New recommendations on the Real Estate Regulatory Bill made by the HUPA ministry have been sent to PMO for approval, and the cabinet has approved of the same, said Niranjan Hiranandani, MD, Hiranandani Constructions Pvt. Ltd. (HCPL). “Now, it will be tabled in Parliament for passing the Bill, making it an Act,” he added. “This is a positive step and will bring in transparency to the real estate sector,” said Niranjan Hiranandani, adding that the Bill will bring about a common regulatory platform for all stakeholders in the industry. “Well, almost all, as the local self government bodies have been left out of the ambit – this needs to be re-visited,” he said.
“I expect ‘positive sentiment’ as the reaction of home seekers to the Bill. The new recommendations have made it mandatory for states to set up regulatory bodies within one year of the Bill’s enactment while also setting up a web-based online registration facility within a further period of one year from setting up of the bodies,” added Niranjan Hiranandani.
On the likely impact of the new recommendations, Niranjan Hiranandani said the resultant transparency would attract foreign investors. “The Real Estate Regulatory Bill has the potential to increase transparency levels in the Indian Real Estate sector, which will result in instilling more confidence among global investors, and providing better access to structured capital for Indian real estate,” he pointed out.
“Having said this, there is an issue which needs to be addressed. While the amended Bill reads ‘positive’ in terms of inducing transparency and better governance in real estate, the moot point remains non-inclusion of local self government bodies within its ambit – the slow approval processes by government agencies are major contributors to project delays,” said Niranjan Hiranandani. “I hope this aspect gets due attention, and that the issue gets resolved. One option could be developers getting a chance to appeal against any delay in approvals like occupancy certificates on part of sanctioning authorities to the Regulator,” he added.
The move to include ongoing projects that have not received completion certificates so far under the purview of the Bill is also unfair in some respects – we expected project registrations to have been ‘prospective’ and not ‘retrospective’, said Niranjan Hiranandani.
Niranjan Hiranandani mentioned the impact of provisions applicable to projects which have not received an occupation certificate (OC) – any such building needs to be registered under the Bill, he Hiranandani said, pointing out that a large number of buildings in the country do not have an OC. “There is no concept of OC in some parts of the country,” he said.
The other issue where he feels there is a need to ‘re-visit’ the Bill is the aspect of ‘prison term’ among the various forms of penalty. “A ‘prison term’ is draconian,” said Niranjan Hiranandani. “The Bill says that failure to register a project will cause the developer to attract a penalty of 10 per cent of the overall project cost, and an additional penalty of 10 per cent and/or a three-year prison term in case of continued non-compliance. Penalty should be commensurate with the error committed; the issues are civil in nature, not criminal which makes the aspect of a ‘prison term’ draconian in nature, and it needs to be re-considered,” said Niranjan Hiranandani.
The Escrow Account aspect is one that will create new challenges as regards funding arrangements, said Niranjan Hiranandani. “Developers will now have to compulsorily deposit 50 per cent - or such lesser percentage as notified by the appropriate authorities - of the amounts realized for the real estate project from buyers, in a separate (escrow) account, within a period of 15 days to cover the cost of construction. The real estate industry is already cash-crunched, and for the developer community, need for funding will surely go up. Detailing, and we will have to study how this clause pans out in times to come," he says.
The other aspect of the Bill with the new recommendations which Niranjan Hiranandani found positive was that of being the sole option for redressal of grievances. “The Bill, in its initial form, had positioned itself as the sole course of action for redressal of grievances by customers, with no recourse to other consumer forums. This clause has been done away with in the version that the cabinet has cleared, so recourse can be sought in consumer courts and other forums as well. This will reduce the burden which would have fallen upon the Regulator, by sharing the grievance redressal with other forums.
“I expect the Real Estate Regulatory Act to facilitate an organized and transparent real estate sector. I also look forward to a single window and time bound clearance system as some of the positives resulting from the same – hopefully, also the demand for recognition as an industry. This would make it possible for the industry to borrow funds at competitive rates, which will help rationalize property prices,” concluded Niranjan Hiranandani.
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