Finally, buyers may get their due
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There is good news for home buyers. After dithering for close to a decade, the government has finally made up its mind to set up a regulator for the real estate sector. The Ministry of Housing and Urban Poverty Alleviation (MHUPA) on November 11 unveiled the draft Real Estate (Regulation and Development) Bill 2011 and has placed it in the public domain for comments.
The preamble to the Bill states that the Real Estate Regulatory Authority is being established for "regulation and planned development" of the real estate sector and "to ensure sale of immovable properties in an efficient and transparent manner" and also "to protect the interest of consumers". The Bill also provides for a Real Estate Appellate Tribunal as a dispute redressal mechanism.
The one feature of the country's real estate market is the asymmetric nature of the relationship between the builder and the buyer. This issue has been discussed extensively in these pages.
Assuming that the Bill in its present form is enacted, to what extent will its provisions seek to achieve the goals stated in its preamble? Let us first study the provisions.
The Bill categorically states that, "No promoter shall develop any immovable property or make any construction … without registering the real estate project and obtaining a certificate of registration from the Real Estate Regulatory Authority."
The Bill, thereby, mandates that every project has to be registered with the regulator and the builder can proceed with construction only after receiving the certificate of registration. If a project is being built in phases, fresh registrations have to be obtained for each phase. It however exempts registration for developments on an area below 4,000 square metres.
Further, the Bill also mandates every builder to register with the regulator and obtain a certificate of registration. This provision will ensure that only genuine players who are engaged in the business of real estate can get a registration and will effectively shut out fly-by-night operators who cheat buyers by forming a firm for a project and then dissolve it once the units are sold, in order to avoid responsibilities.
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- Edit - Defining moment