge. Also, the revised bill includes compulsory registration of projects of 500 sq. metres or 8 flats, against the previous norm of 1,000 sq. meters or 12 flats. With a vast universe under coverage, the bill is expected to have far-reaching positive effects on execution and accountability," it added.
 
 
Construction and sale of an apartment, which is the base of real estate sector, has the capacity to catapult the growth of an entire ecosystem on its own. Once the execution delays are reduced considerably, housing sales will receive a boost, the agency feels in three ways:
 
  1. Increased sale of houses create ancillary demand. There will be automatic demand for furniture, consumer durables, fit-outs, automobiles, fibre optics and telecom companies.
  2. This will spur job creation and expansion of industries giving a boost to commercial segment. Benefits of this will also trickle to retail realty as increased income implies enhanced purchasing power.
  3.  An upbeat economy with a functional regulatory mechanism will place India on a global footing and make it one of the most sought after destinations for international investors.
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    COMMENTS

    vswami

    4 years ago

    In the Realty Regulatory Bill, not even a whisper made about, or measures of reform factored in, for ushering in any change or improvement in certain procedural legal formalities promoters are obligated to strictly comply under the respective special laws governing Flats and Apartments. Hence the need for sharing,once again,though at this late hour :

    The opinion of an expert on the property law as found @ http://www.lawyersclubindia.com/…/Stamp-duty-for-conveyance…
    goes to reinforce, in substance, the same basic viewpoint as set out in the several personal Blogs, in public domain, and websites

    For ready reference, given below is an extract from what Expert raj kumar makkad says:

    Q

    It is the duty of the Builder to form a Society or any other legal body ....About 80,000 Housing Societies are waiting for a quick and easy remedy and that has paved the way for Deemed Conveyance.

    Only after executing the Conveyance, the legal ownership of the land and building will be with the Society; till such time, the Society will have only possession rights without any legal rights for redevelopment or for earning any commercial benefit.

    There are five stages to complete the Conveyance of land and building in favour of the Society even under Deemed Conveyance.......
    A Special Cell has been started by the Maharashtra Societies Welfare Association....., to provide guidance on Deemed Conveyance. ....

    UQ

    Note: The Expert has, in a simplistic manner, stressed that ”till such time, the Society will have only possession rights without any legal rights for redevelopment or for earning any commercial benefit". However, in the nature of things, the better or logical conclusion would be that, till such time final conveyance takes place in favour of 'Society' or 'Owners' Association' , 'absolute ownership' cannot be regarded to have become vested in the purchasers; so much so, the purchasers cannot, if strictly viewed/ construed, rightly claim to have acquired all such rights and interests (not merely the two such rights as found mentioned/shortlisted) as are supposed to pass on/devolve only along with profoundly "absolute ownership".

    To be quite precise, the 'society' in the case of Flats, and the 'owners' association' if apartments, ought to have been duly formed and registered , strictly as required by the special enactments, so that the final conveyance of the 'property' in favour of such society or association could be effected; as, otherwise, the final conveyance could never be effected / take place - that is, would remain incomplete.

    It is a matter of great regret and disappointment to realize that, while Maharashtra has shown the righteous way, the Karnataka government,- to be precise its concerned authorities, though duly vested with necessary powers,- has thus far remained woefully mute, and disparagingly immune ; despite the matter being undeniably of the utmost importance from the viewpoint of public interest (in its true sense).

    PRAKASH D. BASRUR

    4 years ago

    In all such discussions the buyer's views are not mentioned ! The article fully depends upon the views of an agency which is on the side of the builder/developer lobby ! The agony gone through by the actual buyer of houses for the last 60 years is well known to everyone including the writer , i.e. the unscrupulous ways of buyer's arm twisting by the builder/developers and the infamous "estate agents" ! That community comprises of shady elements is a very well known fact and over the years millions of property buyers have had to admit to the dictat of that developer/builder/agent nexus. Unfortunately neither the bill nor the writer of the article seem to have gone through the horrors that the property buyers have had to go through for last 60 years ! This is typical of our "blind folded" society's futile attempts in solving consumer problems through the round abut ways of our parliament of the people , by the people and for the people ! Jai Hind !

    REPLY

    Sucheta Dalal

    In Reply to PRAKASH D. BASRUR 4 years ago

    Every article will not have the buyers views. Moneylife has plenty more on real estate which represent the buyers point of view.

    In addition, there is Moneylife Foundation, a NGO, where our legal helpline provides assistance on housing related issues.

    Why not explore the work we do ? Check out foundation.moneylife.in

    And finally, unless people get together to push for reform, nothing will change. We try to do it in our small way, but we need SIGNIFICANTLY larger numbers to be able to generate the right momentum.
    So how about spreading the word about these activities? Most articles and the NGO are free -- so it costs nothing to join and help your self and people like you!

    That does not mean that the foundation can run without financial support and donations -- but we can come to that later...

    PRAKASH D. BASRUR

    In Reply to Sucheta Dalal 4 years ago

    Dear Sucheta !
    I am already a small amount donor of your (our ?) NGO ! I have done about 10 deals in aquiring flats in Mumbai-Pune area and have had a bitter experience of dealing with the developer-builder-estate agent nexus in my active life of last 50 years ! I am sure you too have dealt with this "triangle" and got entangled into their web ?

    Sucheta Dalal

    In Reply to PRAKASH D. BASRUR 4 years ago


    Dear Mr Basrur

    Thank you for your support to Moneylife Foundation.

    On the flat deals... we have been fortunate -- or probably followed what we preach... but thankfully not suffered.

    Best wishes to you for the New Year.

    PRAKASH D. BASRUR

    In Reply to Sucheta Dalal 4 years ago

    Dear Sucheta ,
    Arguments apart , I sincerely congratulate you for your fearless crusade in exposing wrong doings in our society. There are very few people in India who are dedicated to your cause as you are ! May Almighty give you a long life to pursue your mission for long. Wish you a Happy New Year !

    Deepak Mahulkar

    4 years ago

    First of all, I have an apprehension about relation between project delays and high price. Everyone knows that Rates are quoted before commencement of project which inter alia means the builder envisages project delays at the time of inception. In case project gets completed within time, builder is benefited. When delayed, he is not at loss. Of late, most of the people in building industry are with political clout or dubious characters thus having no knowledge of construction or the policy. The delay is therefore obvious. Sanctioning authorities in Government further adds the delay.

    RITENDRA KUMAR ROYCHOWDHURY

    4 years ago

    construction violating plan is the rule of the day. without the help of ruling political party it can not be happened.so new laws can be made but who will implement it?our country is govern by various lobby, one of them is the builder.

    Mahesh S Bhatt

    4 years ago

    Strucural support for 5 years should have been 15 years minimum as life of the building is supposed to be 75 years.

    Also no mention in terms of workmanship of other parts of construction such as external/internal water proofing.Poor tiling/plastering/accessories like sliding doors etc

    Good Start 2016

    Mahesh

    vswami

    4 years ago

    IMPROMPTU

    AS shared on Facebook;and HERE and http://swaminathanv208.blogspot.in/2015/...

    satdin.in

    4 years ago

    no laws can be helpful unless builder-political-municipal nexus is abolished.almost every project is violating exiting law in one way or other. every body knows way?

    Why are PSUs being spared from penalties?
    Public sector companies are flouting SEBI regulations with impunity. Why should SEBI discriminate between PSUs and private sector companies on levying penalties for non-compliance?
     
    The official website of the British Monarchy states that although civil and criminal proceedings cannot be taken against the Sovereign as a person under UK law, The Queen, the present Monarch, is careful to ensure that all her activities in her personal capacity are carried out in strict accordance with the law. 
     
    In fact, Queen’s daughter, Princess Ann faced court charges in March 2001, when she pleaded guilty to speeding while on her way to Hartpury College in Gloucestershire. She was fined ‎£400 by the Cheltenham Magistrate’s Court and had five points added to her driving licence. 
     
    As per the reports, the following year, she became the first senior member of the Royal Family to have been convicted of an offence under the Dangerous Dogs Act, 1991. She pleaded guilty to the charge that her dog, Dotty, attached two children while she and her husband were walking the dog in Windsor Great Park. The Princess was fined ‎£500 by Berkshire Magistrate’s Court and ordered to give Dotty more training. 
     
    Such is the level of compliance of law in United Kingdom. But in India, though we no longer have monarchy, it appears that the Government is above the law.
     
    Women Directors on the Boards of Public Companies:
     
    Last week, Finance Minister said that 1,707 listed companies, including public sector undertakings, do not have women directors.  In a written reply to the Lok Sabha, he said that prosecution has been launched against 121 defaulting companies, other than public sector units (PSUs). 
     
    Market regulator Securities And Exchange Board Of India (SEBI) had prescribed fines on listed companies, other than PSUs, between Rs50,000 and Rs1.42 lakh depending on the period of default from 1st April to 30 September 2015. A daily fine of Rs5,000 is being imposed for continued violation after 1 October 2015. 
     
    It is not made clear as to why PSUs have not been imposed with the fine for non- compliance. On the contrary, SEBI had requested the government to advice the concerned administrative Ministries to take appropriate steps for ensuring compliance by defaulting listed PSUs, the Finance Minister said. 
     
    Why this discrimination between public and private sector companies in so far as compliance of legal requirements is not explained by SEBI, nor have they been exempted from compliance by SEBI so far.  
     
    1 in 4 listed PSUs do not have independent directors:
     
    As many as 25% of the listed public sector companies have no independent directors on the board, according to the India Board Report 2015-16 published by Hunt Partners in association with AZB and Partners and PWC. 
     
    As per clause 49 of the listing agreement with stock exchanges, for a company with an Executive Chairman, at least 50% of the board members should comprise of independent directors. In the case of a company with a non-executive Chairman, at least one third should be independent directors. 
     
    These regulations are the result of SEBI’s decision to improve corporate governance in listed companies for protecting interest of minority shareholders. This is applicable for all listed companies but surprisingly a large number of public sector companies are yet to comply with these requirements.
     
    SEBI should act without fear or favour:
     
    It is a sad state of affairs. Instead of leading by example, public sector companies are at  the forefront of non-compliance. This reflects badly on the Central Government who hold majority ownership of these companies. 
     
    Enforcing compliance of securities regulations is the primary job of SEBI and hence the responsibility for ensuring compliance lies squarely on the market regulator, who should have pulled up all those companies, who fail to comply with its own regulations without any fear or favour.  
     
    If Reserve Bank of India (RBI) can impose penalties on both private and public sector banks who fail to comply with banking regulations, there is no reason why SEBI should discriminate between public and private sector companies in so far as levying of penalties for non-compliance of securities regulations. 
     
    Can we expect the Central Government to hold all those responsible for non-compliance of its own rules and regulations in its own backyard first, before launching prosecution against the private sector companies for non-compliance?
     
    (The author is a financial analyst, writing for Moneylife under the pen-name ‘Gurpur’.)
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    User

    COMMENTS

    Meenal Mamdani

    4 years ago

    A very valid criticism. It seems that SEBI is derelict in its duties in various spheres, not just this one, as seen from several articles in MoneyLife.

    Is this because the regulator is not autonomous, as it should be, but is under pressure from the govt of the day? Or is it because it does not have enough qualified (wo)manpower to investigate and pursue the wrong-doers? Or is it because the mindset of SEBI officials is pro-govt as often these regulators are former govt officials?

    Whatever the cause may be, it must be addressed to restore confidence of investors in companies, whether public or private.

    Supreme Court appoints Uttar Pradesh Lokayukta
    The Supreme Court on Wednesday appointed Justice Virendra Singh, - former judge of the Allahabad High Court - as the Lokayukta of Uttar Pradesh and expressed its disapproval of the way constitutional authorities mandated to appoint the ombudsman failed to discharge their responsibilities.
     
    Noting that its earlier directions for the appointment of Lokayukta went unheeded, the apex court bench of Justice Ranjan Gogoi and Justice N.V. Ramana "deeply regretted" the "failure if not refusal of the constitutional functionaries" to comply with the court's order.
     
    The court said that it was "unimpressed" by the explanation given by senior counsel Kapil Sibal appearing for Uttar Pradesh that serious efforts were made by the collegium consisting of chief minister, leader of opposition and the chief justice of the high court to decide on a name to be appointed as Lokayukta.
     
    Sibal earlier told the court that the three-member collegium met for five hours on Tuesday and two hours on Wednesday morning.
     
    Sibal gave five names to the court. There was a consensus between the chief minister and leader of opposition on three names while the chief justice of the Allahabad High Court expressed no opinion.
     
    Having recorded this, the court in exercise of its extraordinary powers appointed Justice Virendra Singh, who is at present head of the state consumer commission, as the state's Lokayukta.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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