‘Make all the stakeholders accountable if there is to be a law providing for a regulator to oversee the real estate sector' appears to be the major demand of those providing services and products. The proposed law, Real Estate (Regulation and Development) Bill 2011, while widely welcomed, cannot just be for developers, they say. The Bill has been widely welcomed by consumer organisations and agencies involved in the sector.

CENTRAL LEGISLATION

According to an official press release, the Bill has been framed as a Central legislation to establish a uniform regulatory environment for the Real Estate sector, to safeguard the interests of consumers, and to promote orderly growth of the real estate and housing sectors. The Bill provides for the establishment of a State-level Regulatory Authority to institute transparency and accountability in real estate and housing transactions by enforcing mandatory public disclosure, standardisation and fair practices.

Consumer forums and regulatory agencies including the Competition Commission and the National Housing Bank endorsed the provisions of the Bill, as it would bring in greater transparency in the functioning of the industry and remove information asymmetries. At a consultation organised by the Union Ministry of Housing & Urban Poverty Alleviation last week in Delhi, major industry representatives, including CREDAI, National Real Estate Development Council (NAREDCO) and chambers of industry and commerce have given their inputs.

APPROVAL PROCESS

Mr Lalit Kumar Jain, President, Confederation of Real Estate Developers Association of India (CREDAI), told Business Line that while the principle of regulation is a welcome move, the developers are worried that a regulator under the Act could become one more step in the approval process for developers. The developers would welcome a ‘comprehensive regulator without the Red Tape,' he said.

The biggest bottleneck in project implementation is the approval process. The planning authorities can delay a project interminably. If the proposed law calls for compulsory registration and licensing systems, then it would just be one more step — causing delay — in the process and adding to the costs. There are adequate penalties in the existing laws to deal with non-compliance and irregularities, he said.

In a statement to the media, Mr Sachin Sandhir, Managing Director, Royal Institution of Chartered Surveyors (RICS) South Asia, said that it had welcomed the move by the Ministry of Housing to ensure an effective law. Based on the 700 responses that the ministry received, 24 key points were highlighted as discussion points for the meeting. The fact that there was unanimous agreement on the need for a real estate regulator, and that all participants were receptive of the Bill is indeed a good development.

REGULATORY FRAMEWORK

RICS said that it has highlighted that a majority of buying and selling in real estate is through brokers. Keeping the brokers out of the purview would leave a large part of the market unregulated. A general consensus emerged for brokers to be considered as part of the regulatory framework. To avoid registration with the envisaged regulatory authority becoming another step in the approval process, a process of deemed approval could be considered. This would mean that developers get registered when they file all required documents and approvals with the regulatory authority, and the authority has the power to question and penalise any project that doesn't comply with the prevailing development controls and other regulations.

There was unanimous consensus that the sanctioning of approvals process had to be streamlined, and that all stakeholders including the government agencies should be brought under the purview of this Bill. The threshold for projects to be registered and regulated should be lowered from 4,000 square metres to 1,000 square metres and preferably set in terms of the number of residential units rather than the area of development.

RICS raised the point that a regulatory framework should have underlying codes of practice and standards, and recommended that a central advisory council should perform the role of setting such standards. This suggestion, if implemented, will lead to the sector becoming more transparent and professional.

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