Interesting features of THE REAL ESTATE (REGULATION & DEVELOPMENT) BILL, 2011

I read the draft version of this bill(http://mhupa.gov.in/W_new/RealEstate_BILL-2011_OM09112011.pdf) and was quite impressed at some of the provisions. Though laws do not bring about change without good implementation, the Government is atleast thinking on good lines. Essentially, the Act aims to ensure fairplay by promoters, have a single web portal for accessing details of approved projects and to have a single pan India tribunal for disputes. Some interesting clauses below and their implications are detailed below.

1. INTEREST  RATE SYMMETRIC:- Section2(u) “interest” means...Explanation.- For the purposes of this clause, the rate of interest chargeable from the allottee by the promoter shall not be more than the rate of interest which the promoter would be liable to pay the allottee in case of default. If only this provision was applied to tax laws also(where Government pays 6% pa on delayed refunds while taking 18% interest for late payments, tax payers would be much more happy. On a lighter vein though, this clause will ensure fairplay in contracts.
2. PROJECT SPECIFIC REGISTRATION:- Section 3. No promoter shall develop any immovable property.. without registering the real estate project and obtaining a certificate of registration from the Real Estate Regulatory Authority established under this Act:  Explanation.- For the purpose of this Act, where immovable property is to be developed in phases then every such phase shall  be considered a standalone real estate project, and the promoter would have to seek registration under the Act for each phase separatel. This would imply that projects need to be registered once on the site, and that even further phases need a distinct registration, which is good.
3. ESCROW ACCOUNT Section4(3) The promoter shall enclose the following documents along with the application referred to in sub-section (1), namely:-(b) (v) that seventy percent of the amounts realized for the real estate project from the allottees, from time to time, would be deposited in a separate account to be maintained in a scheduled  bank, within fifteen days of its realization for meeting the costs of the real estate project and would be used only for that purpose. Completion risk is one thing that has hogged the limelight. Having an escrow account would entail another audit, but would ensure that the project gets completed on time! Now, residential projects cross funding commercial projects may not happen anymore
4. TRANSPARENT MARKET DATA:- Section8. (1) The promoter shall..enter all details of the proposed project ..(2)  The information and documents referred to in sub-section (1)..include,- (g) fortnightly up-to-date list of bookings on the basis of the agreement to sell entered with them. This would ensure that buyers have an accurate assessment of which projects are selling, and this information would allow them to make purchase decisions and in negotiations.
5. 'PRE-FILING CONDITIONS:- Section 9- No promoter shall issue or publish an advertisement or prospectus, or invite any member of the public to buy or book in such projects to be developed or take advances or deposits without obtaining a copy of certificate of registration with the Authority. (2) No promoter shall issue advertisement or prospectus without first filing a copy of such advertisement or prospectus in the office of the Authority/ This borrows several provisions from SEBI Guidelines for equity funding, which is quite interesting in itself! Atleast it would ensure some uniformity in advertisements and 'prospectus'.

However, there is no rose without thorns. The possible cons of the bill are

1. Excessive reliance on the internet:-Since not all realty buyers may be conversant with English/be digitally savvy, the proposed web portal needs to be in multiple languages, and accessible via other modes like mobile etc. 
2. Too small threshold limit for Act:-Since projects above 4000sqfeet carpet area are covered, this would realistically cover any decent size building. While this may be the intention of the act, one wonders whether small builders can bear this compliance cost or not. So either build a NSDL/MCA-21 CFC like compliance infrastructure in place, or else increase the applicability limit for the Act

Like most Indian laws, this is high on intentions but it is to be seen whether it is implemented or not. If implemented, it could go a long way in cleansing the Augean stables of realty.